DIPAM relaxes conflict of interest clause for SUUTI bankers

After merchant bankers raised concerns, the Finance Ministry has diluted the conflict of interest clause for bankers managing SUUTI stake sale while also deciding to expand the panel of bankers for the issue.
DIPAM, in the original RFP issued in early July, had mandated that merchant bankers for SUUTI sale cannot enter into a competing transaction with a private sector entity for entire three years for which they are being hired.
It has now decided to dilute the provision, mandating that the bankers cannot enter into competitive sales only during the share sale transaction.
"As many as 14 foreign and domestic merchant bankers evinced interest in managing the issue but wanted the conflict of interest clause removed," a source said.

The Department of Investment and Public Asset Management (DIPAM) had originally planned to appoint three bankers for selling minority stakes in 51 companies, including RIL, ICICI Bank, ITC, Axis Bank and L&T.
The Specified Undertaking of UTI (SUUTI) has investments in these 51 listed as well as unlisted companies, including Hindustan Unilever, Jaiprakash Associates and a host of Tata Group firms.

It is also looking at expanding the panel of bankers for the share sale.
"We are looking at expanding the panel of merchant bankers. If conflict of interest arises with any of the three appointed merchant bankers during any transaction, we can rope in other bankers from the expanded panel and conclude the share sale," the source said.

The pre-bid meeting with merchant bankers on the revised request for proposal (RFP) will take place on August 27 and the merchant bankers will have to submit their bids by September 6, he added.
Government holds minority stake in these companies through SUUTI, which was formed in 2003 as an offshoot of erstwhile UTI, and is looking at selling them either through an OFS, block deal, bulk deal or regular sale through stock exchanges.
Of the 51 companies in which SUUTI holds stake, eight are unlisted entities -- NSDL, STCI Finance, Over The Counter Exchange, Stock Holding Corporation of India, UTI-IAS Ltd and UTI Infrastructure Technology Services, North Eastern Development Finance Corporation and NSDL e-Governance Infrastructure.

Sale of SUUTI holdings would help swell government's disinvestment kitty. It has also kept the option open for including those companies in which SUUTI holds stake in the second CPSE Exchange Traded Fund, which the government plans in the current fiscal.
The government has set up an ambitious disinvestment target of Rs 56,500 crore for 2016-17. Of the budgeted target, Rs 36,000 crore is to come from minority stake sale in PSUs and the remaining Rs 20,500 crore is estimated to come from strategic sale in both profit and loss-making companies.
In March 2014, the government had sold 9 per cent stake in Axis Bank held through SUUTI for over Rs 5,500 crore.