Report says that it will start with Axis Bank and the share sale in 3 tranches, first of which can be in late October or early November
The government is likely to start the mega share sale in companies detained by the Specified Undertaking of the Unit Trust of India (Suuti) with Axis Bank later this month or early next month, say sources.
The government has 11.5 per cent stake in the investor under Suuti and plans to arrange its properties in three tranches, to avoid oversupply of paper. At the current market rate, Suuti’s stake in Axis Bank is estimated at Rs 14,735 crore. Beside Axis Bank, the government also possesses a large chunk in Larsen & Toubro and ITC under Suuti, which it plans to vend over the next three years.
Investment bankers with the Suuti directive are already creating sales pitches to marquee institutional investors. Based on the early response and present market conditions, the tentative price for the share sale has been reached at Rs 540. The divestment is probably to be done over the offer for sale (OFS) route and the last price will be steady ahead of the share sale date.
Shares of Axis Bank closed at Rs 534 on the BSE on Wednesday.
An investment banker said, “Selling shares in tranches would help the government in minimising the risk. A major part of the stake sale is targeted to be completed during the current financial year, to help meet the divestment target for the year.”
The choice to begin the Suuti share sale with Axis Bank was taken due to ownership-related difficulties with ITC and L&T, said sources.
Suuti has selected Morgan Stanley, ICICI Securities and Citibank as bankers to cope with the Rs 60,000-crore share sale. JM Financial, HSBC and SBI Capital Markets are among the reserve bankers, in case of any clash of interest.
Suuti has assets in 51 companies, of which 43 are listed. The majority of the assets are in Axis Bank, L&T and ITC. In the unlisted space, Suuti owns stake in National Securities Depository, Stock Holding Corporation of India and North Eastern Development Finance Corporation.
“The Axis stake sale is crucial for the central government, as it would help them to gauge investor sentiment. Depending on the response, they would proceed with other big offerings, including L&T,” said the banker cited above.
The government has separated the 51 entities into three groups. Group A consists of all the front-line listed companies like Axis Bank, L&T and ITC. Group B consists of unlisted entities. All the smaller listed companies where SUUTI owns stake have been categorised as Group C.
SUUTI is an twig of the erstwhile Unit Trust of India (UTI). In 2002, government had split UTI into two entities, SUUTI and UTI AMC. While SUUTI takes care of the assured return plans of UTI, the AMC manages marked-linked schemes.
For the present financial year, the government has charted a target of Rs 56,500 crore from divestment. Of this, Rs 36,000 crore is assessed to come from minority stake sales in different public sector units, while the outstanding Rs 20,500 crore will come from strategic sale in several companies. Of this, the government has succeeded to gather only Rs 3,183 crore till date. Of this, Rs 2,716 crore was from an OFS in NHPC.