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Govt to sell stakes in L&T, ITC, Axis Bank, raise 60,000 crore

PUBLISHED ON AUG 11, 2016 06:13 AM IST

MUMBAI: The government is reviving a plan to sell stakes in three large companies, which can help it raise close to 60,000 crore and help it meet its disinvestment target. It has called for bids from investment bankers to kick-start the process.

The exercise to sell the government’s minority stakes held by the Specified Undertaking of the Unit Trust of India (SUUTI) in engineering giant Larsen & Toubro, consumer goods behemoth ITC, and Axis Bank, has been taken up again after three years due to favourable market conditions, merchant bankers said. While investment bankers will have to submit bids to manage the sale, technical bids are scheduled to be opened this week.

The government holds minority stakes in 51 companies through SUUTI , but a large part of it is in the three companies — it owns 8.32% in L&T, about 11.17% in ITC and 11.93% in Axis Bank. Apart from the three companies, SUUTI also holds equity stakes in Reliance Industries, Tata Steel, Hindustan Unilever (HUL) and Titan, among others.

“Just the three companies put together is a huge 60,000-crore revenue opportunity for the government,” said Vikas Khemani, president and CEO, Edelweiss Securities. “The government has set a three-year time line. So depending on market conditions, we should see some of the stake sales happening soon.”

The government has set a divestment target of 56,500 crore in 2015-16. While it has missed targets in the previous years, according to merchant bankers, there will be a good response from the market in the current scenario.

“There were some concerns that bankers could be restricted from bidding for public issues of competing firms. But these have been addressed and we should see a good response (for the SUUTI stake sale),” said Pranav Haldea, MD, Prime Database, which tracks primary market activity.

The IPO market has been booming this year. In the April-June quarter itself, 5,855 crore was raised through initial public offerings. Overall, companies are expected to raise over 30,000 crore in IPOs this year.

SUUTI was formed by restructuring the erstwhile Unit Trust of India (UTI) into UTI Trustee Company Pvt Ltd (acting through SEBI registered UTI Mutual Fund) and SUUTI.

The government plans to appoint three merchant bankers for sale of the SUUTI holdings for a period of three years, according to proposals it had put up earlier.

The options for stake sales will include offer for sales, block sales and regular sale on bourses or through any other method compliant with Sebi rules.

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