Fri. Mar 29th, 2024

KOLKATA: The Government of India is apparently trying to raise around ₹22,000 Crore by selling off its stake in hospitality, FMCG and cigarette giant, ITC and Axis Bank, the 3rd largest bank in India, some industry sources are saying.

“Given the current timeline, the government is hoping to complete the transaction by the end of this week or early next week,” an official, acquainted with this development, told the press. The transaction will be done through a bulk deal on the Indian bourses, the person added.

The central government held the aforementioned stakes through Specified Undertaking of the Unit Trust of India (SUUTI). It owns 7.94% in ITC and 4.69% in Axis Bank, as on March 31, 2020. On the other hand, for 2019-20, the government had lowered its disinvestment target down to ₹65,000 crore from the budget estimates of ₹1.05 Lakh Crore.

ITC share price, on the BSE, was marginally down (15 paise) to ₹173.9 at close of market hours Tuesday . Meanwhile, shares of Axis Bank settled at ₹389.2 which equates to a decline of 3.38% on the BSE. At this price, the combined value of SUUTI stake in ITC and Axis Bank adds up to ₹22,123 Crore.

Investors of Axis Bank had expected a surge in bad loans in light of the nationwide lockdown imposed by the Indian government. As a result, its stock has fallen 53% in the last three months. ITC has come down 19% compared to the Sensex, which has lost around 25% in the same time period.

Sources say that the government plans to raise an ambitious ₹2.1 Lakh Crore in the current fiscal year. It intends to do so via sale of its holdings in state-run companies. This plan includes the ₹90,000 Crore that should be raised from the sale of a minority stake in Life Insurance Corp (LIC) through an initial public offer and selling its stakes in IDBI Bank.

SUUTI has minority stakes in 51 listed and unlisted companies, with most of its value locked in Axis Bank, ITC and L&T. Some government sources have added that LIC and other India-based Mutual funds are expected to participate in this stake sale. This sale is expected to happen at a marginal discount of 2-3% to underlying trading price on the transaction date. For the record, SUUTI has already sold its entire stake in L&T. But, the government might take a complete exit from the former two companies via this sale, say some sources.

Of the 51 corporations, 8 entities in which SUUTI owns either significant minority or majority stake are — NSDL, STCI Finance, UTI-IAS and UTI Infrastructure Technology Services, Over-the-counter Exchange of India, Stock Holding Corporation of India, North Eastern Development Finance Corporation and NSDL e-Governance Infrastructure.

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