NEW DELHI: The government is in no hurry to sell its stake in marquee companies such as ITCBSE 1.21 %, Larsen & Toubro and Axis BankBSE -0.96 % held through the Specified Undertaking of Unit Trust of India (SUUTI).
It will take a decision in this regard on the basis of the progress in its disinvestment programme and the need for funds towards the end of the financial year, officials said. There will be no distress sale and insurance firms will not be pushed to buy a stake in companies operating in sensitive sectors, a senior government official said.
“In both ITC and L&T, there is enough headroom for other institutional players without breaching any foreign investment limits. If insurers feel there is value in these scripts they will take their own decision,” said the official, who did not wish to be identified. The government does not interfere in investment decisions of state-owned enterprises, he said. The SUUTI holds 11.16 per cent stake in ITC, 8.32 per cent in L&T and 11.94 per cent in Axis Bank at present. These holdings are together worth nearlyRs 62,000 crore, more than Rs 56,500 crore budgeted through disinvestment in the current fiscal.
The government has committed to a stiff fiscal deficit target of 3.5 percent of GDP for the current fiscal. “We are in a comfortable situation. If valuations are good, we will take a call depending on market conditions,” the official said. Earlier this month, the government had invited applications from merchant bankers and selling brokers in a request for proposal or RFP for a sale of SUUTI holdings in different companies, which were later bracketed into three groups.
Group A consists of shareholding in three listed companies which include Axis Bank, ITC and Larsen & Toubro. Those selected will be appointed for a period of three years or till last such sale gets completed, as per the RFP document.
Experts said the government should not delay stake sale in SUUTI’s assets. “It (government) should have a clear cut programme for all firms where it looks to divest. Market conditions can change, so it’s better that it maximises the receipts as and when it can,” said Jagannadham Thunuguntla, head of research at Karvy Stock Broking. At present, India’s largest insurer, Life Insurance Corporation holds 14.37 per cent stake in ITC and has little headroom to raise its investment as it is bounded by the insurance sector guidelines that restrict insurers to a maximum 15 per cent of equity in a single company.
The other four general insurers jointly hold 6.31 per cent in the company. “Some of these insurers have listing plans. So, it will depend on their financial health that how much exposure they will like to increase,” the official said.
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Source: Economic Times
