Mumbai: The Specified Undertaking of the Unit Trust of India (Suuti) on Friday sold a 1.6% stake in India’s largest engineering and construction firm Larsen and Toubro Ltd (L&T) through a block trade, said three people aware of the development.
Institutional investors such as State Bank of India bought shares in the block sale.
On Friday, Mint reported that Suuti was looking to sell up to 3% stake in L&T through a block deal.
The stake sale fetched Suuti around Rs2,000-2,100 crore, said one of the three people cited above, requesting anonymity as he is not authorized to speak to the media.
“The base deal was for around 1.5% stake, so that has been covered today. There was provision to sell another 1.5% stake but they did not opt to sell that stake today,” this person said. Suuti was able to sell shares at a price just slightly higher than the floor price of Rs1,415 per share, he added.
On Friday, shares of L&T closed at Rs1,418.90 on the BSE, down by 1.78%, while the benchmark Sensex closed at 27,274.15 points, down 0.57%.
On Thursday, L&T shares had closed at Rs1,444.5.
Citi, Morgan Stanley, and ICICI Securities Ltd advised Suuti on the stake sale.
The stake sale drew more interest from domestic institutional investors, said a second person cited above, requesting anonymity. “The book was mostly subscribed by domestic institutions such as banks and mutual funds, though there were also some foreign institutional investors,” he said.
According to data from the NSE block deals report, State Bank of India Ltd acquired 5.655 million shares from Suuti at a weighted average price of around Rs1,415.58 per share.
Spokespersons for Citi, Morgan Stanley, ICICI Securities and Department of Investment and Public Asset Management (Dipam) could not be immediately reached for comments.
Suuti, an offshoot of the erstwhile state-run investment firm Unit Trust of India (UTI), has shares in 43 listed and eight unlisted firms. It holds an 11.17% stake in ITC Ltd, 8.16% in L&T and 11.53% in Axis Bank Ltd.
The Parliament bifurcated UTI in 2002, creating Suuti and UTI Asset Management Co. Pvt. Ltd, the former holding the assured-return investment plans of UTI and the latter overseeing market-linked plans. The bifurcation took place after UTI’s US-64 investment scheme ran into trouble.
The government has been seeking to sell company stakes held by Suuti to boost revenue and help meet its asset sale target.
Suuti has split its divestment programme into three parts.
Group A, which includes its holding in ITC, L&T and Axis Bank, will be up for divestment first.
Group B will include the eight unlisted firms in which Suuti owns shares. Group C will hold the remaining 40 listed firms held by Suuti.
The eight unlisted companies include National Securities Depository Ltd, North Eastern Development Finance Corp. Ltd, NSDL e-Governance Infrastructure Ltd, Over The Counter Exchange of India, STCI Finance Ltd, Stock Holding Corp. of India Ltd, Unit Trust of India Investment Advisory Services Ltd and UTI Infrastructure Technology and Services Ltd.
On 13 July, Mint reported that Life Insurance Corporation of India (LIC) will likely step in to buy between a third and half the equity assets of Suuti.
The purchase from Suuti could mean a spending of between Rs25,000 crore and Rs30,000 crore for the state-run insurer, and an equivalent windfall for the government said the report.
The government has considered selling Suuti assets several times in the past.
This time, the decision has been driven by the need to meet an ambitious divestment target and a conducive market environment.
The government has set a disinvestment target of Rs56,500 crore for 2016-17, of which Rs36,000 crore is expected to come from minority stake sales in state-owned companies. The remaining Rs20,500 crore is expected to be raised through the strategic sales in both profit-making and loss-making state-owned companies.
