New Delhi, Jan. 21: The government has picked three merchant bankers — JP Morgan Chase, Citigroup and JM Financial — to sell part of the Specified Undertaking of UTI’s (SUUTI) stake in Axis Bank valued at about Rs 6,000 crore.
The SUUTI was formed in 2003 as an offshoot of erstwhile Unit Trust of India and holds a minority stake in Axis Bank, ITC and Larsen & Toubro. Earlier this month, the Union cabinet decided not to wind up the SUUTI. The move will enable the government to offload its holdings in these companies separately on the basis of suitable market valuations.
Officials said the government could sell about half of its stake in Axis Bank for approximately Rs 6,000 crore. The selloff could happen before the vote on account on February 17 through block trades on the bourses.
The other promoters of the bank are Life Insurance Corporation, General Insurance Corporation, New India Assurance and National Insurance Company.
The sale is part of the government’s efforts to shore up revenues to narrow the fiscal deficit to 4.8 per cent of the gross domestic product (GDP) in 2013-14 from 4.9 per cent a year earlier. Slower-than-budgeted tax receipts and high public expenditure have increased the government’s reliance on selling shares to narrow a budget shortfall.
The finance ministry expects the Axis Bank stake sale to help it balance its book as divestments in many companies are stuck owing to the opposition by administrative ministries and the unions.
The SUUTI holds an 11.54 per cent stake in ITC, 23.58 per cent in Axis Bank and 8.27 per cent in L&T, valued around Rs 40,000 crore. Stake sales in L&T and ITC are difficult because of regulatory issues.
Last month, Axis Bank was allowed to raise its foreign direct investment limit and is looking to buy shares from the market.