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Axis stake goes on the block

New Delhi, March 20: The state-owned rump of the collapsed Unit Trust of India (called Specified Undertaking of Unit Trust of India, or SUUTI) — which has a large legacy holding of shares in several Indian companies — is finally starting to dump a part of its holding to raise cash.

The department of economic affairs today announced that SUUTI would sell 4.22 crore shares in Axis Bank through a block deal on Friday that could potentially raise up to Rs 5,726.5 crore.

SUUTI, which was created in 2003 by splitting the Unit Trust of India into two distinct entities — the Specified Undertaking of the Unit Trust of India and UTI Mutual Fund — holds about 20.72 per cent in Axis Bank, the country’s third-largest private bank.

The sale to institutional buyers will include offloading a 3-4 per cent stake to LIC, which holds about 10.65 per cent in Axis Bank.

SUUTI is run by an administrator appointed by the Centre and has no permanent employees. This will be the first stake sale by SUUTI.

The shares will be sold at a discount of up to 0.5 per cent. The Axis Bank share fell 2.11 per cent, or Rs 29.30, to Rs 1,356.85 on the Bombay Stock Exchange. Given the discount, the shares will be sold at a price range of Rs 1,290 to Rs 1,357 apiece.

SUUTI announced on its website that JP Morgan India, Citigroup Global Markets India and JM Financial Consultants would be the three merchant bankers handling the sale of Axis Bank shares.

The sale has been taken up along with the launch of the PSU exchange traded fund in a bid to meet the government’s reduced divestment target of Rs 16,000 crore.

Besides Axis Bank, SUUTI holds 11.54 per cent in ITC and 8.27 per cent in Larsen & Toubro. These investments together with SUUTI’s shareholding in Axis is valued at about Rs 40,000 crore.

In February, the cabinet decided not to wind up SUUTI to enable the government to offload its holdings in these companies.

However, officials said SUUTI’s stakes in ITC and Larsen & Toubro would not be sold at the moment.

Besides SUUTI, the other promoters of Axis Bank are Life Insurance Corporation, General Insurance Corporation, New India Assurance and National Insurance Company. These companies continue to have boardroom control over the bank.

Last year, Axis Bank was allowed to raise its foreign investment limit to 62 per cent.

The foreign shareholding in Axis Bank is about 48.16 per cent of its paid-up capital, including 43.18 per cent held by foreign institutional investors, as on December 2013. This gives scope to foreign funds to buy into Axis, said analysts.

The bank, which had lent Rs 196,966 crore up to March 31, 2013, and had reported a net profit of Rs 5,179 crore in 2012-13, also owns and runs seven subsidiaries — Axis Capitals, Axis Finance Pvt Ltd, Axis Private Equity Ltd, Axis Trustee Services Ltd, Axis Asset Management Company, Axis Mutual Fund Trustee Ltd and Axis UK Ltd.

 
 
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