Mumbai, Aug. 29: The Unit Trust of India (UTI) will divest its stake in close to 180 companies where it holds 10 per cent or more. A strategic sale would enable the mutual fund to get better value on its equity investments.
The entire exercise of a strategic equity sale in 180 companies is being co-ordinated by the Trust’s department of investment monitoring, sources said.
However, finding the right value for each company during these times when the stock markets are looking down is a “Herculean task” for the department, sources said, adding the selloff would take time to be concluded.
For some deals, such as ITC and L&T, the department will involve officials from UTI’s secondary market operations division to get the right price for the stock. This will be done because these stocks generally influence the stock market trend.
Recently, the mutual fund was successful in divesting stocks like Bajaj Hindustan and FMCG major Nestle at a sizeable premium to the market price.
However, UTI sources pointed out that the deals take a long time to get consummated. For instance, in the case of Bajaj Hindustan, the deal was concluded after more than six to nine months of hard-nosed negotiations.
Efforts to contact Ajeet Prasad, president, in charge of the department of investment monitoring proved futile.
Analysts say even if the success rate in strategic sales is 50 per cent, UTI’s troubles would soon be over. However, the officials were reluctant to provide the price at which the sales were completed.
Besides meeting the redemption pressure on its various schemes, the proceeds of the divestment may be used to repay the government which has been supporting the mutual fund.
One of the options for sale considered by the mutual fund major is divesting its stake to the highest bidder through a tender offer, sources said.
However, the mutual fund major has the responsibility of maintaining equilibrium in the market, especially ensuring that heavyweight scrips do not plummet further in an already downbeat market. This would mean that most of the deals would be negotiated outside the market.
The recent slew of block deals after two-way fungibility was allowed in the Indian markets where stocks like Ranbaxy, Reliance were sold to foreign investors at a premium are a pointer to another avenue opening up for the mutual fund.
The mutual fund had earlier earmarked 30-35 companies, where it holds sizeable equity, for strategic sale. The 30-35 companies earmarked earlier are multi-national companies keen on tightening their control over their Indian subsidiaries.
“Their gameplan is simple. While the objective is not to destabilise the management, it will surely gain maximum value for their investments,” an analyst said.