Sale of small portions of Suuti (the Specified Undertaking of the UTI) holdings in a few companies in 2016-17 helped the government raise `10,779 crore, 70% higher than what it got from strategic sales in 31 companies/units in 1999-2004.
Receipts from Suuti stake sales could be much higher in 2017-18 as the government will likely use this route to achieve its ambitious disinvestment target of `72,500 crore for the year, analysts say. Through Suuti, government holds small stakes in as many as 51 companies, including blue chip private firms.
After Suuti stake management was transferred to the department of investment and public investment (DIPAM) in April 2016, `6,682 crore was raised by selling a 2% of Suuti stake in ITC to LIC in a block deal on March 7. Similarly, 1.62% stake sale in L&T in a bulk trade garnered `2,096 crore on November 4. Another `2,000 crore was realised from management of Suuti holdings in a separate clutch of companies. In total Suuti contributed 21% of the Centre’s total disinvestment receipt of `46,247 crore in the last fiscal year.
Suuti’s current holdings in ITC, Axis Bank and L&T (considered strategic) are worth `50,000 crore at current market prices or nearly 70% of the government’s disinvestment revenue target for 2017-18. However, the stake sales in these companies and others, sparingly done in the past and on which the government appeared to tread with caution, are likely to be done only in tranches, spread over next two years.
DIPAM has selected six merchant bankers for advising Suuti on the stake sale of above mentioned companies under an arrangement that three bankers are always available for any transaction which Suuti wants to execute. This has provided flexibility to Suuti to transact in the strategic holding at a short notice without hammering of these shares in market.
Other big companies in which Suuti holds minority stakes include Reliance Industries, Sun Pharma, Tata Motors, Tata Steel, Tata Power, Tech Mahindra, Hindustan Unilever, ICICI Bank, Ambuja Cement, Hero Motocorp and Bharat Petroleum.
The government has been criticised in the past for holding on to the stake in ITC, a tobacco manufacturer. Suuti’s 9.17% stake in ITC could fetch `30,382 crore at the current market price.
The government may also include Axis Bank stocks held through Suuti in a planned new exchange traded fund (ETF) to sell its shares as part of the disinvestment programme in the current fiscal. The ETF would also include stocks of some PSU banks. At current prices, the Suuti stake in Axis bank is worth close to `14,393 crore.
The previous NDA government which set the process in motion and managed to sold 18 ITDC hotels as well as majority stakes in 13 companies including Videsh Sanchar Nigam, Hindustan Zinc, Indian Petrochemicals Corporation, Bharat Aluminium Company and Hindustan Zinc for a total sum of `6,344 crore.