Merchant bankers managing sale of government stake in Axis Bank, L&T and ITC held through SUUTI can enter into a competing transaction with a private company provided they notify SUUTI as and when they enter into any conflict of interest situation.
However, for that phase, the bankers will not be considered for managing the sale in these three companies.
Earlier, the merchant bankers were not permitted to enter into any competing transaction for entire three years for which they are being hired and hence, the bankers had approached DIPAM for a change in the clause.
Consequently, the Department of Investment and Public Asset Management (DIPAM) has loosened the rules for merchant bankers that would manage the sale of minority stake of the government in Group A companies — Axis Bank, L&T and ITC.
“As and when the merchant bankers get into the conflict of interest related to any one of the Group A companies, they have to notify SUUTI and will not be considered for selection for a particular transaction,” SUUTI said in a clarification to merchant bankers.
The merchant banker will also need to notify SUUTI as and when they are out of the conflict situation, it added.
A complete stake sale in the three Group A companies could fetch the exchequer about Rs 64,000 crore based on today’s closing price.
SUUTI will also notify the select merchant bankers at a particular point in time of its intent to launch a transaction. “During this period, the notified merchant bankers would be barred from getting into conflicting transactions,” it added.
The government holds 11.53 per cent in Axis Bank, 11.17 per cent in ITC and 8.16 per cent in Larsen & Toubro.
SUUTI will also notify closure of the transaction after which the barred merchant bankers will be eligible to regain ranking provided they are out of the conflict situation.
“The operating guidelines regarding communication between SUUTI and the merchant banker in this regard will be worked out with the appointed merchant bankers,” SUUTI said.
SUUTI will appoint six merchant bankers on its panel.
As many as 14 foreign and domestic merchant bankers had evinced interest in managing SUUTI stake sale, but wanted the conflict of interest clause removed. Hence, the government held a fresh pre-bid meeting on August 27 to clarify their issues. The merchant bankers will have to submit their bids by September 6.
The Specified Undertaking of UTI (SUUTI), an offshoot of the erstwhile investment firm Unit Trust of India (UTI), has investments in 43 listed and 8 unlisted firms.
The companies in which SUUTI holds stake have been classified into three groups. Group A includes its holding in blue-chip ITC, L&T and Axis Bank.
Group B includes the eight unlisted firms in which SUUTI owns 100 per cent stake. Group C consists of 40 listed firms held by SUUTI.