The government sold 2.5% of its equity stake in engineering major Larsen & Toubro held through its investment arm SUUTI for more than Rs 4,000 crore on Wednesday, Secretary, Department of Investment and Public Asset Management, Neeraj Kumar Gupta said. The stake sale in L&T involved six block deals on BSE and at least one block deal on NSE.
L&T shares rose as much as over 1.7% to the day’s high of Rs 1,781.4 on BSE on the news, and were later trading up 0.9% at Rs 1,766. L&T’s stock has risen by about an impressive 30% so far since the beginning of this calendar year. Meanwhile, the benchmark BSE Sensex was down 0.25% at 31,219.87 points. The latest stake sale has cut the government’s stake in L&T to about 4.2% from 6.7% earlier.
The government’s investment arm SUUTI (Specified Undertaking of Unit Trust of India) holds equity stakes in over 50 companies, including large holdings in L&T, ITC and Axis Bank, earlier held by the erstwhile Unit Trust of India before its breakup. SUUTI’s equity stakes in L&T, ITC and Axis Bank alone are valued at above Rs 50,000 crore.
The government is gradually selling its stake in companies held through SUUTI to help it achieve its disinvestment target of Rs 72,500 crore in the current financial year 2017-18. The government has mulled selling SUUTI’s equity holdings several times, and is also reportedly considering including SUUTI stakes in its proposed next CPSE ETF – the exchange-traded fund of public sector enterprises – which it plans to launch in the current financial year 2017-18.
Earlier, in February, SUUTI sold 2% from its 11.7% equity stake held in the tobacco major ITC Ltd in a block deal for reportedly 6,700 crore. The state-run insurer-AMC Life Insurance Corp of India was the buyer in the deal. Previously, in 2014, SUUTI sold 9% equity stake in Axis Bank, raising Rs 5,500 crore.
Indian government has undertaken strategic sale of stake in profitable PSUs to help boost up state revenue and bridge the fiscal deficit. In the last financial year 2016-17, the government raised Rs 46,247 crore through disinvestment, the highest ever amount earned by sale of equity stake in PSUs, though falling short of the original target, as expected.
This fiscal, the government seeks to sell 10% equity stake each in three major state-run railway companies IRCTC, Ircon and IRFC via IPOs. The Union Cabinet has also approved listing of five state-run general insurance companies, which is likely to begin only in the next financial year with the first listing possible by September-October. The government is also reportedly looking at selling 10% equity stakes each in the capital goods major Bharat Heavy Electricals Ltd and energy company Oil India Ltd.