Markets: Eerie calm

Markets: Eerie calm

it is not clear when market sentiment can change; as in the past, it can be quite sudden.
At a turn and yet not

At a turn and yet not

RBI could be tempted to cut policy rate to support growth at its bi-monthly review.

Axis Bank stake sale will fund higher PSU burden

Jan 10 2014, 19:55 IST
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Through SUUTI, the government holds 20.7 pct in Axis Bank, 11.32 pct in ITC and 8.21 pct in Larsen & Toubro (L&T). Reuters Through SUUTI, the government holds 20.7 pct in Axis Bank, 11.32 pct in ITC and 8.21 pct in Larsen & Toubro (L&T). Reuters
SummaryAxis to fetch Rs 7,200 cr, BSNL/MTNL get Rs 11,324 cr, IOC sale off.

a 10% stake sale in IOC, following strong opposition from the petroleum ministry, which said that the oil marketing company’s share price has plunged around 50% since 2010 when the stake sale was first mooted. “It has been deferred,” oil minister M Veerappa Moily told reporters after the CCEA meeting. The EGoM on IOC disinvestment may meet again next week.

There are some strategic concerns over the sale of “SUUTI shares” as well. In the case of ITC, for instance, the stake sale can trigger a takeover attempt from ITC’s parent BAT, which has a 31.6% stake in the company. Given that domestic financial institutions hold 20.72% of ITC, BAT will be in the driving seat — FIIs that hold 15.26% in ITC may end up supporting BAT. In the case of L&T, which is making a foray into defence equipment, the government would in fact like to retain a stake as this could be useful in the future.

The government’s disinvestment plans are flattering — it has so far managed to garner just Rs 3,000 crore from stake sales in seven PSUs, including Power Grid Corporation, Hindustan Copper, National Fertilisers and MMTC, while the target for FY14 including Rs 14,000 crore from the sale of residual stakes in Hindustan Zinc and Balco is Rs 54,000 crore. The stake sales in Hindustan Zinc and Balco is stuck due to the ambiguity over whether Parliament’s approval is required for the sales.

Road shows for an IOC stake sale had received a very cold response among investors at promotional in the US, the UK and Singapore. At current share prices, an IOC disinvestment will not garner more than Rs 4,500 crore. Similarly, a sharp 30% drop in power and military equipment maker BHEL’s share price in the past one year has forced the Centre to put a planned 5% stake sale on hold. Heavy industries minister Praful Patel said on Thursday that no decision had been taken so far regarding BHEL, which is considering a special dividend to the government in place of a stake sale.

The biggest disappointment has been Coal India, from which the Centre was planning to raise about Rs 20,000 crore through a 10% stake sale. Its unions have vehemently opposed any sort of a stake sale even after the government cut down its stake sale plan to 5% from 10% planned in the Budget. The likelihood of any disinvestment this

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