Government eyes stake sale in more PSUs

It may launch a second exchange traded fund and further sell stake in SUUTI

GN Bureau | September 30, 2016


#PSUs   #NMDC   #NALCO   #BHEL   #SUUTI   #UTI  

 The government is looking to sell some of its stake in NMDC, NALCO, BHEL through the offer for sale (OFS) route. According to a news report in moneycontrol.com, the centre may divest through an OFS in companies that bought back government shares, in accordance with its plan to dilute share in public sector undertakings (PSUs). 

The government aims to raise Rs 5,000-7,000 crore in the period of October 2016-March 2017 by divesting in mid-sized companies. It may launch a second exchange traded fund (ETF) and further sell stake in Specified Undertaking of UTI (SUUTI) during October-March. 
 
The government kicked off its divestment drive on a high note when it announced to sell its minority shareholdings in the SUUTI fund in July. But the plan hit a roadblock when it received a tepid response from investment bankers and had to pull back its request for proposal (RFP). It then reissued the RFP, and also increased the number of merchant bankers to six from three to underwrite its stake sale. 
 
SUUTI was formed in 2003 as an extension of the United Trust of India (UTI). It comprises 51 companies - 8 unlisted and the rest listed companies. Through SUUTI, the government holds minority stake in these companies and is planning to divest its shareholding. 
 
The government is mulling to divest through an offer for sale (OFS), a block deal, a bulk deal or just by a regular sale on stock exchanges. Three blue-chip stocks – Axis Bank, ITC and L&T – which contribute to approximately 95 percent of SUUTI’s holdings in value terms, can bring in around Rs 63,000 crore if divested completely. 
 
To reach its divestment target of Rs 56,500 crore for this fiscal, the government has been on the front foot to raise revenue. The government has already put 7 percent of its stake in Hindustan Copper for sale through an OFS, that began on Friday and will help to raise Rs 401 crore. It also plans to sell 10 percent stake in NMDC, for which an overseas roadshow was started on September 5. At current prices, a 10 percent sale in NMDC could earn the government around Rs 4,000 crore.
 

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