The Union Cabinet has decided to defer the earlier decision to wind up operations of Specified Undertaking of UTI or SUUTI—the bifurcated arm of the erstwhile Unit Trust of India—and transfer its assets and liabilities to an asset management company. This clears the decks for the government to sell stake held in blue chip public listed firms such as ITC, L&T and Axis Bank through SUUTI.
“Finance ministry proposal on SUUTI has been approved,” information and broadcasting minister Manish Tewari told media on Thursday.
Earlier in November 2012, the government had given nod to a proposal to dismantle SUUTI—which was formed in 2003 following the restructuring of UTI after its assured-return schemes collapsed—and create a National Asset Management Company (NAMC) to manage the assets owned by it.
Presently, SUUTI owns a 11.32 per cent stake in ITC, 20.72 per cent in Axis Bank and 8.2 per cent in L&T. As per the current market price, the total value of these stakes is over Rs 47,000 crore or over $7.5 billion.
The government is expected to sell stakes held by SUUTI, starting with cutting its holding in Axis Bank (formerly UTI Bank). In December, the private sector lender obtained the government’s approval to raise foreign investment ceiling to 62 per cent from 49 per cent earlier.
A part sale of its stake in one or all of its holding in these firms would help the government raise cash to meet its fiscal deficit target.
The government has been hard pressed in meeting its disinvestment target due to the poor state of the primary market despite the stock markets near their all-time highs. The upcoming general elections also complicate the matter as the government cannot take significant decisions on fresh disinvestments.
Moreover, the government is finding it difficult to sell stake in the major state-run companies due to opposition from respective ministries. After its failed attempt to convince labour unions of Coal India for stake sale in the company, the government is now reportedly seeking a record dividend worth Rs 15,000 crore from the public listed miner to get closer to meet its disinvestment target. Currently, the government owns 90 per cent stake in the world’s largest coal miner.
Meanwhile, the Empowered Group of Ministers on Thursday delayed the proposed 10 per cent disinvestment decision in Indian Oil Corp after it faced strong opposition from the Ministry of Petroleum and Natural Gas. The sale of 10 per cent stake in IOC is expected to bring Rs 4,500 crore to the exchequer’s kitty, at the current market prices. Media reports suggest that the ministerial panel may again meet next week to take a call on this.
(Edited by Joby Puthuparampil Johnson)