Ajay Piramal-led Piramal Enterprises Ltd is looking at a proposal from investment bankers to pick up around 5 per cent equity stake in private sector lender Axis Bank from Specified Undertaking of Unit Trust of India (SUUTI), as per a report by the Business Standard, quoting unnamed sources.
The Indian government, which owns 20.7 per cent equity stake in Axis Bank via SUUTI, is looking to offload a part of its stake in the private lender. Given the market capitalisation of the bank, the 5 per cent stake is expected to cost around Rs 2,800 crore to Piramal Enterprises.
Last week, SUUTI appointed JPMorgan Chase & Co, Citigroup Global Markets and JM Financial as merchant bankers to manage the proposed 5 per cent stake sale as part of the government’s divestment programme to meet fiscal deficit target.
As per RBI norms, no specific approval is required to pick up to 5 per cent stake in a bank and the transaction can be effected through block deals on the bourses.
Apart from Axis Bank, SUUTI owns 11.32 per cent stake in ITC and 8.2 per cent stake in L&T.
Piramal Enterprises has been using its huge cash pile which it got by selling its domestic formulation business to Abbott Laboratories for around Rs 18,000 crore a few years ago. It has been particularly bullish on financial services and has also formed an NBFC to expand its presence in the lending business.
However, it was not among the applicants who were in the race for a banking licence. A stake in Axis Bank would provide it an exposure to the banking sector without getting tied to its regulatory norms.
Recently it harvested a cool profit by exiting its 10.97 per cent in telecommunication major Vodafone India for Rs 8,900 crore. The company had made a strategic investment of Rs 5,900 crore in two tranches – of Rs 2,893 crore in 2011 and of Rs 3,007 crore in 2012 – to buy the stake.
(Edited by Joby Puthuparampil Johnson)