ITC, L&T can help govt raise over Rs 43k cr

NEW DELHI (TIP): The government has lined up big bang stake sale in blue chip public sector stocks — Coal India, ONGC and NHPC — to raise over Rs 45,000 crore but has so far done little to offload its shares in ITC and Larsen & Toubro, which can help it mobilize another Rs 43,500 crore. While the proposal has been on the table for over five years now, the finance ministry has repeatedly deferred a decision on sale of shares in these two private companies that have no promoter group at the helm, amid intense lobbying to prevent the government from offloading its stake.

At the same time, more shares of Axis Bank — the third prominent non-PSU in the portfolio — are expected to be sold in the market as the government chases record disinvestment receipts of over Rs 58,000 crore. Is there a reluctance to sell the ITC and L&T shares? Officials in the finance ministry said there are not holding back the sale and added that a decision will be taken at an opportune time. The government became the owner of these shares by accident when it decided to bail out the erstwhile Unit Trust of India to help the country’s first mutual fund repay its liabilities to retail investors.

As part of the deal, dues related to the non-net asset value (NAV) based schemes of the UTI were cleared by the government and after setting all liabilities, the assets, which mainly included shares of top-notch companies were left with the Specified Undertaking of UTI (SUUTI). Today, SUUTI owns around 11.3% stake in ITC, which is worth over Rs 31,500 crore, while its 8.2% in Larsen & Toubro is valued at over Rs 12,100 crore. Similarly, based on the current trading price, SUUTI’s 11.6% in Axis Bank (earlier UTI Bank) is estimated to be of the order of Rs 11,500 crore. So, the three stocks put together can help the government mop up over Rs 55,000 crore, which is more than all the disinvestment proposals cleared by the government so far this year add up to.

What it has monetized so far is a part of its holding in Axis Bank when it sold a 9% stake last March to raise around Rs 5,500 crore. In the past, however, there have been suggestions that the government may give up strategic interest by selling shares in the two companies. For instance, shares of ITC, it has been argued, may be acquired by foreign tobacco majors and can have health implications. In case of L&T, the argument is that the company has got into strategic areas, and is undertaking a lot of defence-related activity, which may be compromised if foreign investors bought SUUTI’s shares.

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