SUUTI stake sale in blue chip companies like ITC and L&T put on hold

NEW DELHI: The finance ministry has put the sale of stakes in blue chips such as Larsen and Toubro and ITC, held by the Specified Undertaking of Unit Trust of India, on the backburner because it's calculating this won't be needed to meet the government's fiscal deficit target thanks to savings in expenditure as global commodity prices have dropped.

The ministry is confident of raising the amount budgeted through disinvestment in ONGC, Coal India and a few others. This combined with savings will mean the fiscal deficit target of 4.1 per cent of GDP can be met.

"We may not go in for selling stakes in L&T and ITC," a top finance ministry official told ET. North Block was considering the sale of a part of the holdings through an exchange-traded fund but is now looking to sell only SUUTI's residual stake in Axis Bank. SUUTI currently holds a 11.28 per cent stake in ITC and 8.19 per cent in L&T. It holds 11.7 per cent in Axis Bank, which is worth more than Rs 13,000 crore. The holdings in the three companies are worth nearly Rs 60,000 crore at current prices, more than the Rs 58,000 crore budgeted to be raised from asset sales in FY15. The government is already pushing 10 per cent disinvestment in Coal India and 5 per cent in ONGC, which can fetch nearly Rs 38,000 crore at current prices.

It also has approval for disinvestment in Steel Authority of India and NHPC. Road shows for public offers of ONGC and Coal India are already underway. Though tax collections have been tardy and indirect taxes may well miss the budget estimate, likely savings on all three subsidies - fuel, fertiliser and food--and plan spending will help the government shore up its finances.

Finance minister Arun Jaitley had budgeted for Rs 43,000 crore from disinvestment through stake sales in public sector enterprises and another Rs 15,000 crore from residual holdings in companies privatised earlier. SUUTI came into being in February 2003 following the splitting of Unit Trust of India after the US-64 debacle. All net asset valuebased schemes were transferred to UTI Asset Management Co. and large equity holdings along with other assets including real estate and 25 assured-return schemes went to SUUTI.

The union cabinet had in 2012 approved a proposal for winding up SUUTI and creating a National Asset Management Co. to manage its assets and leverage them to buy stakes in state-owned companies. The decision was reversed a year later to allow SUUTI to monetise its holdings. The government subsequently shed some of its shares in Axis Bank for Rs 5,500 crore.