Let SUUTI sell its blue-chip shares

The finance ministry’s proposal to let the Specified Undertaking of UTI ( SUUTI) sell shares of Indian companies originally held by it is a good way to raise revenues.

It requires overturning an earlier Cabinet decision to shut SUUTI and transfer the assets and liabilities to a new holding company. The reversal makes sense as the capital receipts would partly ease the pressure on the government’s fiscal deficit due to rising subsidies and a slowdown in revenues. SUUTI’s shareholding in L&T, ITC and Axis Bank itself is worth nearly Rs50,000 crore.

That’s not small change for a government staring at a likely shortfall in its divestment target of Rs40,000 crore from the stake sale in PSUs this fiscal. The Sensex is up over 13% in the last three months, and the government cannot hold these shares forever in the hope that the market will do even better someday.

The government is not in the business of buying and selling shares. The government had acquired the shares of these professionally-run blue-chip firms under specific circumstances as the SUUTI was formed to bail out investors in the UTI’s US-64 scheme. Therefore, the government should not hold on to these shares forever.

Moreover, SUUTI has the right to sell these shares without having to seek Cabinet approval each time, cutting needless dither and delays. The money raised should be used to step up allocations in social infrastructure.

SUUTI’s equity holdings in Axis Bank (20.72%), ITC (11.32%) and L&T (8.21%) have been termed as strategic. Why is it strategic for the government to own shares of private companies?

Now, bids should be invited for the shares to ensure that no one entity or investor gets to buy more than some percentage of shares on offer. This will enable the government secure the maximum consideration for its SUUTI’s holdings.