Mumbai: The Specified Undertaking of the Unit Trust of India (Suuti) will pare its holding in India’s largest engineering company Larsen and Toubro Ltd (L&T) through a block deal, said two people aware of the development.
Suuti is looking at selling up to 3% in L&T through the block deal, which is likely to be executed on Friday, said one of the two people cited above, requesting anonymity, as he is not authorized to speak to reporters.
The stake sale will fetch the government around Rs4,000 crore, he added.
On Thursday, shares of L&T fell 0.12% to Rs1,444.5 on BSE, while the benchmark Sensex shed 0.53% to 27,437.2 points.
Investment banks Citi, Morgan Stanley and ICICI Securities Ltd are advising Suuti on the stake sale, said the second person cited above, also requesting anonymity.
Spokespersons for the above banks could not be immediately reached for comments.
Suuti, an offshoot of the erstwhile state-run investment firm Unit Trust of India (UTI), has shares in 43 listed and eight unlisted firms. It holds an 11.17% stake in ITC Ltd, 8.16% in L&T and 11.53% in Axis Bank Ltd.
India’s Parliament bifurcated UTI in 2002, creating Suuti and UTI Asset Management Co. Pvt. Ltd, with the former holding the assured-return investment plans of UTI and the latter overseeing market-linked plans.
The bifurcation took place after UTI’s US-64 investment scheme ran into trouble.
Suuti has split its divestment programme into three parts: Group A, which includes its holdings in ITC, L&T and Axis Bank, will be up for sale first. Group B will include the eight unlisted firms in which Suuti owns shares. Group C will hold the remaining 40 listed firms held by Suuti.
The eight unlisted companies include National Securities Depository Ltd (NSDL), North Eastern Development Finance Corp. Ltd, NSDL e-Governance Infrastructure Ltd, Over the Counter Exchange of India, STCI Finance Ltd, Stock Holding Corp. of India Ltd, Unit Trust of India Investment Advisory Services Ltd and UTI Infrastructure Technology and Services Ltd.
On 13 July, Mint reported that Life Insurance Corp. of India (LIC) will likely buy between one-third and half of the equity assets of Suuti. The purchase from Suuti could mean spending of between Rs25,000 crore and Rs30,000 crore for the state-run insurer, and an equivalent windfall for the government, said the report.
The government has considered selling Suuti assets several times in the past.
This time, the decision has been driven by the need to meet an ambitious divestment target and a conducive market environment.
The government has set a divestment target of Rs56,500 crore for 2016-17, of which Rs36,000 crore is expected to come from minority stake sales in state-owned firms. The remaining Rs20,500 crore is expected to be raised through strategic sales in both profit-making and money-losing state-run companies.