Photo: Pradeep Gaur/Mint
Photo: Pradeep Gaur/Mint

Revised tender for sale of SUUTI stakes may draw more participants

Altered request for proposal removes restrictive clause on banks handling deals of rivals to companies in which SUUTI holds a stake

Mumbai: The revised tender floated by the government for the proposed sale of company stakes owned by the Specified Undertaking of the Unit Trust of India (SUUTI) will encourage more investment banks to participate and manage the sale process, said three investment bankers directly familiar with the matter.

The altered request for proposal (RFP) now removes the restrictive clause on banks handling deals of rivals to the companies in which SUUTI holds a stake. Instead, banks will now be required to notify the government of any conflict situation at the time of the deal.

In case conflict arises, the bank in conflict will be substituted by another bank based on its rank.

The government is now looking to hire six banks as against the plan of having three banks earlier. Banks will be engaged for three years.

An earlier tender had received poor response from investment banks as it barred them from managing fund-raising plans of rivals competing with companies in which SUUTI held stakes.

“The detailed terms and conditions look more acceptable now. With the restrictive clause removed, more banks may be willing to participate in the bid process," said one of the bankers cited above, requesting anonymity.

Mint reported on 23 August that only four investment banks—SBI Capital Markets Ltd, ICICI Securities Ltd, IDFC Securities Ltd and Edelweiss Financial Services Ltd—submitted unconditional bids to manage the sale and were later invited to make presentations.

Strict terms and conditions proved to be a deterrent to attracting more bidders for the mandate to manage the sale, which was to start with the disposal of SUUTI stakes in ITC Ltd, Larsen & Toubro Ltd (L&T) and Axis Bank Ltd.

“The earlier tender did not make any sense. It will now be a lot easier for banks to bid," said the second person who had skipped the process earlier but may now consider participating in the process.

SUUTI has minority stakes in 51 listed and unlisted companies, with most of its value locked in Axis Bank (11.93% stake), ITC (11.17%) and L&T (8.32%).

In addition to the list of 51 listed and unlisted entities, “SUUTI may also consider including other unlisted, illiquid and thinly traded equity shares to its list", said the document seeking bids from bankers.

At current market prices, the government could raise 16,628.86 crore by selling its entire stake in Axis Bank. The government’s stakes in ITC and L&T can fetch 33,789.53 crore and 11,426.09 crore, respectively.

In March 2014, the government sold a 9% stake in Axis Bank held through SUUTI for over 5,500 crore.

Parliament bifurcated state-run investment firm Unit Trust of India (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 plan ran into trouble.

The asset sales would help the government meet its ambitious disinvestment target of 56,500 crore for 2016-17 and shrink the fiscal deficit projected at 5.33 trillion.

So far in this fiscal, the centre has garnered 2,716.55 crore from a stake sale in NHPC Ltd, according to information made available by the Department of Investment and Public Asset Management.

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