BS reported that running out of time to meet its year’s disinvestment target of INR 40,000 crore, the Union government may consider pledging shares held by the Specified Undertaking of UTI to raise loans and buy shares of public sector undertakings.
A finance ministry official said that the bifurcated arm of the erstwhile Unit Trust of India could get a few thousand crore rupees of loans from banks for purchase of PSU shares but added the proposal was in the initial stage.
Last month, ICICI Securities had suggested a plan to mop INR 46,171 crore from buyback of securities, strategic cross purchases and secondary sale of equity in these units in the immediate to medium term. It had suggested raising INR 22,941 crore from monetizing the portfolio of Suuti, besides looking for banks and insurance companies for possible selloffs.
Suuti holds 11.54% in ITC Limited, 8.27% in Larsen & Toubro and 23.58% in Axis Bank. The value of holdings in these companies is INR 18,983 crore, INR 6,251 crore and INR 9,786 crore, respectively.
The idea was for Suuti to exit from all the stocks after the bifurcation. In earlier years, too the government considered selling its stake in these institutions held by Suuti but the plan was shelved.
Selling Suuti stake in private companies can help the government meet its disinvestment target. Of the year’s target of INR 40,000 crore from divesting stake in its PSUs, the government has got just over INR 1,100 crore from disinvestment in Power Finance Corporation. It had collected INR 22,762 crore from disinvestment proceeds in 2010 to 2011 against the same target of INR 40,000 crore.
Another finance ministry official said that we are looking into other options where we can get the best price without being hammered. In a bullish market, you don’t mind small hammering but in a bearish market, any speculation can be risky. We are seeking Cabinet approval for that. The official said cross-holding could help get the right valuations for PSU follow on offers in the current market.
Buyback of equity by cash rich PSUs is also being considered actively, as the government devises an alternative plan to beat market blues. The ministry is also exploring options such as sale of residual stake in companies such as Hindustan Zinc and Bharat Aluminum Company and buyback of equity by cash rich PSUs. Some PSUs, like Steel Authority of India and Hindustan Copper have decided against raising fresh equity in the light of current market conditions.
The government however has decided to go ahead with plans to divest shareholding in these companies, as it felt the needs of cash surplus PSUs are different from a cash strapped government. The government had mopped up INR 22,762 crore from disinvestment proceeds in 2010 to 2011 against a target of INR 40,000 crore.
(Sourced from Business-standard.com)
