Divestment strategy: Govt plans sale of SUUTI stake in 51 companies

New Delhi: Government has invited merchant bankers to help it sell minority stakes in 51 companies, including RIL, ICICI Bank, Axis Bank and L&T, and is looking at exiting them within three years.

The Specified Undertaking of UTI (SUUTI) has investments in these 51 listed as well as unlisted companies, like Hindustan Unilever, ITC Ltd, Jaiprakash Associates and a host of Tata Group firms.

The Centre plans to raise Rs 36,000 crore from stake sale in PSUs in 2016-17 and expects Rs 20,500 crore through strategic sales of SUUTI stake.

Government holds minority stake in these companies through SUUTI, which was formed in 2003 as an offshoot of erstwhile UTI, and is looking at selling them either through an OFS, block deal, bulk deal or regular sale through stock exchanges.

As per the Request for Proposal, SUUTI plans to appoint up to three merchant bankers/advisers and selling brokers for assisting and advising on the SUUTI Holdings for a period of three years.

“The advice shall be regarding sale of the shares held by SUUTI in various companies either through the Offer For Sale (OFS), Block Deal, Bulk Deal, Regular sale through Stock Exchange or any such other mechanism subject,” the RFP said, while inviting bids from merchant bankers by 1 August.

The bankers would have to put in a single consolidated bid for the entire SUUTI Holdings. However, the sale process of each of the 51 companies would be carried out individually.

Of the 51 companies in which SUUTI holds stake, 8 are unlisted entities – NSDL, STCI Finance, Over The Counter Exchange, Stock Holding Corporation of India, UTI-IAS Ltd and UTI Infrastructure Technology Services, North Eastern Development Finance Corporation and NSDL e-Governance Infrastructure.

Sale of SUUTI holdings would help swell government’s disinvestment kitty. It has also kept the option open for including those companies in which SUUTI holds stake in the second CPSE Exchange Traded Fund, which the government plans in the current fiscal.

The government has set up an ambitious disinvestment target of Rs 56,500 crore for 2016-17. Of the budgeted target, Rs 36,000 crore is to come from minority stake sale in PSUs and the remaining Rs 20,500 crore is estimated to come from strategic sale in both profit and loss-making companies.

In March 2014, the government had sold 9 percent of its stake in Axis Bank held through SUUTI for over Rs 5,500 crore. As per the RFP, merchant bankers would be required to advise on all statutory or regulatory norms and assist in securing all approvals and exemptions from regulatory agencies such as Sebi, stock exchanges, FIPB, DIPP, RBI, MCA in respect of the companies constituting the SUUTI Holdings.

They will also be required to hold domestic and international roadshows to generate interest amongst prospective investors and arrange meetings with the key investors and facilitate communication.

“All expenses in this regard will be borne by the Merchant Bankers except the tour expenses of SUUTI and company officials,” the RFP said.

The merchant bankers will have to undertake market research, assist in the pricing of the issue, allocation of shares and provide after sale support in respect of the companies constituting the SUUTI Holdings.

Selected merchant bankers will have to submit to the SUUTI separate list of institutional and other major investors, both, domestic and international, (indicating name and address) to be approached for the sale in respect of the companies constituting the SUUTI Holdings.

“A detailed strategy for reaching out to the retail investors so as to create awareness about retail participation in the sale in respect of the companies constituting the SUUTI Holdings,” the RFP said.

The selected Merchant Bankers will be required to advise SUUTI on the “proper and optimum timing” and best floor price for the sale.

The other listed companies in which government through SUUTI holds stake include Ambuja Cements, HERO Motocorp, Tech Mahindra, Tata Steel, Tata Power, Tata Motors, BPCL, Ultratech Cement, Sun Pharmaceuticals and Videocon Industries.