Govt may pare 1-2% SUUTI stake in Axis Bank to meet disinvestment targets

Proposed move may fetch Centre Rs 2,300 crore

In its effort to meet disinvestment targets, the central government may further pare its stake in Axis Bank held through Specified Undertaking of the Unit Trust of India (SUUTI) this fiscal year (2020-21, or FY21). The proposed move may fetch the government around Rs 2,300 crore.

The Centre has cut its disinvestment target for 2020-21, from Rs 2.1 trillion to Rs 32,000 crore.

The plan is to sell an additional 1-2 per cent stake in India’s third-largest private sector lender in FY21 in tranches, revealed a senior government official. If the government is not able to sell 2 per cent of its stake in FY21, it will be done the following fiscal year (2021-22, or FY22), clarified the official. The plan now is to sell the remaining shareholding of 1 per cent in the private sector lender, and exit its holdings entirely in FY22.

The government currently holds 3.37 per cent stake in Axis Bank after a share sale on December 21, 2020, according to disclosures made to exchanges to prohibit insider trading. However, the shareholding pattern as on quarter ended December 2020 shows 3.54-per cent SUUTI stake.

Since April 2020, the government has cut its 1.32-per cent stake held in Axis Bank through SUUTI. Most of the stake was sold, as shares of the private sector lender recovered from hitting their 52-week low of Rs 285 on March 25, 2020.

The government has mopped up receipts in excess of Rs 1,800 crore, according to Business Standard’s calculations. The lender’s shares had hit a 52-week high of Rs 800 on February 16.

The government had waited for the stock to touch Rs 600-levels. It then took a call to offload its stake in the private sector lender, Business Standard had earlier reported. However, the decision to lower the stake in Axis Bank was taken last year, informed the official.

The shares of the bank closed at Rs 777 on Wednesday.

As the Covid-19 pandemic disrupted the government’s share sale and privatisation plan, the Centre had gone ahead with the offer for sale (OFS) in public sector undertakings (PSUs) and reducing stake held through SUUTI. The delay in privatisation and deferment of share sales due to lower valuations of PSUs had led to the government revising its divestment target to Rs 32,000 crore for FY21.

So far, the government has collected Rs 19,809 crore in divestment receipts in FY21 through buyback, OFS, initial public offering, and reducing shares held through SUUTI.