Running out of time to meet its year’s disinvestment target of Rs 40,000 crore, the Union government may consider pledging shares held by the Specified Undertaking of UTI (Suuti) to raise loans and buy shares of public sector undertakings (PSUs).
A finance ministry official said 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 Rs 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 Rs 22,941 crore from monetising the portfolio of Suuti, besides looking for banks and insurance companies for possible selloffs.
Suuti holds 11.54 per cent in ITC Ltd, 8.27 per cent in Larsen & Toubro and 23.58 per cent in Axis Bank.
The value of holdings in these companies is Rs 18,983 crore, Rs 6,251 crore and Rs 9,786 crore, respectively, according to the ICICI paper.
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.
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Selling Suuti stake in private companies can help the government meet its disinvestment target.
Of the year’s target of Rs 40,000 crore from divesting stake in its PSUs, the government has got just over Rs 1,100 crore, from disinvestment in Power Finance Corporation. It had collected Rs 22,762 crore from disinvestment proceeds in 2010-11, against the same target of Rs 40,000 crore.
Another finance ministry official said, “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 Aluminium Co, 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 Rs 22,762 crore from disinvestment proceeds in 2010-11, against a target of Rs 40,000 crore.