Special Undertaking of UTI (SUUTI), which was formed to take over the assets of US-64 after they plunged drastically in 2002, is planning to offload 17 per cent of its 27 per cent stake in Axis Bank. The Business Standard that SUUTI plans to sell its stake through block deals on the stock market, but will hold on to its stake in L&T and ITC due to concerns expressed by the two companies. Calculated at todays closing price of Rs 670, the value of stake held by SUUTI in Axis Bank is more than Rs 6,500 crore. It is still being discussed whether the shares would be sold only to governement-run entities or others could also buy the stake, the report added. Axis Bank informed the Bombay Stock Exchange today that it has not recieved any communication from SUUTI regarding the matter.
SUUTI is still talking to merchant bankers, which includes Citi and Goldman Sachs, and a decision on the details and timing of the sale will be taken soon. The timing of sale would depend upon the market conditions as Axis Bank share is currently trading much lower than its 52-week high of Rs 1291. The decision is prompted by the fact that SUUTI will cease to exist by June 2009 and has to meet redemption payment obligations, estimated at Rs 19,000 crore. However, an earlier had suggested that SUUTI would not have to sell its shares in Axis Bank to meet its redemption requirements. RBI will also be in approval of this move as it does not want one single entity to hold more than 10 per cent in a bank.
The promoter group of Axis Bank, which includes SUUTI, holds a 42.43 per cent stake as reported at the end of June. Life Insurance Corporation has 10.37 per cent stake and other the five public sector non-life insurance companies which hold the rest 4.95 per cent between them. Non-promoter shareholdering, which is 21.72 per cent, includes HSBC Financial Services Middle East (4.94 per cent), Oriental Global (4.50 per cent) and ICICI Prudential (4.42 per cent).
SUUTI holds a 9 per cent stake in L&T, which is worth around Rs 6,700 crore. The reservation regarding sale L&T’s stake is national security implications since the company is involved in several defence-related projects. Similarly ITC 11.9 per cent stake, worth more than Rs 8,000 crore, is not being sold as the company fears that foreign tobacco companies could acquire a foothold in ITC.