The government-owned Specified Undertaking of the Unit Trust of India (SUUTI) on Friday sold a 1.63 per cent stake in blue-chip firm Larsen & Toubro (L&T) through a block deal to raise Rs 2,100 crore, potentially opening a new window for the Centre to meet its FY17 disinvestment revenue target of Rs 56,500 crore.
The transaction marks the beginning of sale of SUUTI holdings in a number of companies this year to offset a likely huge shortfall in the Centre’s target of raising Rs 20,500 crore from strategic sales. The government owns shares in 51 companies through SUUTI. SUUTI’s prized holdings include Axis Bank, ITC and L&T. Prior to the block/bulk deal, SUUTI owned 8.32 per cent in the technology and engineering major. This was the first block/bulk deal transaction undertaken by the Modi government to sell shares since it came to power in May 2014.
Department of Investment and Public Asset Management secretary Neeraj Kumar Gupta said that SUUTI offered 1.5 per cent of its equity stake in L&T with a greenshoe option of retaining another 1.5 per cent to absorb additional demand. When asked, Gupta confirmed that state-owned Life Insurance Corporation, a major investor in government’s disinvestment programme, did not participate in the deal as it probably didn’t have headroom to further invest in the company. Foreign institutional investors, domestic institutional investors, mutual funds and banks participated in the L&T block deal.
The L&T scrip ended Friday 1.78 per cent lower at Rs 1,418.90 on the BSE.
With the L&T transaction, the Centre has raised about Rs 24,000 crore so far in the current fiscal or 42 per cent of FY17 disinvestment target. Besides buyback of shares by PSUs, which contributed more than half of the disinvestment revenue so far this year, planned stake sales via a new exchange-traded fund, offer for sales in a number of PSUs, IPOs and likely SUUTI stake sales in more firms, would help achieve the disinvestment revenue target for FY17.