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Tuesday, July 17, 2018

SUUTI closure deferred; govt can sell stakes in 3 private cos

Specified Undertaking of UTI holds stakes in ITC, L&T, Axis Bank

By: ENS Economic Bureau | New Delhi | Published: January 10, 2014 4:02:07 am

In a move that could potentially help the government partly bridge the fiscal deficit for the current fiscal, the Union Cabinet on Thursday decided to defer its plans to wind up the Specified Undertaking of UTI (SUUTI), thereby paving way for sale of its holdings in three private firms — ITC, L&T and Axis Bank.
“The proposal of the finance ministry (with regard to SUUTI) has been approved,” information and broadcasting minister Manish Tewari told reporters after a meeting of the Cabinet. SUUTI holds 11.32 per cent stake in ITC, 20.70 per cent in Axis Bank and 8.2 per cent in Larsen & Toubro and the combined value of the stake stood at around Rs 47,000 crore as of Thursday’s market capitalisation.
As was first reported by The Indian Express on November 22, 2013, the Ministry of Finance had, through a draft note dated November 18, 2013, proposed to the Cabinet to defer its decision to wind up SUUTI as it is empowered to dispose of all assets including strategic assets without seeking Cabinet approval.
With the government deciding not to wind up of SUUTI, it would be able to offload its holdings in these companies separately on the basis of suitable market valuation.
While the Cabinet had in March 2012 approved the proposal to wind up SUUTI, a new firm, National Financial Holdings Company Ltd (NFHCL), was incorporated and registered in June 2012 under the Companies Act and its board has already met four times since then. Though it was decided to transfer all assets and liabilities the new entity, the government is now reconsidering the same because of the limitations of NFHCL.
The note sent by the finance ministry in November pointed out that being a company under the Companies Act, NFHCL does not have powers and functions that are there with SUUTI. While NFHCL can’t dispose of any strategic assets without the approval of the Cabinet, SUUTI is empowered to do so.
“Seeking Cabinet approval for divesting its strategic assets, which are liquid financial instruments, will affect the optimal and effective utilisation of these assets by delaying time critical decisions,” said the note, adding that it will also save transaction and tax related costs amounting to around Rs 200 crore if the transfer of assets is not done.
Other than selling the strategic assets worth Rs 47,280 crore, the note referred to several other pending tasks for which SUUTI has been requested to be retained in its present form. The tasks include — the sale of equity of co-promoted entities such as NSDL, SHCIL, OTCEI etc, sale of unlisted thinly traded equity of around 400 companies, recovering NPAs worth Rs 746 crore and making payments of around 5 lakh investors for their unclaimed maturity amount of around Rs 1,400 crore.

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