The Government of India, which is staring at a steep shortfall in its divestment target for the fiscal 2016-17 solid two percent SUUTI (Specified Undertaking of Unit Trust of India) stake in ITC today. The sale (a block deal to LIC) which is expected to realise the government Rs 6,700 crore fueled the scrip to its 52 week high at Rs 291.95. The government has already been selling its SUUTI stake in companies such as Axis Bank and L&T.
This sale comes at a time when the government is looking to bridge a wide gap in its disinvestment revenues. For the fiscal 2016-17, the plan was to raise Rs 56,500 crore through disinvestment but as the fiscal year comes to an end the shortfall is significant and it is estimated that the government will, at best, raise Rs 45,500 crore. Sale such as what was done today will help government reach its revised target.
Going forward it is expected that more such sale will be in the offing as the government has targeted an even higher ambitious from disinvestment in 2017-18 at Rs 72,500 crore. Selling SUUTI assets is a less complicated way for the government to raise revenues as it does not have all the negative trappings of a traditional disinvestment. Government has also announced that it plans to list some of railway corporations such as IRCTC, IRCON etc.
SUUTI, created in February 2003, when Unit Trust of India’s flagship scheme US-64 collapsed, holds significant stakes in Axis Bank, ITC and L&T. That apart, it has less than 5 percent stake in many blue chip companies such as ICICI Bank, Reliance Industries, HUL, Titan and so on. It also has stake in eight unlisted companies.
Though unrelated, ITC block deal comes at a time when the company is witnessing a succession. YC Deveshwar, who was the chairman of the company for the last 20 years, is taking on a role of mentor (he will be the non-executive chairman) with Sanjiv Puri having taken over as its CEO. Government still holds 9.1 percent stake in ITC post this sale.