Government may hold on to ITC, L&T shares despite review

NEW DELHI: The government may hold on to its shares in blue chips such as ITC and L&T despite the Specified Undertaking of Unit Trust of India (SUUTI) seeking bids from merchant bankers to advise the agency on its holdings that span across sectors.

While several experts have suggested that SUUTI, which is wholly owned by the government, sell some of the marquee stocks instead of divesting stake in PSUs to raise money, a source in the government said that rushing in with the sale may not be prudent.

"You need to look at the kind of returns that some of the large companies have offered and the potential that is still there given that they operate in strategic sectors or in segments of the economy that will benefit from the rising purchasing power. In addition, some of the companies have an excellent track record of paying dividends. This has to be budgeted for," said a source, who did not wish to be identified.

SUUTI has inherited the shares from the erstwhile Unit Trust of India, after clearing the liabilities, but has held on to several stocks, raising eyebrows.

In a request for proposal from advisers, SUUTI has listed 51 companies, which include Here MotoCorp, Tata Steel, Sun Pharma and Reliance Industries. L&T (Rs 8,800 crore), ITC (Rs 22,364 crore) and Axis Bank (Rs 15,000 crore) could almost fetch around Rs 45,000 crore. While the government is open to diluting SUUTI stake in Axis Bank, it has been averse to selling ITC or L&T shares. While officials repeatedly cite "strategic projects", ranging from submarine and other defence-related equipment to reactors to justify holding on to L&T shares, in case of ITC it is the perceived takeover threat from foreign players that has prompted the Centre to let SUUTI retain its equity.

In addition, sources said, new fund-raising avenues such as buybacks would help meet the divestment target, in addition to other measures to speed up the process.

ITC Limited

Larsen & Toubro Limited

Reliance Industries Limited (RIL)

Axis Bank