SUUTI to sell stake in Axis Bank through qualified institutional placement route

The Specified Undertaking of Unit Trust of India (SUUTI) will use the qualified institutional placement (QIP) route to sell stake in Axis Bank. The Government is expected to mop up between Rs 7,500 crore and Rs 9,000 crore through this stake sale.

Selling of shares through the QIP mechanism does not require pre-issue filing of placement documents with SEBI. However, these documents will need to be placed on the Web site of the stock exchanges with an appropriate disclaimer to the effect that the placement is meant only for QIBs on private placement basis and is not an offer to the public.

Issue size For each placement, there are at least two allottees for an issue size of up to Rs 250 crore and at least five allottees for an issue size in excess of Rs 250 crore. No single allottee will be allotted in excess of 50 per cent of the issue size. SUUTI currently holds 20.72 per cent in Axis Bank, of which little over 10 per cent is to be sold through block deal. It has already appointed three merchant bankers — JP Morgan India, Citigroup Global Markets India and JM Financial Consultants — for the sale. Shares of Axis Bank closed at ₹1,216.30 on Thursday, up nearly 2.5 per cent from the previous day’s closing.

A senior Finance Ministry official said the Board of Advisors of SUUTI had met once on this issue and they will meet again to finalise the sale process. This board is headed by former Oriental Bank of Commerce Chairman K. N. Prithiviraj and has four members. The sale is expected to be completed next month.

SEBI guideline The official also said the stock has seen wide fluctuations; hence a range has been proposed for the sale process. It all depends on the price at which the shares are sold. SEBI guidelines for QIP prescribe a pricing formula. It says that the final price would not be less than either the six-month average or the two-week average.

The recent decision to sell stake in Axis Bank comes days after the Cabinet deferred its earlier proposal to wind up SUUTI.

SUUTI was formed following the US-64 fiasco in 2002; after restructuring of the erstwhile Unit Trust of India came into effect from February 1, 2003. It was handed over all remaining assets of US-64. Last week, the Cabinet also restored a provision which stated that the administrator can sell assets after obtaining approval from the Government. However, no approval from the Cabinet Committee on Economic Affairs would be needed to sell any of the three strategic investments.

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