SUUTI to offload Axis Bank shares at 5% discount today

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The government will offload 9 per cent stake in Axis Bank, held through a trust fund called the specified undertaking of the Unit Trust of India (SUUTI), through block deals on Friday.

This would mean selling of 4.22 crore shares out of the 9.72 crore that the government holds in what appears to be the last disinvestment of this financial year. The share sale is expected to garner anywhere between Rs 5,444 crore and Rs 5,727 crore to the exchequer.

The three merchant bankers for the transaction, namely JP Morgan, Citigroup Global Markets and JM Financial Consultants, have proposed the price band at Rs 1,290-1,357 a share; the lower end being at a 4.92 per cent discount to Thursday’s closing price of Rs 1,356.85.

The government holds 20.72 per cent stake in Axis Bank; the other promoters being Life Insurance Corporation, General Insurance Corporation, New India Assurance and National Insurance Company.

“Axis Bank is a fundamentally strong private lender and institutional investors always look for opportunities to buy large chunks of fundamentally good stocks at a discount. It is likely that the government will offload the shares successfully,” said Paras Bothra, vice-president of equity research at Ashika Stock Broking.

FIIs held 43.18 per cent stake in the lender as of December 31, 2013, and DIIs 9.74 per cent. Axis Bank has recently raised the FDI limit to 62 per cent from 49 per cent. Bothra said even if there was a shortfall in subscription of shares, LIC would likely lap up the remaining shares.

In a block deal, a minimum of 5 lakh shares, or a minimum of Rs 5 crore worth of shares are sold through a single transaction on a separate window of the exchange. The government had earlier deferred its decision to sell its 29.54 per cent residual stake in HZL and Balco. SUUTI also holds 11.54 per cent stake in ITC, and 8.27 per cent in L&T.

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