Hard pressed for funds after plans to divest its stakes in Maharatna companies like Indian Oil Corporation (IOC) and Coal India ltd (CIl) seem to be in jeopardy, owing to weak market conditions and labour unrest, the Government in a last ditch effort plans to revive the currently defunct Specified Undertakings of Unit Trust of India (SUUTI) which holds shares in ITC, Axis Bank and l&T.
The move would help the Government sell its stakes in the three entities once SUUTI is revived, sources familiar with the development said. The Centre’s stakes in these companies is worth approximately `50,000 crore. With the disinvestment target for the current fiscal being `40,000 crore and the likelihood of it being achieved looking remote at this juncture, the move of reviving SUUTI and allowing it to sell off its stakes in the aforementioned companies would help the Centre fill its cash starved coffers, sources added.
Accordingly the Finance Ministry has moved a Cabinet note seeking to revive SUUTI by reversing an earlier Cabinet decision (taken on March 23, 2012) when it had approved SUUTI’s closure and sanctioned transferring its assets and liabilities to a new entity - National Financial Holdings Company ltd (NFHCl).
The issue, sources informed, is likely to be discussed during the meeting of the Union Cabinet scheduled for January 9, 2014.
By seeking the cancellation of the March 2012 Cabinet decision, the Finance Ministry in its proposal has said that this would allow SUUTI to sell its strategic assets with the prior approval of the Centre, as was the practice earlier when it was in existence.
This clearly means that once SUUTI comes back into existence, the Government, official sources told The Pioneer, would be able to sell the stake it holds in ITC, Axis Bank and l&T.
SUUTI’s equity holding in Axis Bank stands at 20.72 per cent, while in ITC it is 11.32 per cent and in l&T the stake is 8.21 per cent.
It had come into existence through an Act of Parliament in October 2002 and its mandate was to make payments to all investors of schemes specified in Schedule I of its Repeal Act. Since its inception, SUUTI has disbursed `47,765 crore to 87 lakh investors till March 2013, while till October 2013 `1,400 crore remain unpaid by it.
NFHCl, the new entity which had come into existence after SUUTI became defunct, was formed under the Companies Act.
The step to scrap the previous Cabinet decision to make SUUTI defunct was undertaken by the Finance Ministry as it was realised by the Government that as a public financial institution, SUUTI was in a better position to deal with its investment, divestment and other activities like filing cases under SARFAESI Act, and more significantly transact any kind of financial business, whereas NFHCl has no such powers, sources informed.