Govt. plans to sell its 3% stake in Axis Bank to meet disinvestment target

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The Central Government is planning to sell its 3% stake in private lender Axis Bank and raise Rs.5,316 crore. The government owns these shares through the Specified Undertaking of Unit Trust of India (SUUTI). The bank announced this sale through a notification to the stock exchanges. The government is planning to use the proceeds from this sale to achieve its Rs.80,000 crore disinvestment target for the fiscal year 2019.

Axis Bank

The floor price for this stake sale has been set at Rs.689.52 per share. On Monday, Axis Bank’s shares closed at Rs.710.35 on the Bombay Stock Exchange (BSE). The proposed floor price represents a 3% discount on Monday’s closing price. As of December 2018, SUUTI owned 9.56% stake in Axis Bank. The sale will be managed by ICICI Securities, Morgan Stanley, and Citigroup Global Markets India.

According to the offer-for-sale, SUUTI plans to sell around 50.8 million equity shares of Axis Bank that have a face value of Rs.2 each on February 12. This represents about 1.98% of Axis Bank’s shares. Another 26.3 million shares (about 1.02% of Axis Bank’s shares) will be sold on February 13. The sale on February 12 is exclusive to institutional investors. Retail buyers will be provided access on February 13. Around 10% of the shares will be reserved for retail buyers.

During the Budget Speech 2019, interim Finance Minister Piyush Goyal said that this fiscal year’s disinvestment target would be achieved. To meet this objective, the government has been generating funds from various sources.

The government has already raised Rs.25,325 crore through exchange-traded funds (ETFs). Another Rs.14,000 crore will be generated when the government sells its 52.63% stake in Rural Electrification Corporation to Power Finance Corporation. The Union Cabinet has already provided its approval for this sale. The government is expected to generate about Rs.12,000 crore through buybacks by public sector undertakings.

Source: Financial Express

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