Government To Reduce Stake in Axis Bank, ITC Only Through ETF: BQ Exclusive
The government would gradually lower its stake in these two companies through the Bharat 22 ETF, says a government official.
The government wants to pare its stake in Axis Bank Ltd. and ITC Ltd. through Specified Undertaking of Unit Trust of India by more offers of exchange-traded funds and not through offers for sale.
The government would gradually lower its stake in these two blue-chip companies through the Bharat 22 ETF, a senior government official told BloombergQuint on condition of anonymity. The government’s holding in both the companies through SUUTI form part of the exchange-traded fund.
The SUUTI held 4.97 percent in Axis Bank and 7.94 percent in ITC as of September, according to exchange filings. SUUTI’s stake in Axis Bank, as on Oct. 17, was valued at around Rs 9,726 crore, while that in the cigarettes-to-hotels conglomerate was worth nearly Rs 23,958 crore. Axis Bank and ITC Ltd. have a weight of 7.7 percent and 15.2 percent, respectively, in the Bharat-22 ETF.
The SUUTI’s stake in Larsen & Toubro Ltd. is exhausted and the stock would be replaced on the Bharat 22 ETF, the official cited earlier said.
The government has decided to not divest its stake in ITC below a threshold as it expects higher returns if British American Tobacco Plc—the Kolkata-headquartered company’s largest shareholder—mounts a takeover, the official said. British American Tobacco has been trying to takeover ITC, but Indian laws currently forbid foreign companies from directly purchasing shares in domestic cigarette makers.
The Bharat-22 ETF is a passively managed mutual fund scheme whose portfolio maps with the S&P BSE Bharat 22 Index—three of which are private firms and the others state-run, including the central public sector enterprises. The government launched the fourth tranche of the ETF in September.