L&T, Axis New Tro­phies for Finmin Af­ter Mkt Boom

Min­istry to show­case bloated as­sets as tools for driv­ing Modi govt’s re­vival pro­gramme

The Economic Times - - Economy -

DEEPSHIKHA SIKAR­WAR & VI­NAY PANDEY

The surge in stock prices of Larsen & Toubro, Axis Bank and other com­pa­nies has de­liv­ered a bo­nanza for the new govern­ment. The fi­nance min­istry will present these as­sets as among the in­stru­ments that can be used to help the Naren­dra Modi ad­min­is­tra­tion’s eco­nomic re­vival pro­gramme. The value of the stakes that the govern­ment has in listed non­state com­pa­nies through SUUTI (Spec­i­fied Un­der­tak­ing of the Unit Trust of In­dia) has risen to nearly .` 52,000 crore at the last count, over half of it ac­counted for by just one com­pany. To­gether with other as­sets, the cor­pus adds up to nearly .` 60,000 crore. This money could fi­nance most of the rail­ways’ di­a­mond quadri­lat­eral project or the govern­ment could use it to buy out much of the stressed as­sets of banks to in­fuse cap­i­tal and also give them a fresh start to aid eco­nomic re­ju­ve­na­tion. En­gi­neer­ing and con­struc­tion com­pany L&T has risen over 45% this cal­en­dar year, valu­ing the govern­ment’s 8.19% stake in it at about .` 12,000 crore. The big­gest bounty, how­ever, is the govern­ment’s 11.28% stake in ITC, which is en­gaged in tobacco, ho­tels and con­sumer goods. The hold­ing is worth more than .` 31,000 crore. Axis Bank has risen nearly 45% since Jan­uary. Af­ter di­vest­ing some of its hold­ing in the last fi­nan­cial year, the govern­ment holds an 11.7% stake in the bank that’s worth more than .` 10,000 crore. Along with the resid­ual hold­ing in Hindustan Zinc and Balco, the govern­ment has nearly .` 1 lakh crore that it can use for tar­geted spend­ing.

“We will flag these funds to the new govern­ment for util­i­sa­tion for a spe­cific pur­pose,” said an of­fi­cial in­volved in their ad­min­is­tra­tion.

SUUTI was formed in Feb-

Value of stakes that govt has in listed non-state com­pa­nies and other as­sets adds up to nearly 60,000 crore

ru­ary 2003 af­ter the re­struc­tur­ing of the erst­while Unit Trust of In­dia. The Cab­i­net had, in March 2012, cleared a pro­posal to wind up SUUTI and cre­ate a Na­tional As­set Man­age­ment Com­pany (NAMC) to man­age the as­sets owned by it. The NAMC was, in turn, to lever­age its as­sets to buy govern­ment stakes in pub­lic sec­tor com­pa­nies.

But in Jan­uary this year, the Cab­i­net de­ferred a de­ci­sion on this, al­low­ing the govern­ment to mon­e­tise its hold­ings.

The govern­ment sub­se­quently raised .` 5,500 crore from the sale of part of its stake in Axis Bank, mak­ing up for a short­fall in tax and dis­in­vest­ment re­ceipts.

As per the in­terim budget, the fis­cal deficit for the cur­rent fi­nan­cial year is pro­jected at 4.1% of GDP. The cur­rent fis­cal con­sol­i­da­tion plan en­vis­ages low­er­ing the deficit to 3% of GDP by 2016-17.

How­ever, the new govern­ment may want to tweak the fis­cal con­sol­i­da­tion plan by chang­ing the mile­stones in line with its devel­op­men­tal goals.

The SUUTI as­sets and the resid­ual stakes in Hindustan Zinc and Balco would al­low it to pur­sue ag­gres­sive fis­cal con­sol­i­da­tion as well as boost in­fra­struc­ture spend­ing to give a fil­lip to growth.

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