Eligibility criteria for Suuti bankers to be eased

Conflict of interest clause to be amended

Worried that none of the major investment banks might place bids to manage the Specified Undertaking of the Unit Trust of India (Suuti) mandate, the department of investment and public asset management (Dipam) is set to relax a few contentious conditions in the request for proposal (RFP).

According to sources, the government will soon announce clarifications to the RFP floated earlier this month inviting bankers to manage the ~60,000-crore potential stake sale in companies held by Suuti.

Besides smaller clarifications, Dipam could ease the ‘conflict of interest’ clause in the RFP that prevents investment banks from undertaking mandates of companies with the same nature of business with those in the Suuti basket.

As Suuti’s mandate is for a three-year period and involves stake sales in 50 companies spanning across sectors, the clause potentially restricts investment banks from handling any other private share sales. This condition makes bidding for Suuti mandate tenable, said bankers, who have provided the same feedback to Dipam at a pre-bid meeting held on July 15.

"We will issue clarifications soon based on our discussions with those interested in bidding as merchant bankers," a government official told Business Standard. The person said Neeraj Gupta, secretary of Dipam, will soon take a call and issue a note on the clarifications and relaxation sought by the bankers.

'Conflict of interest' is a common clause in both public and private sector mandates these days, but it created some intended consequences for this mandate, say bankers.

Bulk of the Suuti stake is in ITC, Axis Bank, and Larsen & Toubro.

"The banking and consumer goods space might see a lot of action in terms of fund-raising over the next three years. Under this, banks may not want to lock themselves with Suuti mandate, which typically doesn't generate any fees," said a banker who participated in the pre-bid meeting, which saw participation from almost all investment banks.

Investment banks willing to act as advisors-cum-investment-bankers-cum-selling-brokers have to give bids to Dipam by August 1.