Eligibility for Suuti bankers eased
Government restricts conflict of interest clause to ITC, Axis Bank and L&T
The government on Monday diluted a critical clause in the Request for Proposal (RFP) inviting investment bankers to manage the mega share sale in companies held by Specified Undertaking of the Unit Trust of India (Suuti).
Besides, it created three buckets for companies where Suuti has stake and gave merchant bankers separate tasks related to these entities.
The Centre has decided to restrict the “conflict of interest” clause, which prevents investment banks from undertaking mandates of companies in the same line of business with those in the Suuti basket, to ITC, Larsen & Toubro (L&T) and Axis Bank.
The government has also extended the last day for submission of bids from August 1 to August 10.
The earlier RFP was worded in such a way that it restricted investment banks awarded the Suuti mandate to take up any other mandate from rival companies.
As Suuti has holdings in more than 50 companies spanning across sectors, investment banks were worried that they might not be able to work on any other mandates.
The revised RFP by the government says bankers will be evaluated on their “commitment(s), which may act either as a constraint, or as a conflicting interest, to your involvement in the proposed sale in respect of the companies included in Group A.”
The government has included ITC, L&T and Axis Bank in Group A. The bulk of Suuti holdings are in these three companies.
The initial RFP says bankers would be evaluated on their “commitment(s), which may act either as a constraint, or as a conflicting interest, to your involvement in the proposed sale in respect of the companies constituting the SUUTI Holdings.”
Also, investment banks now will have to give an undertaking stating that they are “not advising or acting on behalf of or associated with any other person or entity…which is engaged in the same line of business as that of the companies included in group A…”
Earlier, the clause was applicable to the entire Suuti basket.
“Most banks wouldn’t have qualified or would have liked to lock-in themselves with Suuti mandate. As the Suuti basket almost covers entire gambit of business, it would have technically barred them from taking any other mandate. The revise RFP asks bankers to not take up mandates from rival companies to ITC, L&T and Axis Bank,” said a banker asking not to be named.
Axis Bank is the country’s leading private sector bank, ITC operates in the consumer goods and tobacco space and L&T is an engineering and construction major.
The government is looking to appoint three investment banks who will act as “merchant bankers, advisers and selling brokers” for the Suuti disinvestment for a period of three years.
Besides group A companies, the government has created two other categories — group B companies and group C companies.