Mumbai: India’s government is likely to sell part of the stakes it holds in Axis Bank Ltd., ITC Ltd. and Larsen & Toubro Ltd. through an exchange-traded fund this year, people familiar with the matter said. Shares of the three companies fell.
The new ETF would be larger than the Central Public Sector Enterprises ETF, a fund unveiled in 2014 that’s made up of the government’s shares in state-owned companies, the people said, asking not to be identified as a final decision regarding size and timing of the latest sales hasn’t been made yet.
While it’s the fourth occasion India will be using an ETF to sell shares it holds to maintain public spending without increasing the fiscal deficit, it’s the first time that a fund will house equity in private-sector companies, rather than state-controlled enterprises.
DS Malik, a spokesman for India’s finance ministry, wasn’t available for a comment when contacted by phone Wednesday.
Prime Minister Narendra Modi’s administration has budgeted to raise Rs725 billion (Dh40.82 billion, $11 billion) from such share sales in the fiscal year beginning April 1 as it aims to shrink Asia’s widest budget deficit. India has met or beaten its so-called disinvestment target only five times since 1998, data show.
Axis Bank shares closed 0.6 per cent lower in Mumbai on Wednesday, erasing earlier gains of as much as 2.9 per cent. ITC, a hotels-to-tobacco conglomerate, fell 2.8 per cent, its biggest drop in almost two months. Larsen, the largest Indian engineering firm, lost 1.2 per cent.
The Indian government holds about 11.5 per cent of Axis Bank, 11.1 per cent of ITC and 6.6 per cent of Larsen through Specified Undertaking of the Unit Trust of India, data compiled by Bloomberg shows.
The government’s first share sale through the CPSE ETF in March 2014 generated Rs43 billion, while a second tranche in January raised at least Rs45 billion. It garnered Rs92 billion in its third offering.
