MUMBAI: The current bout of persistent selling in Indian equities has prompted the government to go slow on its proposed stake sale in Axis BankNSE -3.03 %, and an extended volatile run in growth assets may also lead New Delhi to defer some of the initial share sales scheduled to be completed in FY19.
Market sources told ET that the government was initially planning to sell up to 4 per cent of its stake in Axis Bank by early November. However, the Department of Public Asset Management (Dipam) decided to postpone the sale after meeting the empaneled bankers last week. Volatility could prompt the Centre to defer some other IPOs.
This delay in Axis Bank stake sale would adversely impact the government’s ambitious plan to garner Rs 80,000 crore through divestments this fiscal: It has raised only Rs 7,000 crore until now. The government owns 9.6 per cent in Axis Bank through Specified Undertaking of Unit Trust of India (SUUTI). The plan was to undertake an institutional placement in Axis Bank involving select foreign institutions and domestic mutual funds.
“The government was seeking to raise around Rs 7,000 crore through the stake sale. We had already conducted few roadshows earlier this year. We were optimistic about the share sale since Axis Bank stock was doing well until August. However, when secondary markets are falling, investors go risk-averse and, hence, getting big-ticket buyers would be a challenge,” said an investment banker privy to the development.
The Centre has been seeking to offload the bulk of its Axis Bank stake for more than three years now. However, the weak stock performance and concerns about hostile takeover have thwarted the government’s efforts. Axis Bank has underperformed its private peers by a huge margin since 2016. The Private Bank Nifty has gained close to 60 per cent since the beginning of 2016, while Axis Bank shares have only managed to climb 25 per cent.
Bankers privy to the development said things were looking optimistic during the April –August period when Axis Bank shares started catching up with the broader market. In fact, a bulk of the 25 per cent gains made by Axis Bank stock since 2016 was between June and August this year.
The government had offloaded 9 per cent its Axis Bank stake in 2014 to mop up Rs 5,500 crore – the last major transaction in the lender. It has also diluted a marginal stake in the private lender through the newlylaunched CPSE Exchange Traded Fund (ETF).
The ongoing market weakness will also impact other divestments.
“Primary markets are closely linked to secondary markets. It is difficult to rope in investors for any capital market issuance when secondary markets are witnessing a turbulent phase,” said V Jayashankar, senior executive director of Kotak Investment Banking. “The current correction is just a temporary setback and capital market activity is expected to revive soon.”
There are a dozen divestment offerings lined up currently, including the launch of a CPSE Debt ETF, another tranche of Bharat 22 ETF, and IPOs of several small and midsized PSUs, including the Indian Railway Catering and Tourism Corporation (IRCTC). Bankers are also working on offers for sale (OFS) in Coal IndiaNSE -3.77 % and NBCC.
Source: economictimes.indiatimes.com