Govt may raise Rs5,736 cr through SUUTI's sale of 9% stake in Axis Bank

A cash-strapped government of India is selling a 9-per cent stake in the country's second biggest private sector lender Axis Bank Ltd that could fetch around Rs5,736 crore (about $935 million), helping to bridge the government's huge deficit that has pushed up its borrowing and chocked credit flows to private sector.

The government, which holds around 20.7-per cent stake in Axis Bank through the Specified Undertaking of Unit Trust of India, an entity created in February 2003 following the restructuring of Unit Trust of India, plans to sell the stake between Rs1,290 and Rs1.357.35 per share in a bulk deal today.

The government is desperately trying to offload stakes in state-controlled entities in a bid to narrow the country's fiscal deficit, which, the finance minister is trying to bring to less than 4.6 per cent of the country's gross domestic product for the financial year ending 31 March 2014, from levels above 5.0 per cent last year.

The stake sale is likely to happen at 0.5 per cent discount to Thursday's closing price.

Sources say that Life Insurance Corporation (LIC) may invest close to Rs2,000 crore to Rs2,500 crore and as a result its stake in Axis Bank may rise to nearly 13.5 - 14.8 per cent from the present 10.6 per cent.

LIC has regulatory approval that it can maximum hike stake to up to 15 per cent in Axis Bank.

At present, SUUTI owns 20.72 per cent stake and LIC holds 10.65 per cent stake in the bank. After the block deal, SUUTI's stake is likely to fall by 9 per cent.

It is not known who else will be buying stake in Axis Bank under the present stake sale.

Citigroup Global Markets India Pvt Ltd, JP Morgan India Pvt Ltd and Mumbai investment bank JM Financial Consultants Pvt Ltd are the advisers to the deal.