Government to sell stake in Axis Bank

The government of India on Tuesday will sell up-to three percent stake in Axis Bank in order to raise 5,316 crore rupees or 747.8 million dollars. The government owns a 9.56 percent stake in the private bank through SUUTI (Specified Undertaking of the Unit Trust of India). Around 50.8 million shares will be in the offering which translates into 1.98 percent of its holdings. The share buy out is strictly meant for nonretail investors only.

Here is the statement filed by Axis Bank in a regulatory filing “The Specified Undertaking of the United Trust of India (the “Seller”) proposes to sell up to 50,759,949 (1.98%) equity shares of face value of Rs. 2 each of AXIS Bank Ltd (the “Company”) (“Base Offer Size”), on February 12, 2019 (“T day”), (for non-Retail Investors only) and on February 13, 2019 (“T+1 day”) (for Retail Investors and non-Retail Investors who choose to carry forward their un-allotted bids) with an option to additionally sell 26,337,187(1.02%) equity shares of the Company….”

Both retail and non retail investors will have the option of buying an additional 26.3 million shares or another 1.02 percent of its stake. The floor price has been set at rupees 689.52 per share. Shares in Axis bank were trading at 710.52 rupees on Monday representing a 1.2 percent loss.

Non-Retail Investors are allowed to place their bids only on the T day. While placing their bids the non-Retail Investors may provide their consent to carry forward their unallotted bids to T+1 day for allocating them in the unsubscribed portion of the retail category. The non-retail Investors who have placed their bids on T day and have chosen to carry forward their un-allotted bids to T+1 day shall be permitted to update their bids on T+1 day as per the OFS Guidelines.

This is part of a larger effort by the government to divest itself of shares and meet its divestment targets. At 35,533 crores it is only halfway. The reasons for divestment may not be clear at first but underwhelming tax collections and massive handouts to farmers in the form of farm loan waivers could mar the fiscal health of the country in the long run. The government in its bid to divest is seeking to meet its fiscal deficit target now at 3.4% of GDP from previous 3.3%.

The offering of the shares will take place between 9 am and 3:30 pm on February 12th and 13th.

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