The government on Friday sold 9 per cent of its residual equity stake -- held in SUUTI -- in Axis Bank through a block deal expected to fetch around Rs 5,500 crore.
The block deal happened soon after the opening of the market in various trades averaging Rs 1,315 per share, according to market sources. In effect, the government through this block deal sold as many as 4.2 crore shares (equivalent to 9 per cent) out of 20.72 per cent stake in Axis Bank held through Specified Undertaking of UTI (SUUTI), formed in 2003, an offshoot of erstwhile UTI.
Pursuant to the deal, SUUTI's holding will come down to 11.72 per cent in Axis Bank.As the current fiscal is coming to an end, this block deal has come in handy for the UPA-led coaltion government which was striving to meet some of its fiscal deficit target through divestment of PSU shares, although most of the PSU divestment plans did not materials because of poor market conditions for most of the accounting year 2013-14.
In fact, the government as per the revised Budget estimate expected Rs 3,000 crore from divestment of residual government stake in private sector companies in the current fiscal ending March.
However, investors in D-Street gave a thumbs down signal to the move which led to pulling the scrip of the country's third largest private sector lender down by over 3 per cent in the morning trade. Consequently, shares of Axis Bank fell to the day's low of Rs 1,313.25, down Rs 44 a piece or 3.21 per cent over previous close. Over 4.92 crore shares of the bank changed hands in the early hours of trade .
Commenting on the deal, CNI Research CMD Kishore P Ostwal said, “The stock will bounce back on strong fundamentals of the bank. There was demand in the counter and now with the stake sale supply has come."
The merchant bankers on Thursday initiated the process of stake sale and had fixed a price band of Rs 1,290-1,357 a piece for the deal.