FinMin finalises cabinet note to wind down SUUTI

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The government’s strategy to bridge the fiscal deficit seems to have taken a concrete shape. The Finance Ministry is learnt to finalise cabinet note for winding down SUUTI and setting up a new asset management company (AMC) in its place, reports CNBC-TV18’s Aakansha Sethi. This is a slight silver lining in the government’s fiscal deficit map. CNBC-TV18 reported last week that the cabinet note for winding down SUUTI has now been finalized and contours have taken shape. The AMC that will be setup in place of SUUTI will be managed by an independent fund manager. It will pledge the holdings of SUUTI which was setup after UTI restructuring and holds shares in ITC , L&T and Axis Bank . It has valuation of about Rs 32,000 crore. The money that will come in from pledging these shares will be used to buy shares in PSUs. The government is expected to borrow about Rs 50,000-60,000 crore for the same. As per current regulation, only about 50% of the portfolio can be leveraged. But according to sources in the government, they have spoken to both public and private sector banks and financial institutions like LIC to give them more than 50% by which, the government is hoping to raise about Rs 50,000-60,000 crore. This money will be transferred to the government’s account which will help it meet the fiscal deficit gap. There is no specific mention with regards to timeline when the government will sell these shares. The government says that at a time when the PEs of the markets is at sufficiently high level for it to make a profit it will sell these shares. It will use the profits made to repay loans. This company is expected to be setup latest by the end of January. The cabinet note is expected to come for approval anytime in the next two weeks.