Nov. 29 (Bloomberg) -- India is seeking to revive the option of selling some government stakes in ITC Ltd., Larsen & Toubro Ltd. and Axis Bank Ltd. to raise funds, three Finance Ministry officials with direct knowledge of the matter said.
The ministry intends to ask the Cabinet to approve the proposal as pressure grows on the administration to meet its target of 540 billion rupees ($8.7 billion) in total share sales in the year ending March 31, said the officials. They asked not to be identified as the plans aren’t public.
The officials said a final decision has yet to be taken and didn’t give a time frame for the approval process. The government’s attempt since the end of 2011 to set up a fund management company for the stocks, which would then pledge them as collateral to secure loans, has stalled.
India faces a slump in economic growth that’s hurting tax revenues, adding pressure on the government to sell some of its stake in ITC, Larsen & Toubro and Axis, worth a combined 474 billion rupees at current prices, to help contain the budget deficit. Prime Minister Manmohan Singh’s goal is to shrink the gap to a six-year low of 4.8 percent of gross domestic product this fiscal year.
D.S. Malik, a spokesman for the Finance Ministry, declined to comment on the proposal for share sales.
ITC, Larsen & Toubro and Axis pared gains. ITC, earlier up as much as 2.3 percent, was 2 percent higher at 319.7 rupees at 11:17 a.m. in Mumbai. Larsen, which rose as much as 0.9 percent, traded up 0.4 percent at 1,027 rupees. Axis, up 2.5 percent earlier in the day, rose 2 percent to 1,143 rupees. The S&P BSE Sensex index advanced 1.2 percent, paring earlier gains of as much as 1.4 percent.
Finance Minister Palanaippan Chidambaram aims to sell 400 billion rupees of shares in state companies in the 12 months ending March 31 and 140 billion rupees of legacy holdings in private businesses. He’s raised about 3 percent of the target for disposals in state companies, with just four months of the fiscal year left, according to Finance Ministry figures.
Budget and trade shortfalls are among risks that imperil India’s investment grade credit rating. Standard & Poor’s said this month it may lower India’s assessment to junk next year unless the general election due by May leads to a government capable of reviving economic expansion.
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