INSUBCONTINENT EXCLUSIVE:
Irrespective of who rules, the industry is among the heavily taxed and thanks to human frailties it remains an exception to the law of
The arguments for taxing it ranges from being a deterrent to filling the coffers.
So far so good.
But how can governments which want to
promote a healthy life style for its citizens through high taxation on smokers justify their ownership of a cigarette company That too a
firm not started by the government, but a stake that landed on its lap by default.
Yes, it is the ITC debate that is back on the table
Swadeshi Jagran Manch, an organisation founded by S Gurumurthy, a man of clean habits, to promote native entrepreneurship and prevent
multinational companies from gobbling up the locals, wants the government to raise its holding in the biggest cigarette maker
This is when the state is struggling to fund roads, hospitals, schools and there is a real threat of it breaching the fiscal deficit
destabilise the Indian management to achieve its longterm objective of taking over the company and re-converting ITC into a tobacco company,
shows other businesses are a drain on the capital
No wonder, ITC, a consumer good company with no debt, is trading at 28 times its March earnings when peers such as Hindustan Unilever and
In 2002, when the state-run UTI was teetering the government bailed it out by paying investors what the investment institution promised.
In
return, the government got many assets, including stakes in ITC, Axis Bank, Larsen Toubro that are held by an entity SUUTI.
Over the years
SUUTI sold some to realise the values
Why not a strategic stake sale in listed firms where there are willing buyers like BAT
Even a beginner to investing would tell you that a chunky sale would fetch a premium if it goes with control
So is the case with Axis Bank and other ownership
If BAT is interested in ITC, a Uday Kotak may be interested in buying Axis
Government ownership is pampering vested interests and harming taxpayers.
SUUTI made a profit of Rs 3,940 crore selling shares in LT
It also sold shares worth Rs 5, 521 crore by transferring Axis, ITC and LT shares to Bharat ETF, data from its website shows.
Neither the
United Progressive Alliance nor the National Democratic Alliance administrations have come up with a convincing answer
how to deal with exits after bailing out corporations with taxpayer money, look no further than Uncle Sam.
When the US used hundreds of
billions of dollars from the Troubled Assets Relief Programme during the global financial crisis to bail out firms like Citigroup and
General Motors, there was an uproar
But the state soon sold out, and in many cases even made a profit.
It is a pity that a government struggling to fix its finances and aiming
to boost foreign currency reserves does not think about selling down the SUUTI holdings to strategic investors to maximise value
It may be time to wind up SUUTI.
