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| Govt to completely exit from Maruti Udyog | | |
NEW DELHI, DEC 21
Nearly two-and-half decades after it joined hands with Japan's Suzuki to float Maruti Udyog, the government today decided to completely exit the venture through sale of its residual 10.27 per cent stake that could fetch it over Rs 2,700 crore.
Maruti, which changed the face of the Indian car industry and commands a dominant 50 per cent-plus share in the burgeoning car market, would see the Government offload its remaining 2,96,79,689 shares (as on September 30, 2006) to Indian public sector financial institutions, state-owned and private sector banks and Indian mutual funds.
The approval to the stake sale was taken at the Cabinet Committee on Economic Affairs. However, Finance Minister P Chidambaram refused to specify when the shares would actually be sold, "Significant money can be raised through the sale which can be this fiscal, may be next fiscal... Depends on the market condition. The call is mine."
Shares of Maruti, in which Suzuki holds the majority 54.2 per cent stake, opened at Rs 910.05 on the Bombay Stock Exchange, and closed the day at Rs 926, up by Rs 3.
SBI Caps and Kotak Mahindra Capital Company, who were appointed as advisors during the previous stake sale in January at a zero fee, would once again advise the government on the process.
Asked if the proceeds would go to the National Investment Fund (NIF), Chidambaram said: "Strictly no, as this not a disinvestment of a public-sector undertaking."
As part of the stake sale process, the Government will come out with a floor price over which bids would be invited.
The sale of shares would be to "bidders quoting above the floor price, at the price actually quoted by them, starting from the bidder who quotes the highest price and then proceeding to the second highest bidder and so on with the discretion to sell only a part of shares offered for sale", the Government said.
The Government had in January this year mopped up Rs 1,567 crore from sale of eight per cent equity in the car major to banks and financial institutions at an average price of Rs 678.24 share.
The record levels of Sensex have ensured that it gets around double that amount from its remaining 10.27 per cent stake as the stock price has risen over 35 per cent from the sale price in January.
Today's decision marks the end of Government's gradual withdrawal from the auto major. In June 2003, the Government sold a 27.5 per cent stake in Maruti to the public at a price of Rs 125 per share to garner Rs 993 crore.
Maruti, which is investing as much as Rs 9,000 crore over the next five years to expand capacity and launch new models, had a 39 per cent growth in net profit in fiscal 2005-06 at Rs 1,189 crore while total income (net of excise) in the period grew 10 per cent at Rs 12,481.4 crore.
Maruti Udyog Limited (MUL) was established in February 1981 through an Act of Parliament, to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system.
Suzuki was chosen from seven prospective partners worldwide and a licence and Joint Venture agreement was signed between the Government and the Japanese company in October 1982. |
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