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Wednesday, Aug 28, 2002

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Centre seeks to get more for Maruti stake

Balaji C. Mouli

NEW DELHI, Aug. 27

IN a bid to improve the minimum realisation from the sale of its 20 per cent of stake in Maruti Udyog Ltd (MUL), the Government is planning to raise the underwritten value of the stock from Rs 2,300 per share to around Rs 2,500 per share.

Under the privatisation deal signed in May this year, Suzuki had agreed to underwrite the Centre's 20 per cent equity offer of sale, through a book building issue, at Rs 2,300 per share. The remaining Rs 200 per share is proposed to be underwritten by bankers and financial institutions. If the issue is priced at Rs 2,300 per share, the Government will realise around Rs 830 crore. In case it is Rs 2,500 per share, it will net an additional Rs 70 crore.

The proposal has, however, hit a road block with the Securities and Exchange Board of India stipulating that any such move would require the underwriters to guarantee that the stock price will not fall below Rs 2,500 per share for a period of 60 days after the public offering, according to officials.

SEBI has taken this position to protect the interests of the small investor to avert a situation wherein investment bankers and mutual funds form a club along with the brokers, resulting in the stock price diving a day after the public offering. The Ministry of Disinvestment has told SEBI that the bankers may not be agreeable to this condition since the commission charged for underwriting is only 2 per cent. Further, Suzuki is under no obligation to hold the stock price post-issue. The Ministry is currently in talks with SEBI on this issue.

The proposal to increase the underwritten value follows valuations conducted by the Government. Suzuki was, however, unwilling to underwrite anything over Rs 2,300 per share.

In line with the privatisation deal, Suzuki acquired control of Maruti Udyog Ltd by subscribing to Rs 400-crore rights issue wherein the Government renounced its share. It also paid the Government Rs 1,000 crore as premium for acquiring control of the company. The Japanese auto major picked up the rights issue at a share price of Rs 3,280 per share.

Post-rights issue, Suzuki's equity stake in the company rose from 50 per cent to 54.20 per cent, while the Centre's share fell from 49.76 per cent to 45.5 per cent. The Centre now proposes to sell off its remaining stake in two phases. In the first phase, around 20 per cent equity is proposed to be offloaded in the market. For the balance share, the Centre can exercise a put option at a discount of 15 per cent or 10 per cent of the average market price. The book value of the stock has been estimated at Rs 2,050 per share.

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