Jayanta Mallick

Kolkata, Jan. 17

THE arbitrator appointed by both the joint venture partners of Maharashtra Scooters Ltd (MSL) Western Maharashtra Development Corporation (WMDC) and Bajaj Auto will announce on January 31 the price for MSL share, proposed to be bought by the Bajaj group. This was stated by an official spokesperson of WMDC over phone from Pune, the headquarters of the Maharashtra Government outfit.

WMDC holds 27 per cent stake in MSL, while Bajaj Auto owns 24 per cent. Bajaj Auto sought to buy out the partner's stake, and WMDC resorted to arbitration process after price negotiations failed between the two partners.

The protocol agreement for the joint venture provides for mutual consent to retain "absolute control" over the company by either partner in case one intended to exit.

The agreement also provides for arbitration to fix a "rate" for such purchases and gives the partners "first option" to purchase the other's share.

The agreement, however, does not make it mandatory for the seller to accept the arbitrator's price recommendation.

According to the agreement: "If the party receiving a notice, within 30 days of its receipt, fails to accept the proposal for purchase of shares, the party giving the notice will be free to sell the shares to any other party, but only at a rate not less than the rate specified in such notice."

The price of the MSL shares depends on the investments of MSL in Bajaj Auto, Bajaj Auto Finance and Bajaj Hindusthan, book value of which is Rs 84.65 crore.

The market value of the three investments at yesterday's closing prices was Rs 773.1 crore. Total investments of MSL including other non-listed instruments (at cost) as on March 2005 stood at Rs 174.27 crore.

MSL stock price has been falling over the past two days on fears that the recommended price may not match the asset valuation per share.

The share closed at Rs 331 on Tuesday at the BSE compared to Monday's closing price of Rs 350.

(This article was published in the Business Line print edition dated January 18, 2006)
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