Maruti stake sale gets off block

The government today invited Expression of Interest (EoI) for sale of 8 per cent stake in Maruti Udyog from its total holding of 18.28 per cent.

Only public sector financial institutions and public sector banks are allowed to bid and the entire stake can be sold to a single bidder.

As per the latest share price, the eight per cent stake is worth Rs 1585.5 crore. "According to the articles of association of the company, the government's remaining 10 per cent stake in the company would continue to allow it to have one director on the company's board till July 2006. After that, the government would not have a seat on the board of directors," a senior company executive said.

The government holds 5,28,24,020 equity shares in Maruti, representing 18.28 per cent of the company's equity. Out of this, 2,31,12,804 shares, representing 8.00 per cent of the equity, are on sale.

The offer comes with a lock-in period of six months. The government has said the present holding of the institution in Maruti and the shares sold by the government should together not exceed 10 per cent equity of Maruti on the date of transfer.

The minimum bid value has been fixed at Rs 10 crore.

Among public institutions, only LIC holds a sizable stake of 3.31 per cent in Maruti, as per the shareholding data on September 30. Asset management companies and mutual funds managed by these institutions are not eligible for participating in this transaction, officials added.

"The public financial institutions and banks would be interested in the bids as they can get a large chunk of the stake at a single price. Buying it in the secondary market would be much more expensive," one of the advisors to the government said.

The last date for submitting the expression of interest is January 4, 2006. Kotak Mahindra Capital Company Limited and SBI Capital Markets Limited are advising the government on the matter.

Maruti's stock price closed at Rs 686 on Monday.