Cabinet approves Maruti stake sale

After a quarter century, the government has finally decided to exit from its most successful automobile venture, Maruti Udyog Limited (MUL) as the Cabinet today approved the sale of its residual 10.27 per cent stake through competitive bidding to public sector banks and financial institutions.

The sale according to the company's current market capitalisation would make the government richer by Rs 2,750 crore.

After the Cabinet Committee on Economic Affairs gave the nod to the final sale of 2,96,79,689 shares owned by the government, it would be the third and final sale for the company, which commands a staggering over 50 per cent share in the Indian passenger car market.

The Japanese car giant Suzuki Motor Corporation, holds a majority 54.2 per cent stake in MUL.

Finance Minister P Chidambaram after the Cabinet meeting told reporters: "The government's stake in the company will be sold on the same pattern and manner as in January this year. We will be inviting bids for the sale process and will be raising significant amount from the stake sale in Maruti. The sale will depend on the market conditions and may happen in this or next fiscal and the timing and the call will be mine."

The government had already earned over Rs 2,560 crore from the two earlier divestments in MUL of around 35.5 per cent of it's equity. In January this year government had sold eight per cent equity in MUL to public sector banks and financial institutions through competitive bidding at an average price of Rs 678.24 a share and mopped Rs 1,567 crore.

The MUL shares traded at Rs 926, (up .33 per cent), on the Bombay Stock Exchange on Thursday. The government is expected to net 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.

R N Subramanium, market analyst at SSKI said: "The sale is expected to net significant amount for the government and help it to achieve its disinvestment targets. We are expecting over Rs 2700 crore from the stake sale. As the sale will be from competitive bidding, it will not change the structure of the company and Suzuki will have a constant stake (54.2 per cent) in MUL."

The government had sold 27.5 per cent stake in Maruti to the public at a price of Rs 125 per share and netted Rs 993 crore, in June 2003. Last year, Maruti accounted for half of the about 1 million cars sold in India.