Fis Prodded To Pick Mul Rights

The finance minister will talk to financial institutions (FIs) about picking up the government's portion of the Maruti Udyog rights issue. The FIs had earlier indicated their unwillingness to pick up stake in the company citing the losses Maruti had posted in 2000-01 and its declining share in the car market.

However, Maruti has not only improved its marketshare but has also turned around -- reporting marginal profits for the first six months of this fiscal. Also, since the total rights issue will be worth Rs 400 crore, the argument expected is that the total amount which the FIs will be expected to pump in will not be too large.

The government will get a negotiated renunciation premium as well as a control premium for its portion of the rights issue.

The Cabinet Committee on Disinvestment, had, at its meeting on September 27, cleared the roadmap for Maruti disinvestment which was approved earlier, but made one concession -- allowing Suzuki to bid for the government's share of the rights issue. The government will now renounce its portion of the rights issue to the highest bidder--FIs or Suzuki Motor Corporation.

The valuation of Maruti's rights issue will be a delicate issue with Indian FIs unwilling to pay too high a price and the government concerned about possible allegations of selling Maruti 'for a song'. Hence, the decision to offer the government's portion of the rights issue to the 'highest bidder'.

Negotiations with FIs had started in January this year. The prime minister's office has also earlier stepped into the negotiations to persuade the FIs to subscribe to the government's share of the issue. The matter was however left hanging at that time.

Given the non performing asset position of the institutions, they had said that they were not in a position to invest in a company which is 'losing market share by the day'. Some of the FIs which were approached for the purpose include Unit Trust of India, State Bank of India, Industrial Development Bank of India and Infrastructure Development Finance Corporation.