The Indian government is selling off part of its remaining stake in Maruti Udyog, the country’s largest car maker. The government’s stake will be divested directly to financial institutions (FIs) or banks.
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The decision to reduce the government stake comes after pressure from the communist parties who form part of the country’s coalition government, which currently holds 18.28% of Maruti Udyog. Eight percent of that stake is being sold off.
This is the third time the government has moved to sell off part of its Maruti Udyog stake. On the first occasion, management control passed from the government to Suzuki Motor Corporation, which currently holds a 54.2% stake and is not interested in increasing it further.
In its second round of equity divestment the government reduced its stake to the current 18.28% and Maruti was listed on the Indian bourses. Since then, about two years ago, Maruti’s share price has shot up by nearly four times its listed value and 130 times its book value.
The current stake sale of 8% is therefore likely to fetch a high return for the government – it’s estimated at INR15bn (EUR273m).
While the stake will be sold to financial institutions, care will be taken to ensure that no single FI’s net holding in MUL is more than 10%. The Life Insurance Corporation of India is the FI with the highest stake in MUL at 3.31%. The FIs will also not be allowed to sell their newly acquired shares inside six months.
The reserve price for the divestment and the selected bidder(s) are expected to be announced on 12 January.
Deepesh Rathore/Tilak Swarup
