INDIA BUSINESS WORLD - JANUARY 2006
THE MONTH THAT WAS

GOVT MOPS UP RS 1,568 CRORE FROM SALE OF 8% MARUTI STAKE

In the first divestment of this fiscal, the government has garnered Rs 1,567.6 crore by offloading 8% stake in Maruti Udyog Ltd to eight public sector banks and financial institutions. Life Insurance Corporation picked up more than 50% of the 2.31 crore shares on sale.

“This is the first time in the history of divestment in India that the sale of government shares fetched a price higher than the prevailing market prices. Fuelled by the aggressive pricing of the bidders due to the ‘French auction model', the discovered price was much higher than the market prices,” a senior government official said.

“The average price at which the 8% shares have been sold works out to be Rs 678.24. This is a premium of 22.8% of the six-month average, 12.30% of the threemonth average, 4.01% of the 10-day average and 4.17% premium of the last traded price of the scrip on January 10," finance minister P Chidambaram said after the meeting of the empowered group of ministers on disinvestment (eGoM).

After sale, LIC's stake in the company has gone up to 9.26%. It acquired 5.81% stake . The government had set an upper limit of 10% of the total stake that any one institution could hold in the automobile company, including the shares bought. The government holding in the company, which stood at 18.24% prior to the sale, will now come down to 10.24%.

SBI was the second most successful bidder, picking up 39 lakh shares at Rs 660 each. Both LIC and SBI were “anchor investors” in the bidding process, the official added. Each of the 3,609 employees of Maruti have been offered 20 shares.

The highest bidder for a stake in Maruti was Small Industries Development Bank of India (SIDBI), which offered a price of Rs 725, followed by Corporation Bank at Rs 690. Other successful bidders like Exim Bank made an offer of Rs 680, Indian Bank Rs 670, Union Bank of India Rs 665 and State Bank of Patiala Rs 660. The floor price was fixed at Rs 620 a share.

The government is planning to sell the remaining 10.24% shares in Maruti also to exit from the company. "The Department of Heavy Industries has said residual shares of Maruti Udyog could also be divested at a suitable time. The proposal will be considered as per the process," the finance minister said.

The entire proceeds of the sale of 8% shares of Maruti will go to the National Investment Fund (NIF). The corpus of the NIF will be managed by public sector fund managers and 75% returns from the fund will be used for social sector projects and 25% will be used for reviving under performing PSUs.