Market volatility has prompted the government to postpone the disinvestment of its residual 10.27 per cent stake in Maruti Udyog Ltd to the next financial year.

The last date for submitting bids for the purpose was March 9. The postponement has been approved by Finance Minister P Chidambaram.

The decision to disinvest in MUL -- the third and final sale of the government's stake -- was cleared by the Cabinet Committee on Economic Affairs on 21 December, 2006. The government was to sell 2,96,79,709 shares of Rs 5 each through competitive bidding and hoped to raise between Rs 2,400 crore (Rs 24 billion) and Rs 2,800 crore (Rs 28 billion).

When the decision was taken, the Sensex was at 13,384, with the Maruti scrip at Rs 926. Since then, the Sensex has touched a high of 14,652 on February 8, before declining to today's level of 12,430. The Maruti share closed at Rs 779.4.

On February 22 this year, the government had invited an expression of interest for competitive bids. It had offered to sell all or part of its shareholding in MUL to Indian public sector financial institutions, public sector banks and Indian mutual funds.

SBI Capital Markets Ltd and Kotak Mahindra Capital Company Ltd were joint advisors to the government for the transaction. Each of the institutions can hold shares up to 10 per cent of the company's paid-up capital.

MUL has a market share of more than 50 per cent in the Indian passenger car market. Japanese car giant Suzuki Motor Corporation holds a majority 54.2 per cent stake.

The government's second stake sale in Maruti took place in January 2006, when it sold eight per cent to public sector banks and financial institutions through competitive bidding at an average price of Rs 678.24 a share and mopped up Rs 1,567 crore (Rs 15.76 billion). In June 2003, it had sold 27.5 per cent in Maruti to the public at Rs 125 per share and netted Rs 993 crore (Rs 9.93 billion).

The Maruti Saga