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Government to get premium for Maruti share rights

The government will get a premium from financial institutions for handing them its share of planned rights issue in the country's largest carmaker Maruti Udyog Ltd, a business daily said on Thursday.

"The renunciation premium will be finalised through negotiations between the government and the FIs (financial institutions)," the Business Line said, quoting government and FI officials.

India decided on Tuesday to cut its stake in Maruti in two phases, starting with the rights issue possibly in September.

Disinvestment Minister Arun Shourie said the government's share of the rights issue would be allotted to domestic financial institutions and mutual funds, thereby providing new funds to the carmaker without diluting the Indian holding.

In the second phase, "both the government and the FIs will then separately divest their shares at a premium through an offer for sale and an initial public offering", the newspaper said.

Maruti, in which the government and Japan's Suzuki Motor Co each hold 50 per cent of the Rs 1.32-billion equity, has a 57 per cent share of India's new car market.

The government has not disclosed how much of its stake it tends to sell.

Suzuki said on Wednesday it could not comment on whether it would buy its allotment of new shares "because we have not received any information from the Indian government" about the rights issue or any other aspect of the government's plan to dispose of its stake in Maruti.

Under a 1992 agreement, Suzuki must approve any move by the Indian government to sell its stake or raise new capital.

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