In a change of stance, the government is now offering an incentive to the book runners of the initial public offer in Maruti Udyog Ltd that is expected to hit the market by the end of the current financial year.
The book runners would be entitled to an incentive of up to five per cent depending on the price they can sell the 3.6 million shares comprising 25 per cent government equity in the book building process. The higher the price, the better the incentive, a senior divestment ministry official said.
As per the deal between the government and Suzuki Motor Corporation in February, the Japanese auto giant had underwritten the initial public offer at Rs 2,300 per share while gaining management control over the company by fully subscribing to a Rs 400 crore (Rs 4 billion) rights issue.
The move to give an incentive comes after the idea of hard underwriting at Suzuki's insistence did not find favour with merchant bankers and was subsequently struck down by the Securities and Exchange Board of India.
With market-men projecting few takers for the Maruti IPO at anything substantially higher than the Rs 2,300 for a Rs 100 share underwritten by Suzuki, the Japanese company was trying its best to reduce its exposure.
The exact incentive structure is being finalised and would be taken to the Cabinet Committee on Divestment for clearance, the official said, adding the Cabinet was likely to meet towards the end of this week. (Rs billion)
The Cabinet Committee on Divestment was also expected to approve the third book runner for the IPO following a request from Suzuki.
A consortium of JM Morgan Stanley and HSBC has been recommended by the core group on divestment as the second co-book runners in addition to Kotak Mahindra Capital Company Limited and ICICI Securities, who are already working on the public offer.
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