New Delhi: The government decided to sell its 10% stake in Maruti Udyog Ltd, India’s largest car maker, to 32 public sector banks and financial institutions for Rs2,360 crore, exiting its 26-year-old joint venture with Japan’s Suzuki Motor Co.
The average price for the 2.96 crore shares on offer was Rs797 a share, said P.V. Bhide, secretary in the department of divestment.
Maruti shares closed Thursday on the Bombay Stock Exchange at Rs794. 65, down 1%, or Rs8. The share-sale decision was announced after markets were closed.
“The government earned a handsome return on Maruti,” finance minister P. Chidambaram told reporters after the sale was announced. “Maruti is an example that shows government can enter an industry at an appropriate time and exit at an appropriate time.
The money collected from the divestment is likely to go to the Consolidated Fund of India, which can be used to offset regular government expenses, though the finance minister said he has an open mind on other possible uses.
Life Insurance Corporation of India was the biggest-single buyer, paying Rs1,040 crore for 1.3 crore shares at Rs800 per share. This will see its shareholding in the company go up to 13.37% from 8.78%.
While the government had previously asked the bidders to make sure that their aggregate holding in Maruti did not exceed 10% of the company’s equity, it has decided to allot the full amount LIC bid for, after the latter got the go-ahead from Suzuki.
“They will not get the shares until the amendment of articles of association takes place in September,” said Bhide.
Corporation Bank and Export-Import Bank of India were the top bidders at Rs850 a share, while State Bank of India Mutual Fund had the lowest successful bid at Rs775 per share.
In January 2006, the government raised Rs1,567 crore by selling an 8% stake in the car maker. Prior to that, in 2003, the government had collected Rs993 crore when it sold 27.5% of its stake to the public at Rs125 a share at the time of the company’s listing.
Sanjiv Shankaran and Reuters contributed to this story.