The Telegraph
Since 1st March, 1999
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Govt ready to exit Maruti
- Two-year time frame to sell rump holding in auto major

New Delhi, May 31: The government plans to sell its rump holding in carmaker Maruti Udyog within two years.

After divesting 25 per cent out of its equity holding of 45.8 per cent in the automobile major through a public issue next month, the government would like to sell off the remaining 20 per cent equity after a “cooling period” of one year but before mid-2005.

Analysts expect stock values for Maruti to soar after the IPO and the government could well earn up to Rs 200 a share when it decides to divest the rest of its holding.

Sources said the government will, however, have to decide whether to sell these shares in the market or negotiate an off-market deal with the main stakeholder, Suzuki Motor Corporation of Japan, as had been promised by the government in parleys held earlier with the Japanese automaker.

The Indian government launched its roadshow on Friday for the long-awaited sale of part of its stake in Maruti, the country’s largest car maker, to the public, to raise at least Rs 831 crore.

The Delhi-based automaker, which was launched in 1982 as an equal joint venture between the Indian government and Suzuki Motor Corp, is now managed by the Japanese car giant which has a 54.2 per cent stake.

The offer, which opens on June 12, will use the book building method with a floor price of Rs 115 — at which Suzuki has offered to underwrite the issue. At that price, the company’s value is Rs 3,322 crore.

Maruti sells 10 basic car models with over 50 variants, priced between Rs 2 lakh to Rs 18 lakh, retailing nearly half of the country’s estimated 5.6 lakh strong market for cars.

Maruti’s managing director Jagdish Khattar told reporters today that the automaker will continue to concentrate on the small car market though it has launched several sedans as it believes “India will remain a small car market for many more years to come”.

Some 80 per cent of all cars sold in the country are in this segment. Khattar is banking on two-wheeler owners switching over to small cars and older small car owners going in for improved versions of Maruti’s runabout — the M 800.

Suzuki Motor chairman Osamu Suzuki said more small cars would be launched to boost sales and increase marketshare.

Sales of cars and utility vehicles combined in the country, the world’s 12th largest economy, were flat in 2001-02 but grew by 6 per cent last fiscal relying largely on price cuts and discounts.

Figures released by the Society of Indian Automobile Manufacturers (SIAM) showed car sales in 2002-03 rose 6.4 per cent to 541,738 units from 509,088 in the previous year.

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