Financial Daily from THE HINDU group of publications
Friday, Jan 25, 2002
Maruti: Suzuki team coming on Jan 28 for rights talks
NEW DELHI, Jan. 24
THE top brass of Japan's Suzuki Motor Corporation (SMC) is expected to arrive here on January 28 to hold negotiations with the Union Government on the renunciation premium and control premium for the proposed Rs 400-crore rights offering in the joint venture Maruti Udyog Ltd (MUL).
``We will hold discussions with Suzuki officials on the pricing of the rights offering including the renunciation premium and the control premium to be paid by the Japanese partner,'' Government sources said.
The rights offer plan will be firmed up and flagged off on the basis of the quantum of shares which Suzuki agrees to pick up out of the rights portion renounced by the Union Government in its favour, the sources said.
The process is expected to be completed by the middle of March, they said.
The proposed rights issue will constitute the first stage of the Government's plan to divest its holding in Maruti where it is a 50:50 partner with Suzuki.
According to the plan, the Union Government will renounce its portion of the rights in favour of Suzuki during the rights issue following which the Government's holding in Maruti will fall below the existing 50 per cent level.
The rights issue will thus witness Suzuki becoming the largest shareholder in Maruti.
In return for this, the Government will get a renunciation premium for forgoing its portion of the rights in favour of Suzuki as well as control premium for giving up majority control in Maruti to the Japanese partner.
The money accruing from the rights offering will be utilised by Maruti for its modernisation, expansion and diversification needs while the renunciation and control premium will flow into the disinvestment proceeds of the Government.
The second stage of the sell-off plan in Maruti envisages the Government offloading its remaining equity holding in Maruti to the public, banks and financial institutions through an initial public offering (IPO) or an offer for sale.
The Union Government has carried out valuation of Maruti by three independent valuers Ernst & Young, KPMG and S.B. Billimoria & Co.
The price of the rights offering will be pegged to the average of the three valuations finalised by the valuers.
The valuation reports submitted by the valuers were adopted by the board of Maruti at a meeting held in December last.
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