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CCD to meet on May 14 to decide on Maruti rights

Our Bureau

NEW DELHI, May 8

THE first big-ticket divestment deal for the fiscal is round the corner with the Cabinet Committee on Disinvestment (CCD) slated on meet on May 14 to consider the plan for finalisation of the Rs 400-crore rights issue in Maruti Udyog Ltd (MUL) which will cede control over the joint venture car maker to Suzuki Motor Corporation (SMC).

"The Prime Minister's Office has given time on May 14 for a meeting of the CCD. However, the case of IPCL is not likely to come up during the May 14 meeting due to the flurry of correspondence relating to the bid of Reliance,'' Government sources said.

The selection of the strategic partner for IPCL is expected to be finalised after the current Parliament session gets over, they stated.

The Ministry of Disinvestment in tandem with the Ministry of Heavy Industries and Public Enterprises have put up a proposal for the consideration of the CCD after more than three months of negotiations with the Japanese joint venture partner on the two-stage divestment process in Maruti.

"I don't see the proposal being blocked. We will use the Maruti case to market India as an investment destination,'' the sources said.

As per proposal, the Government will renounce its portion of the rights offering in favour of Suzuki, making it the largest shareholder in Maruti. In return for this, Suzuki will pay a renunciation and control premium to the Government.

Post rights issue, the Government's holding in Maruti is expected to come down to about 44 per cent from the present level of 50 per cent while Suzuki's share will increase to 56 per cent from the existing 50 per cent level.

In the second stage, the Government will sell its residual stake in Maruti in two phases through an offer for sale and exit completely from the car maker.

In the first phase, the Government will cut its stake to 25 per cent by selling equity to banks, financial institutions and public. The residual 25 per cent stake would be sold in the second phase of the sell-off plan, the sources said.

The proceeds from the rights issue will be utilised by Maruti for funding its expansion and modernisation plans while the renunciation and control premium would go into the disinvestment kitty of the Government.

The CCD is expected to discuss the pricing of the rights offering and the renunciation and control premium to be paid by Suzuki for subscribing to the Government's portion of the rights and thereby acquiring control over Maruti.

"We will use the Maruti deal to tell global investors that here is a foreign investor who has done well by investing in India by bringing a capital of just Rs 23 crore,'' the sources said.

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