Cabinet Committee clears the way for government exit from Maruti Udyog

As reported by The Indian Express yesterday, the Cabinet Committee on Economic Affairs today considered...

As reported by The Indian Express yesterday, the Cabinet Committee on Economic Affairs today considered and cleared the way for disposing off the government’s residual stake of 10.27 per cent in Maruti Udyog Limited (MUL). The government had sold an 8 per cent stake in Maruti in January this year to domestic financial institutions and banks for around Rs 1,600 crore at an average price of Rs 678.24 per share.

“The same terms and conditions as the earlier stake sale will be followed. Bids will be invited,” Chidambaram said. However, the government is yet to decide whether the sale will be taken up this financial year or the next. Chidambaram indicated that the timing of the sale would be decided by him depending on the market conditions.

After this stake sale of 2.96 crore shares — from which the government is expecting to mop up at least Rs 2,740 crore based on company’s current stock price of Rs 926 — is through, the government holding in Maruti will fall to zero. Japanese car major Suzuki Corporation already has a 54.2 per cent stake in Maruti, India’s largest car manufacturer.

Story continues below this ad

The NDA government had first offloaded a 27.5 per cent stake in the company in June 2003 to the public at a price of Rs 125 per share to garner Rs 993 crore. With the stock market having risen substantially since then, the government has raised more funds in the subsequent sales, even though the percentage stake sold was much lesser.

MUL was established in February 1981 through an Act of Parliament and today’s decision means the government is no longer in the business of making cars and bread (Modern Foods was sold to HLL a few years ago).