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Maruti float may be put off

Gaurav Raghuvanshi in New Delhi

The government has decided to defer the initial public offer in Maruti Udyog Ltd till at least December 2003. The public float, scheduled to be completed by March-end this financial year, is being postponed owing to lacklustre market conditions.

"We are going slow on the Maruti IPO because there is very little appetite for big-ticket issues in the market now. We are also looking for a hard underwriting by a merchant banker at a price higher than the Rs 2,300 per share (of Rs 100 face value) committed by Suzuki," a senior government official told Business Standard.

The government hopes to realise at least Rs 3,200 per share, the amount paid by Suzuki Motor Corporation for the Rs 400-crore (Rs 4 billion) rights issue. It expects the markets to revive by December next year and value the Maruti shares accordingly.

Meanwhile, the divestment ministry had also approached the Securities and Exchange Board of India for allowing the hard underwriting option for the Maruti IPO. The regulator is yet to take a decision. Under the hard underwriting model, the merchant banker would have to bear the difference between the issue price (Rs 3,200 per share) and that committed by Suzuki (Rs 2,300 per share).

According to the three-stage divestment plan cleared by the Cabinet Committee on Divestment in May this year, the government was expected to complete the rights issue and then tap the domestic market with an IPO through the book-building route, for 36 million shares, amounting to 25 per cent of the paid-up capital.

After the Rs 400-crore (Rs 4-billion) rights issue in Maruti that increased its equity base by 10 per cent, the government was left with about 66 million shares, representing 45.54 per cent of the paid-up capital. The rights issue had been fully subscribed to by Suzuki Motor Corporation in return for a control premium of Rs 1,000 crore (Rs 10 billion) to the government.

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