labels: maruti udyog
Government may consider buying out Suzuki news
In a statement that is an indication
20 November 2000
In a statement that is an indication of the government's mood, heavy industry minister, Mr. Manohar Joshi, said that, if the situation warrants, the government would consider buying out the Suzuki stake in Maruti Udyog Limited.

According to the existing shareholders' agreement between the government and the Japanese auto giant, Suzuki Motor Company, if one party wishes to sell out its stake in the venture, the other party has the first right of refusal.

Given this, the government will have to first offer its stake to Suzuki in the proposed privatisation of the joint venture. In an attempt to ensure that the privatisation move fetches "a fair price" to the government, Mr. Joshi has stated that the government may consider buying out Suzuki's 50 per cent stake and offering the entire holding to a strategic partner.

The government will be inclined to exercise this option if, in its opinion, Suzuki's offer price for the government's 49.4 per cent stake is "not attractive enough". And to do so, the government is likely to use the Suzuki offer price as a "benchmark" at which it would buy out the Japanese partner.

What is not clear is whether the agreement with Suzuki permits the government to use Suzuki's benchmark price as a counter-offer to buy it out. However, in the absence of any new benchmark, the only reference price available being the one at which Suzuki increased its stake in 1997, the government's decision to use of the current offer price as a benchmark makes eminent sense.

The Maruti Udyog privatisation has been hanging fire for some time now. The department of disinvestment has always been of the opinion that, with Maruti losing market share every month, the government should off-load its stake in the company as soon as possible for it to get the best price. But the cabinet committee on disinvestment refused to endorse this view.

Further, the administrative ministry also opposed divestment in the company quoting the interests of the domestic ancillary industry, stating that if the Maruti stake is sold off, the domestic ancillary industry would be deprived of any orders and this would lead to a serious situation.

The cabinet committee has finally referred the matter to a committee of secretaries comprising of heavy industry secretary Mr. T S Vijayaraghavan, expenditure secretary Mr. C M Vasudeva and disinvestment secretary Mr. Pradeep Baijal . This committee will consider the various issues involved in the divestment of government stake in Maruti Udyog and make a formal report to the government.


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Government may consider buying out Suzuki