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Financial institutions refuse to buy govt stake in MUL

Indian financial institutions refused to buckle at a meeting on Monday to central government pressure to buy its 50 per cent stake in Maruti Udyog Ltd (MUL), a money-losing, state-run automaker, a domestic business daily reported on Tuesday.

Business Standard quoted unnamed sources as saying a meeting between the prime minister's principal secretary Brajesh Mishra and the heads of five of the nation's biggest financial institutions ended inconclusively. During the meeting, Mishra pushed the financial institutions to "pick up the government stake in Maruti and later go for a public issue."

But financial institutions "have opposed the move, citing its (Maruti's) recent losses and dipping market share over the last few years," the newspaper said.

Maruti's market share has plunged from over 80 per cent early last decade to around 57 per cent now as foreign automakers like Hyundai, Daewoo and Ford have entered the market.

The newspaper report noted the meeting was held just a day before the Cabinet Committee on Disinvestment meets "to approve disinvestment of (the) government stake in Maruti".

That committee is widely reported to be considering five options:
1) sell the government stake to Indian financial institutions;
2) sell it to the public;
3) sell it to a foreign automaker, in effect securing a strategic partner for Maruti;
4) sell the stake to foreign institutional investors;
5) sell the stake to the current joint venture partner, Suzuki Motor Corp of Japan, which already owns 50 per cent.

The paper said the prime minister's principal secretary has been given the task of finding a solution to the contentious issue of how the government should go about disposing of its stake.

The five financial institutions whose heads attended Monday's meeting were ICICI Ltd, a major financial services company, term lender the Industrial Development Bank of India, the state-run State Bank of India, the nation's largest commercial bank, state-run Unit Trust of India, the nation's largest investment fund manager, and the Life Insurance Corporation, the state-run monopoly provider of life insurance in India.

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