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Final talks on Maruti divestment this week

Partha Ghosh

A high-level Suzuki team will have a final round of discussion with the government this week over the latter's proposal to disinvest its shareholding in their car manufacturing joint venture, Maruti Udyog Ltd.

A key member of the negotiating team, Nakamisi, who is also a member of the board of directors of Suzuki Motor Corporation, Japan and linked to Osamu Suzuki's family, arrives here on Wednesday to settle the finer details of the scheme of divestment.

A Cabinet nod to the scheme will be sought, thereafter, sources said.

Suzuki has in-principle agreed to acquire fresh equity shares issued by the JV, through a proposed Rs 400-crore rights issue. The government will renounce its entitlement to the rights issue against a renunciation premium. In addition, the government will also find its shareholding reduced from a little below 50 per cent to around 40 per cent, and hence, it will lose management control.

The government is also expected to get a control premium from the Japanese partner. At a later date, the government will further reduce its shareholding in the company through an initial public offer.

Banks and financial institutions, who were given the option to pick up the government's entitlement in the proposed rights issue but did not, will then have the option to participate in the public issue along with retail investors.

Sources said that if Suzuki and its counsels in India are in agreement with the government's scheme of divestment, a memorandum of understanding is likely to be signed within 10 days, following which the department of divestment will seek the Cabinet's nod to the proposed scheme.

"Nakamisi is arriving to discuss the scheme of divestment soon. We are very positive that the deal will be struck soon," said a senior government official.

He said that post-disinvestment, the equity shareholding structure in the joint venture will change, and hence, the government may get a reduced representation on the board.

The constitution of Maruti's board of directors is still under negotiation.

As on date, the two partners have an equal representation on the board. Suzuki has its nominee as the chairman of the JV, while the government appoints the managing director, alternately.

The arrangement regarding the posts of the chairman and managing director is likely to continue after the divestment.

The Suzuki team comprises Nakamisi and another senior official from Japan and a local representative of the company.

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