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Government denies Suzuki to take control of Maruti

The government on Friday denied media reports that it would cede control of Maruti Udyog Ltd, the country's largest carmaker, to Japan's Suzuki Motor Corp by offering it part of a rights issue.

"We are adhering to the map which was decided between the government and Suzuki in January," said Arun Shourie, the minister responsible for privatisation.

"Suzuki stands by it, the government stands by it."

Two Indian financial dailies, The Economic Times and the Business Standard, reported on Friday that the cabinet committee on divestment had abandoned a plan to get domestic financial institutions to purchase the state's portion of a Rs four billion ($83.6 million) issue of new shares.

The government and Suzuki currently each own 50 per cent stakes in Maruti.

Instead the government's entitlement would be offered to Suzuki, bringing it control of a company which makes six of 10 cars sold in the world's second most populous nation, the reports said.

The Economic Times reported Shourie himself said the previous day that the plan had to be scrapped because "the financial institutions had expressed their inability to pick up the government holding."

The Business Standard, without citing a source, said domestic financial institutions simply were "not interested in picking up any stake in Maruti."

"I don't know how this rumour has come about that they are not interested," Shourie told Reuters late on Friday.

"The domestic financial institutions themselves attended the (January) meeting where the decision was taken about the rights issue. Actually, this road was suggested by one of them."

Asked whether the Maruti rights issue would be completed by the end of this calendar year as stated in the two news reports, Shourie said he could not recall the exact timing.

But he added: "I'm sure all of us will get together soon. Our first step is to appoint valuers for Maruti. I think that process began this afternoon."

Explaining the delay in implementing the divestment plan announced in January, Shourie said: "As you know last year was a bad year for Maruti. And we were advised not to begin things in earnest until September to give the company time to recapture its position in the market.

"That theory has turned out to be correct. They have fought back and recaptured their position in the market."

Maruti posted a loss of Rs 2.69 billion for the past year to March as its vehicle sales fell 13.7 per cent to Rs 350,376.

On Friday, Maruti managing director Jagdish Khattar said the company had been on track to return to the black this year until the suicide attacks in the United States caused the Indian rupee to drop sharply against the dollar.

That has boosted the cost of the auto parts and machinery Maruti imports from Japan.

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