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No takers to co-run Maruti's book

Gaurav Raghuvanshi & Sidhartha

With merchant bankers reluctant to underwrite Maruti Udyog Ltd's shares at anything above the book value of Rs 2,000 each, the government is looking for a co-bookrunner for the car-maker's proposed initial public offering.

A senior divestment ministry official confirmed that the government had not been able to locate a co-bookrunner for the IPO.

However, he said the government hoped to soon find a merchant banker to underwrite the issue at a price substantially higher than the Rs 2,300 per share committed by Suzuki Motor Corporation.

The divestment ministry had shortlisted DSP Merril Lynch, IDBI Capital Markets, J P Morgan and A F Ferguson for the job. It offered the job to IDBI Capital Markets, giving four days for consideration. However, the merchant banking outfit turned down the proposition.

Merchant banking sources told Business Standard that at Rs 2,300 a share, there would be very little retail interest in the issue, especially because Maruti Udyog had posted losses in 2000-01. They were not sure about the interest the issue would generate among institutional investors.

Suzuki, which had paid a premium of Rs 3,180 per share during the rights issue in the company in May, had also underwritten the IPO at Rs 2,300 per share. As part of the divestment deal, Suzuki had subscribed to the entire Rs 4 billion rights issue to gain management control of the company by paying Rs 10 billion as control premium to the government.

"The issue has already been underwritten at Rs 2,300 per share, and we have asked the merchant bankers to build a structure on that. It is true that we have not yet received a good response, but we are confident that they will come back with a better deal soon because their commission depends on the price they get for us," the official said, adding that the issue was a "minor hiccup" because the lead bookrunner had already been appointed.

Kotak Mahindra Capital Company Ltd, which was the financial adviser to the government for the sale of Maruti, has already been appointed the lead bookrunner for the issue.

The government intends to completely exit from Maruti through the IPO by the end of this year, followed by another public offer after about a year. Post the rights issue, the government is left with 45.54 per cent equity in Maruti. As much as 25 per cent (3.6 million shares) is to be offloaded through the IPO, and the remaining 2.97 million through the subsequent public offer.

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