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A successful drive

Having sold its residual stake of 10.27 per cent, the government has come out of Maruti Udyog Ltd. The event is significant for many reasons besides the usual ones connected with the public sector sale programme. The joint venture between the Government of India and Suzuki Motor Company of Japan gave Indian consumers their first modern car in the mid-1980s. That car, the Maruti 800, until recently, was the sole occupant in the affordable `A' segment and continues to find a large number of buyers. Suzuki's stake in the company, which was just 26 per cent in 1982 went up to 50 per cent in 1992. On the eve of its initial public offer of shares in July 2003, the Japanese company was firmly in control with a stake of over 54 per cent. The public offer was a resounding success creating new benchmarks for valuing the passenger car industry and reviving the moribund primary market. A very large number of retail investors benefited. With the public issue, the government's stake came down to just below 21 per cent. Since then the government has divested its stake in two instalments in auctions limited to financial institutions and banks. The reasons why the government did not persist with selling the shares to the public might have to do with economising on the issue expenses; but more likely it was to avoid selling the residual shares in the glare of publicity. Recently all disinvestment proposals have become politically controversial and for all practical purposes the programme has stalled with virtually no credit taken in the Union budget under capital receipts.

The divestment of Maruti shares does not in any way indicate a revival of the public sector sale programme. In some cases the government, after having sold its majority stake to strategic buyers (and hence ceding control), has been unable to dispose of its remaining shares even if it were contractually bound to. The Balco case, which is now under arbitration, might be an extreme example but there are other instances to show that without suitable political backing there will not be any further progress, even in cases considered settled. The government has received Rs. 2,368 crore from the final round of sale of Maruti shares, ending its financial participation on a high note. Here again a comparison with other public sector units might not be appropriate. Maruti continues to be the market leader in the passenger car segment holding its dominant share in the face of severe global competition. The government's record of flexibility in dealing with Suzuki has obviously helped.

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