Hats off to Maruti! True, to the much-hyped road shows and publicity campaigns, the IPO of the Indian automobile giant (the first ever PSU to be divested by the Government of India through the market route instead of a strategic sale) received an overwhelming response, both from institutional investors and retail investors. The Government as a result of this exercise would divest 25% of its stake in Maruti. Keeping in view the oversubscription (of nearly 10 times) to the issue, the Government further decided to retain 10% of this oversubscription, by means of exercising the green-shoe option. This implies that henceforth the Government equity in Maruti would come down to about 17% from 45%, which, the Government has an option to divest within a year either by selling it entirely to the Suzuki Corporation, its joint venture partner or via the market. The Government had approved a cutoff price of Rs. 125 per share, which is Rs. 10 higher than the floor price of Rs. 115 per share. On the listing day (July 12, 2003), Maruti's shares were quoted at around Rs. 170 per share, which is inline with the market expectations of quoting above the Government approved price.

Even though it is the institutional investors who have led the race for a pie in Maruti on the first day of opening of the issue (June 12, 2003), in the real sense, it was the retail investors who have stolen the show all the way through the offer until it was closed on June 19th. As a reward to their enthusiastic participation, the Government has decided to allocate nearly 60% of the total 79 million shares to retail investors and the remaining 40% to Qualified Institutional Investors (QIIs). This indeed, is against the Sebi's norms for allocation of shares issued through book-building process, which states that any unlisted company coming for an IPO through a complete bookbuilding process should allocate 60% of the total shares issued to QIIs and the rest to the retail investors. The move by the Government then, to allocate 60% of the total shares issued to the retail investors should not be perceived as a violation of Sebi's norms, but as a measure to regain the retail trust in the primary markets. Two questions immediately crop up and in fact, they have already become debatable among analysts who are following the entire Maruti IPO saga with keen interest.

Indian automobile giant, strategic sale, institutional investors and retail investors, green-shoe option, joint venture partner, Suzuki Corporation, market expectations, enthusiastic participation, Qualified Institutional Investors (QIIs), book-building process, Sebi's norms, analysts, Maruti IPO saga, Government, Government equity.