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Privatization boosted by big ticket deals

As the threat of war clouded the horizon on the Indian subcontinent, India's government clinched two important privatization sales. Maruti, India's biggest car-maker, was sold to Suzuki - the first foreign company to win a major privatization deal - and Indian Petrochemical Corporation (IPCL) went to Indian conglomerate Reliance Industries.

Two small hotels were sold too, one to an investor from Muscat. Together, the sales will fetch the government around $825 million, one-third of its target for sales this year.

The Maruti sale was tricky, because the shareholders' agreement ruled out sale of the government's stake in the unlisted company to anyone unless Suzuki, an equal partner in the company, approved it. A negotiated deal was the only way out, and that seemed elusive for a while. In the end, a three-part deal was worked out. First, the government will renounce its share of a rights issue, taking its stake down to 45%. Suzuki will pay Rs10 billion ($204 million) to gain control of the company. An IPO will follow by March that will reduce the government's stake to 25%, and the remaining shares will be sold once again to investors by March 2004.

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