The development is expected to trigger another showdown between the institutions and Modis as they stand to lose control of the company. The Industrial Development Bank of India, Industrial Finance Corporation of India, Unit Trust of India, General Insurance Corporation and Life Insurance Corporation jointly hold 1.10 crore (11 million) shares of the company. The company has an equity base of Rs 25 crore.

The Modis hold about 25 per cent stake in the company and, significantly, do not meet the criteria laid down by the institutions for the bidders.

Modis had, about two years ago, bitterly opposed the institutions plan to go in for an open auction route for divesting their holdings.

The Modis had then approached the finance ministry seeking its intervention on the grounds that they as promoters should be given the first right on purchase of institutional holding. The deal, however, fell through as the institutions and Modis could not arrive at a mutually-agreeable price for the shares.

Institutional sources said that SBI Capital Markets has completed the valuation of Modi Rubber. The company's share is believed to have been valued much higher than the current market price of around Rs 90.

The FIs decision to call for bids is likely to stall negotiations between Continental and Modis for acquisition of a stake by the international tyre major in the company. Though Modi Rubber has confirmed that talks are on with Continental, it said no decision has been taken on the pricing. This paper had reported that Continental was close to picking up a stake at Rs 125 per share. The company has also denied that a memorandum of understanding has been signed with Continental and neither have any discussions been held for sale of VK and BK Modi's holding.

Modi Rubber, which has a technical collaboration with Continental of Germany, had a turnover of Rs 829.40 crore ($190 million) in the year ended September 1998. In the first quarter ended June 1999, the company reported a turnover of Rs 241.40 crore ($55 million) with a profit after tax of Rs 2.20 crore ($0.5 million).