Subsequently, Continental began negotiations with Modis for acquisition of a stake in the company. But even as the talks were on, the FIs came out with the offer to sell their 44 per cent shareholding.

Modi Rubber's share is currently trading around Rs 98 on the stock markets.The FIs expect major players from the international as well as domestic tyre industry to bid for the controlling stake in MRL. Though the company has been consistently losing market share and also suffered a loss in the last financial year, experts believe that it has a good turnaround potential.

Acquisition of Modi Rubber would also enable an international player to get an immediate entry into the Indian market.

One of the most prominent bidders is likely to be Continental of Germany with which Modi Rubber has a technical collaboration. Its tyres are marketed under the brandname `Modi Continental'. The bids will be scrutinised by SBI Capital Markets which has been given the mandate to handle the divestment.

The terms and conditions make only large tyre companies with annual turnover of at least Rs 500 crore eligible to participate in the bids. The FIs, put together, control the biggest chunk of the company's equity capital. The Modi brothers VK and BK Modi and their associate companies control over 32 per cent stake in the Rs 25 crore capital base. The company's financial performance has not been very encouraging over the past couple of years. It suffered a loss of Rs 2.86 crore on a turnover of Rs 829 crore during the year ended September 1998. For the third quarter ended June 1999, the company reported a profit of Rs 2.19 crore on a turnover of Rs 241 crore.

Modi Rubber has also been losing its market share over the last few years. It has lost its dominant position in the bus and truck tyre segment to other players such as JK Industries and Apollo Tyres.