The acquisition of the initial 51 per cent stake is currently awaiting clearance by the Union government, as per the provisions of Section 108 of the Companies Act.

According to this section, companies have to obtain the approval of the Government if they want to acquire 25 per cent or more of the equity capital of another company. The Mahindras are market leaders in tractors with a 29 per cent share. The addition of Gujarat Tractors will augment M&M's annual production capacity by 15,000 units and increase its market share by 0.5 per cent. "We have sought the approval of the central government for acquiring shares in Gujarat Tractors and hope to get the necessary clearances by next month," said an M&Mofficial. "After receiving the government nod, we plan to acquire another nine per cent in the company," the official added.

After the amendment of the MRTP Act in 1991, sections 30A to 30G of the Act have been transferred verbatim to the Companies Act under Sections 108A to 108F. Section 108 A of the Companies Act states: "Except with the previous approval of the central government, no individual, firm, group, constituent of a group, body corporate or bodies corporate under the same management shall, jointly or severally, acquire or agree to acquire, whether in his or in its own name or in the name of any other person, any equity shares in a public company, or a private company which is a subsidiary of a public company, if the total nominal value of the equity shares intended to be so acquired exceeds, or would, together with the total nominal value of any equity shares already held in the company by such individual, firm, group, constituent of a group, board corporate or bodies corporate under the samemanagement, exceed 25 per cent of the paid-up capital of such company."

M&M's 51 per cent stake in the tractor company is being purchased for Rs 15 crore. The sale, when it goes through, will reduce the state government to a minority shareholder with 49 per cent. The additional nine per cent stake will be acquired for Rs 4 crore.