This will increase the valuation and fetch more money to the government, disinvestment minister Arun Shourie told mediapersons here on Tuesday. He was briefing them after the meeting of the Cabinet Committee on Disinvestment (CCD). The quantum and valuation of the equity to be divested will be decided in consultation with SMC, Mr Shourie said. The government will renounce its option to invest money in the rights issue in favour of the financial institutions, he said, adding that FIs are willing to invest money in MUL.

MUL would get revenue in terms of premium on the rights shares which would be used for strengthening the company, technologically as well as financially, he said.

To bring out the rights issue, the government will immediately initiate formal negotiations with SMC. With the Japanese partner agreeing to this proposal, the government expects to complete this exercise by September this year, he said.

Valuation of the MUL will be done by three banks, one each appointed by the government, SMC and by mutual consent, the minister said. He expressed optimism that the government's decision to offload its equity would be welcomed by the market the same way VSNL privatisation was greeted.

Mr Shourie pointed out that SMC had objected only to the sale of government shares to any of its rivals in the auto market. The government intends to divest its equity in full cooperation with SMC. In any case, divestment in favour of a partner hostile to SMC will only harm MUL which the government wants to avoid, he added.

He emphasised that the government's intention is not to just get money but also strengthen MUL. This is for several reasons, he said. MUL gives a lot of money to the government by way of indirect taxes. It has a great potential to remain market leader in the small car segment. Further, a large number of ancillaries depend on MUL. The CCD discussed five options that had emerged for MUL divestment, Mr Shourie said. All these options will be discussed with SMC, he added.