New Delhi: Government on May 15 signed an agreement with Japan's Suzuki Motor Corp (SMC) to dilute its equity in Maruti Udyog Ltd (MUL) through a rights issue in exchange of Rs 1,000 crore as control and renunciation premium.

The revised joint venture agreement was signed by Shinzo Nakanishi, Director SMC, Pradeep Kumar, Joint Secretary (heavy industry) and Jagdish Khattar, MUL's Managing Director.

The two partners would meet again on May 30 to discuss management structure in the joint venture, in which government would have just two part-time directors after dilution of its equity through the rights issue.

Speaking after signing of the agreement, B N Jha Secretary (heavy industry) said, "Today is another milestone in the MUL story. This is in line with the policy of the government to free the Indian automotive industry from controls and promote a globally competitive auto industry".

He, however, said the government would continue to maintain its keen interest in the progress and growth of MUL as a dominant player in the auto sector as part of efforts to establish India as a global hub for manufacture of small cars.

Government on May 14 announced that it would reduce its stake in MUL to 45.4 per cent from the current 49.7 per cent. Thereafter, government would offload its remaining equity through public offer by April 2004.

Suzuki would pump in additional money for entirely subscribing to the Rs 400 crore rights issue of 12.19 lakh shares at the rate of Rs 3,280 per share of the face value of Rs 100, as a result of which it's holding in the JV would grow to 54.2 per cent from 50 per cent now.

PTI