The importance of South Asia's 3.5 per cent stake can be gauged from the shareholding pattern of the company.

The successful bidder of Punjab Tractors would acquire the state government's 23.49 per cent stake in the first phase of the disinvestment.

This would be followed by a 20 per cent mandatory offer which would increase the bidder's stake to 43.49 per cent, nearly three per cent short of the combined holding of banks, financial institutions and insurance companies.

The issue of wresting majority control has been haunting the disinvestment process of Punjab Tractors. In fact, it was not decided whether the successful bidder would be able to nominate the chairman of the company.

In fact, an Italian firm, SAME, reportedly withdrew owing to the lack of clarity on management control.

The Punjab Tractors board has proposed to change its article of association to enable the successful bidder to send two nominees on the board.

An official of the merchant banker tracking the disinvestment of the company said, since the power of nominating the chairman was not decided, the successful bidder will have to gain absolute control of the board to manage the company.

The official said this was the first disinvestment case where foreign institution investors would be playing such an important role.

CDC Partner, a FII, has recently expressed its interest to bid for the company.

Stock market sources said South Asia Regional Fund was aware of its importance and therefore increased its holding by 0.5 per cent to 3.5 per cent during the fourth quarter of the last fiscal, when the disinvestment was announced. The fund entered the company in September 2002.

Alongside, the markets were abuzz with rumours that the Punjab government had pegged a reserve price of about Rs 211 per share. The reserve price is the minimum price below which the government will not sell its stake.

As many as 10 short-listed firms have signed agreements of confidentiality with the state government.

These include Mahindra & Mahindra, Escorts, Sonalika, New Holland, Tafe in league with Agco, SAME, FIIs Warburg, J P Morgan and CDC and a consortium led by NewBridge , a private US equity fund.

The PTL stock has evinced trading interest of late. It has reached Rs 160 from Rs 120 in the past two months.