ICI Plc, after the recent government decision to close its application for the stake, is "examining" all options on what to do with the remaining Asian Paints shares held by Kotak Mahindra on its behalf. Senior ICI sources told The Financial Express that one option was to park the remaining stake with a "friendly" foreign institutional investor (FII) pending further discussions with the government.

Kotak Mahindra had acquired these shares from Atul Choksey, a former Asian Paints co-promoter and managing director. Choksey marked his exit from the company with the deal, and proposed to sell the shares to ICI Plc. This was bitterly resisted by the remaining promoters of Asian Paints. KotakMahindra will use the proceeds to repay a loan advanced by ICI Plc to pick up the Asian Paints stake.

Kotak Mahindra has offloaded 18 lakh shares, constituting 4.5 per cent of Asian Paints' paid-up capital, to UTI at Rs 280 per share. This amounts to a Rs 12.7 crore (20 per cent) loss. Kotak Mahindra had bought these shares from Choksey at Rs 351 per share.

The Reserve Bank of India (RBI) permission, which was required for bringing in foreign-currency loan to fund the acquisition, has been extended once and will run out in June-end.

The remaining portion of the Rs 128-crore loan (in rupee terms) will have to be repaid by Kotak Mahindra to ICI within the period. ICI officials said that both ICI and Kotak were weighing certain options on how to go about it.

An official said: "We are examining certain options and will have to arrive at a decision very soon." As per the original agreement between ICI and Kotak, the former will have to meet the difference if Kotak offloads the shares at a loss.

AsianPaints vice-chairman and one of the three existing co-promoters Ashwin Dani said, "We welcome Unit Trust of India as a shareholder of the company." With the 4.5 per cent stake that UTI has bought today, it becomes the largest institutional shareholder in the company with about 12.5 per cent stake.

The offloading by Kotak marks the end of a high-pitched drama that began in August 1997, with Ashwin Choksey selling 9.1 per cent of his 9.5 per cent stake in the company to Kotak Mahindra, which brokered the deal.

However, the Asian Paints board immediately announced that it will not allow the shares to be transferred to ICI. As a result, Kotak was forced to warehouse the shares on ICI's behalf.

ICI Plc, in its effort to get a toehold in Asian Paints, received a major jolt when the foreign investment promotion board (FIPB) turned down its application following the Asian Paints board's refusal to give a no-objection certificate (NOC). Last month, the FIPB had formally closed the ICI application saying that itwill not entertain any more hearings on the issue.