Sources said talks are in an advanced stage. Modicorp chairman BK Modi, when contacted, confirmed that talks were on, but declined to give more details.However, the route which the financial institutions (FIs) would take to offload their shares is not known at present. The Modi brothers had submitted their individual bids in response to the FIs' open tender for divestment of their stake.

"Since they are the only ones left in the race, the FIs may opt to settle for Modis", sources said.

In case the Modis succeed in buying out the FIs' stake, they would have to come out with an open offer immediately to conform to the takeover guidelines of the Securities & Exchange Board of India. The Modis' holding in the company would cross 55 per cent if the FIs divest their shares in favour of the promoters.

Modi said they had shortlisted four merchant bankers to handle the open offer as the offer would have to be made within four days of signing the deal with FIs.

Modis are, simultaneously, working on a restructuring plan for Modi Rubber to facilitate entry of international tyre giant Continental of Germany into the company. The restructuring proposal envisages splitting up Modi Rubber into two companies to bifurcate the tyre and non-tyre businesses.

Continental also recently conveyed to the financial institutions that it was interested only in Modi Rubber's tyre business.

In a letter to the Industrial Finance Corporation of India, the German company said it was not willing to take the liability of non-tyre business of Modi Rubber.

According to Modi, "Continental has done due diligence of the company and has told us that they are interested in buying mainly the Modipuram plant and some other assets".

Sources said Continental is instrumental in giving a push to the restructuring plan now being put in place by the promoters as it is keen to get a majority stake in the company.

Modi said he expects the entire exercise to be completed by the end of the year. Continental has been in talks with all three tyre majors in the country: JK Tyres, Apollo Tyres and Modi Rubber Ltd. Apollo Tyres has offered a stake of around 15 per cent to Continental, but the German company has not formally picked up the equity stake as yet.