Iran's government has sold an 18 percent stake in Iran Khodro, the Middle East's biggest carmaker, for 13.59 trillion rials ($1.3 billion), the Tehran Stock Exchange (TSE) said on Tuesday.

The share offering by Iran's Privatization Organization was one of the largest ever on the Tehran bourse and the biggest in the Islamic Republic's auto industry, TSE Vice President Mohammad-Reza Rostami told Reuters.

Iran Khodro -- a maker of cars and trucks -- has a joint venture with France's Renault to make the no-frills Logan, sold in Iran as the Tondar-90, and also Peugeot's 206 and 405 models.

Rostami said the stake, which was offered on the exchange on June 28, was bought by a consortium of Iranian investors including Iran Khodro, investment firms and pension funds.

There was a lot of interest ... several brokers and customers were competing, Rostami said by phone.

He said the government still held 20 percent of the company, which has been listed on the TSE for almost 10 years.

Iran, which is under tightening sanctions from the United Nations and United States over its disputed nuclear programme, aims to speed up the sale of state assets to attract new capital and help boost the oil-dependent economy.


Earlier this year, an official said Iran planned to raise about $12.5 billion by privatizing more than 500 state firms during the 2010-11 year. But analysts say Western firms are becoming increasingly reluctant to invest in the country due to its long-running nuclear row with the West.

The TSE said that in compliance with the privatization scheme, the Iran Khodro stake was offered at a price of 3,000 rials per share and sold at 3,687 rials per share.

Iran Khodro has an average market share of 65 percent in the country of 70 million people and plans to increase production to 730,000 vehicles by 2011 from around 680,000 in 2010, it added.

Like other Iranian car companies, Iran Khodro benefits from significant tariff protection from foreign rivals.

Rostami said the government was also in the process of selling 18 percent of Iran's other large vehicle maker, Saipa.

The U.N. Security Council has imposed four rounds of sanctions on Iran for defying demands it halt sensitive nuclear enrichment work. The United States and the European Union have adopted additional measures to increase pressure on Iran.

The United States and its allies suspect Iran is seeking to develop nuclear bombs. Tehran denies the charge and says its nuclear work is aimed at generating electricity.

(Writing and reporting by Fredrik Dahl in Dubai; Editing by Samia Nakhoul)