  The eruption of V4332 Sgr discovered in February 1994 shows striking
similarities to that of V838 Mon started in January 2002. The nature of these
eruptions is, however, enigmatic and unclear. We present new photometric and
spectroscopic data on V4332 Sgr obtained in April-May 2003 at the SAAO. The
obtained spectrum shows an unusual emission-line component superimposed on an
early M-type stellar spectrum. The emission-line spectrum is of very low
excitation and is dominated by lines from neutral elemets (NaI, FeI, CaI) and
molecular bands (TiO, ScO, AlO). We also analyse all the observational data,
mainly photometric measurements, available for V4332 Sgr. This allows us to
follow the evolution of the effective temperature, radius and luminosity of the
object since February 1994 till 2003. We show that the observed decline of
V4332 Sgr can be accounted for by a gravitational contraction of an inflated
stellar envelope. The combined optical and infrared photometry in 2003 shows
that apart from the M-type stellar component there is a strong infrared excess
in the KLM bands. This excess was absent in the 2MASS measurements done in 1998
but was probably starting to appear in K in 1999 when the object was observed
in the DENIS survey. We interpret the results in terms of a stellar merger
scenario proposed by Soker & Tylenda. The infrared excess is likely to be due
to a disc-like structure which is either of protostellar nature or has been
produced during the 1994 eruption and stores angular momentum from the merger
event.
