Mumbai: Ending months of speculation over a possible split of the Bajaj Auto empire, the company's board on Thursday approved a scheme to demerge its non-auto business from the flagship company and create a holding company for the two.
Announcing the plans, Bajaj Auto Chairman Rahul Bajaj said the move to demerge the company was to unlock shareholder value and not to divide the group between his two sons — Rajiv and Sanjiv. "It is all nonsense (family feud)... the work is divided and the ownership between four brothers and two sons remains the same," he said.
As per the proposal, Bajaj Group's auto business will be demerged into a new subsidiary Bajaj Holdings and Investment Ltd (BHIL) and other strategic businesses such as wind energy, insurance and financial services would be demerged into another new entity Bajaj Finserv Ltd (BFL).
Bajaj Auto shareholders would continue to hold one share of the company with face value of Rs 10 and would also be allotted one BHIL share of Rs 10 face value and one BFL share of Rs 5 face value. The demerger would be completed this year.
Rebuffing suggestions that the move was to spilt the group, he said: "I will be the chairman of all the three companies. It is not a split of Bajaj Auto. Out of Rs 8,500 crore cash and cash equivalents, Rs 1,500 cr will go to the new Bajaj Auto and Rs 800 crore will be transferred to BFL. The balance Rs 6,000 crore will remain with the BHIL," Bajaj said.
The transaction will enable the new companies to tap into the cash pool of BHIL to support future growth, while enabling BHIL to participate in the growth of the auto business and the financial services business.
Ruling out any change in management structure of the group, Rahul Bajaj said: "There is generally no change in the management structure."
Rajiv Bajaj would continue as Managing Director and CEO while his brother Sanjiv would continue as Executive Director of the manufacturing entity. In addition, Sanjiv would also be responsible for Bajaj Finserve.
The board structure of the existing entity Bajaj Auto would also be unaltered, while the boards of BHIL and BFL would have Rajiv, Sanjiv and their uncle Madhur Bajaj as directors to start with, along with Rahul Bajaj as chairman.
As part of the restructuring process, BHIL would be renamed "Bajaj Auto Ltd" and the existing Bajaj Auto Ltd would be renamed as "Bajaj Holdings and Investment Ltd".
Bajaj said the new companies would be listed on the bourses by December after getting all necessary clearances. The holding company will hold a 30 per cent stake in each of these subsidiaries while existing shareholders of BAL will have 70 per cent stake in the ratio of their current holding.
The news of demerger was, however, not perceived well in the bourses with the company's scrips tumbling by over 10 per cent in intra-day trade as details of the plans emerged. It closed the day at Rs 2500.30, down Rs 179.15 or 6.71 per cent at the BSE.
Comments
0 comment