Rahul Bajaj, patriarch of the Bajaj group, and chairman, Bajaj Auto Ltd, has come up with a way to resolve the impasse in an ongoing fight with brother Shishir Bajaj over the control of Bajaj Hindusthan, which is managed by the latter’s son, Kushagra.
His solution involves the creation of a new holding company to which the 24.53% stake held by Bachhraj & Company in Bajaj Hindusthan will be transferred. Shishir Bajaj and his family, according to this plan, will own a 78% stake in the new company (the Bajaj family together holds 78% in Bachhraj today).
The remaining 22% will be held by the Aditya Birla Group and the Pittie family that currently own the same amount in Bachhraj.
The restructuring of holdings is part of a settlement between Rahul Bajaj and his three cousins on one side, and Shishir Bajaj and his family on the other.
Following a messy fight over details in June 2003, Rahul Bajaj and his associates agreed to sell their stake in Bajaj Hindusthan and Bajaj Consumer Care to Shishir Bajaj at a fixed price.
In turn, the latter agreed to sell his stake in Bajaj Auto, Bajaj Electricals, Mukand Ltd and other Bajaj group companies to Rahul Bajaj at a fixed price.
The price at which the Bajaj Hindusthan shares were to be transferred to Shishir Bajaj and his family was set at Rs6.7 (the market price of the shares on 31 March 2003).
The agreement wasn’t implemented because of some unresolved issues. The two parties subsequently signed second, third and fourth agreements. The price at which the Bajaj Hindusthan shares were to be transferred remained the same, although by April 2006, they had soared to Rs 530.
The latest edition of the controversy starts in May 2006 when Madhav N. Pittie of the Pittie family wrote to Bachhraj saying that a transfer of the family’s stake to Shishir Bajaj at a price of Rs6.70 would be unfair to minority shareholders.
Responding to the letter Shishir Bajaj, chairman of Bachhraj and Company, and Niraj Bajaj, director replied saying the “management will not act against the interest of its share holders.”
The inability to find a solution to this until now, Rahul Bajaj claims, is the only issue preventing the implementation of the agreement.
“If we had enacted the agreement at the time of signing it, then it would not have affected the interest of minority share holders. Now when both the sides have agreed to protect their interest, the Shishir Bajaj camp is asking us sell the share at Rs6.70 to them and compensate the minority stake holders,” said Rahul Bajaj.
“The compensation would run in hundreds of crore and it is not a part of the agreement. So why should we pay it. Instead we have suggested an alternate method where we create a mirror company for Bachhraj and Company to whom the shares will be transferred at the agreed price of Rs6.7. The company will have the same shareholding pattern as Bachhraj thus it will not affect the interest of the minority share holders,” he added.
At Monday’s closing share price of the sugar company of Rs180.5, Rahul Bajaj would have to fork out Rs137.77 crore to minority shareholders as compensation if Bachhraj has to sell the shares to Shishir at Rs6.7 per share.
This is the difference between Rs180.5, the current market price, and Rs6.7,the price at which the shares are to to be sold to Shishir Bajaj and family.
The minority shareholders could well hold out for a larger pay-off, given that the stock was quoting at Rs530 just a year ago and that, in turn, will involve a bigger pay-off.
Rahul Bajaj claimed that this solution wasn’t acceptable to Shishir Bajaj and his family, which was the reason for the delay in the settlement.
Their reluctance could stem from the fact that their beneficial stake, through thenew company, in Bajaj Hindusthan would be only 19.13%. The new holding companywas never part of the original settlement, said Ravijit Chaudhuri, a spokesman for Kushagra Bajaj, Shishir Bajaj’s son.
Meanwhile, in a frequently-asked-questions list mailed to media newsrooms, Kushagra Bajaj sought to explain his family’s point of view.
“All the wrong reasons are being cited as to why the settlement continues to hang fire,” he said in the statement. As for the real reason for the delay, he said that “(Rahul Bajaj) may have been eyeing a company like Bajaj Hindusthan Ltd for one of his sons. This is my conjecture.”
In the mail, Kushagra Bajaj claimed that the Rahul Bajaj camp had agreed to make good any claims arising from minority shareholders of Bachhraj.
“The Rahul Bajaj group accepted this and even filed an affidavit in the Company Law Board accordingly,” he said.
(Sangeeta Singh and Ravi Krishnan from Delhi contributed to this story.)