Bajaj Auto Ltd’s demerger into three units, including a holding company, was aimed at unlocking shareholder value and keeping the units under one group, said chairman Rahul Bajaj.
Bajaj Auto’s shareholders will meet later this week to vote on the demerger.
Last quarter, India’s second largest two-wheeler company announced its break-up into three companies—one for its auto operations, another for its finance operations and a third that will be a holding and investment firm.
“The crux of the matter—today, everything is owned by Bajaj Auto,” said Bajaj. “I am not breaking the group. My group is one and I am trying to unlock the
shareholders’ value, but still keep it one.”
Full control: As chairman of Bajaj’s holding company, Rahul Bajaj will control the purse strings for any expansion the other units may plan.
While Rahul Bajaj will head the holding and investment firm, his elder son Rajiv Bajaj will head the auto business and younger son Sanjiv, the finance one, Rahul Bajaj had said when announcing the plan.
Shareholders will have the choice to stay with the units they want, Rahul Bajaj said. All shareholders of Bajaj Auto will be issued shares of the two new companies in the ratio of 1:1.
After the break-up, Bajaj Auto will first transfer the auto business, with all its assets and liabilities, and Rs1,500 crore from its investment portfolio to the auto manufacturing arm.
Bajaj Auto has a Rs6,000 crore investment portfolio with a market value of Rs8,500 crore.
The company will transfer Rs800 crore from the investment portfolio, its wind power project and investments in Bajaj Allianz General Insurance Co. Ltd and Bajaj Allianz Life Insurance Co. Ltd and non-banking finance company Bajaj Auto Finance Ltd to the finance arm.
As chairman of the holding company, Rahul Bajaj will control the purse strings for any expansion the auto manufacturing and finance arms may plan.
“Trying to keep the group as one gives us more flexibility,” said Bajaj.
The question after the separations was “what do I do to keep the connection” between the auto manufacturing arm and the finance business, he said.