Mumbai: The restructuring of Rahul Bajaj’s business unlocked a value of about Rs1,203 crore on Monday when two new subsidiaries of Bajaj Holdings and Investment Ltd—Bajaj Auto Ltd and Bajaj Finserv Ltd—were listed on the bourses, completing a process that began in May last year.
The unlocked value was below Mint’s estimate of Rs5,123 crore, based on projections from four brokerages.
Bajaj Auto, India’s second largest two-wheeler maker by volumes, listed at Rs945 a share and Bajaj Finserv at Rs700 a share on the Bombay Stock Exchange (BSE), higher than Mint’s estimate of Rs760 a share for the auto business and Rs577.50 a share for the financial services unit.
However, both stocks fared badly in a weak equity market. Bajaj Auto fell 36% to close at Rs604.50 a share, while Bajaj Finserv lost 26% to close at Rs514.65 a share. Bajaj Holdings lost 11% to close at Rs598.25. BSE’s benchmark Sensex declined 1.81% to 16,348.50 points.
“The weak market and little interest in the financial services business brought down Bajaj Finserv,” said S. Ramnath, director (research) at IDFC-SSKI Securities Ltd.
The combined market capitalization of Bajaj Holdings, Bajaj Auto and Bajaj Finserv adds up to Rs22,245 crore, a 5.7% increase over the Rs21,042 crore market cap of the original Bajaj Auto as on 13 March, the last day before the stock was delisted, BSE data shows.
Mint had estimated the total market capitalization to increase 24% to Rs26,165 crore.
Bajaj Group chairman Rahul Bajaj had said unlocking shareholder value was a key motive for separating the automotive and financial services businesses, though he was also driven by the need to satisfy the corporate ambitions of his two sons.
Elder son Rajiv Bajaj will head the group’s automotive operations and Sanjiv Bajaj will look after the group’s financial services businesses.
After the restructuring, Bajaj Auto holds all assets and liabilities of the original company, and Rs1,500 crore in cash and cash equivalents.
The group’s investments in Bajaj Allianz General Insurance Co. Ltd, Bajaj Allianz Life Insurance Co. Ltd and a wind power project, along with associate company Bajaj Auto Finance Ltd, are part of Bajaj Finserv. The financial services subsidiary has Rs800 crore in cash and cash equivalents.
Analysts are concerned about the group’s ability to grow its insurance business and sustain margins in the long run. Company executives, though, are bullish.
Sanjiv Bajaj, managing director of Bajaj Finserv, told Mint the loss in the life insurance business “does not worry us too much” since the business is growing fast.
The company also expects Bajaj Auto Finance’s assets to grow, and plans to decide whether or not it wants to enter the asset management business by October, he said.
“The idea is to expand it into a full-fledged financing entity,” he said, adding that half of the Rs3,000 crore disbursed by the financial arm last year went to non-automotive businesses such as consumer durables and personal loans.
Bajaj Allianz Life Insurance posted a loss of Rs214 crore in 2007-08, while Bajaj Auto Finance made a profit of Rs20.1 crore and Bajaj Allianz General Insurance posted Rs106 crore in profit.