The Board of Bajaj Auto Ltd, on Thursday, approved the scheme for its demerger by incorporating two subsidiaries — Bajaj Holdings and Investments Ltd (BHIL) and Bajaj Finserv Ltd (BFL).
Accordingly, the two and three wheeler manufacturing undertaking will remain under BHIL, while strategic businesses including Bajaj Allianz Life Insurance Company and Bajaj Allianz General Insurance Company conducted by Bajaj Auto Finance Ltd, will be under BFL.  The strategic businesses also envisage wind power project and investments in the consumer finance company, Bajaj Auto Finance Ltd (BAFL).

Management stays
Briefing reporters, Bajaj Auto Chairman Rahul Bajaj said “As of now there will be no change in the management structure with Rajiv  to continue as CEO and Sanjiv as Executive Director in the newly formed subsidiary BHIL.”  This is because, he continued, “to begin with, there is nothing to manage now except the portfolio investments in the BFL as it is a new entity.” On the composition of these new entities only four of the family members — Rahul, Madhur, Rajiv and Sanjiv — will be on the board of BFL.
Baja Auto Executive Director (Finance) Sanjiv Bajaj said the auto business, along with all assets and liabilities including investments in PT Bajaj Auto Indonesia and few vendor companies would be transferred to BHIL.  In addition, a total of Rs 1,500 crore in cash and cash equivalents would be transferred to BHIL. “Similarly, another Rs 800 crore in cash and cash equivalents to BFL,” as well, he added.
Mr Rahul Bajaj said “considering the growth opportunities in the auto, wind-energy, insurance and finance sectors, we consider it timely and appropriate to de-merge these activities into separate entities, as each one of us can focus on these core businesses and strengthen competencies.” 

Tap into cash pool
Further, “these two new companies will be able to tap into the cash pool of the primary investment company to support future growth initiatives, if required,” he added.   
After the demerger, effective from March 31, 2007, each shareholder of existing Bajaj Auto would, for every share held, continue to hold one share of the company of face value of Rs 10 each fully paid up, besides being allotted one share of Bajaj Holdings of face value of Rs 10 each fully paid up; and one share of Bajaj Finserv of face value of Rs 5 each fully paid up.
As part of restructuring, BHIL shall be renamed as “Bajaj Auto Ltd” and existing Bajaj Auto Ltd shall be renamed “Bajaj Holdings & Investment Ltd.” As demerger would operate under two new subsidiaries BHIL and BFL, Bajaj Auto has subscribed to 4.35 crore shares of Rs 10 each aggregating Rs 43.50 crore in BHIL and 4.35 crore shares of Rs 5 each aggregating Rs 21.75 crore in BFL.

Subject to approvals
The demerger, however, is subject to approvals of the stock exchanges, Bombay High Court, and the shareholders. The demerger process, subject to statutory and regulatory procedures, is expected to be completed by end of calendar year 2007. 
After the issue of shares by the new companies, the authorised share capital of BHIL (existing Bajaj Auto) will be 15 crore shares of face value of Rs 10 each aggregating Rs 150 crore, while that of Bajaj Auto Ltd (new) will be 15 crore shares of face value of Rs 10 each amounting Rs 150 crore and BFL’s share capital will be 15 crore shares of Rs 5 each at Rs 75 crore.
The issued (and paid up) capital of BHIL stands at 10.118 crore shares of Rs 10 each at Rs 101.18 crore, while Bajaj Auto Ltd (new) at 14.468 crore shares of Rs 10 each at Rs 144.68 crore and BFL at 14.468 crore shares of Rs 5 each at Rs 72.34 crore.
After the issue of new shares, existing shareholders of Bajaj Auto would hold about 70 per cent shares in the new companies in the same ratio as their current holding, with the remaining about 30 per cent being held by BHIL.  

Q4 profit dips by 11 per cent
Mumbai, dhns: Bajaj Auto, on Thursday, reported a 11.12 per cent decline in profit after adjustments at Rs 308.31 crore for quarter ended March 31, compared to Rs 346.97 crore for same period last year.
The total income (net of excise) increased 8.91 per cent to Rs 2471.25 crore for the quarter, from Rs 2268.95 crore a year ago. For year ended March 31, it recorded a profit after prior period adjustments of Rs 1237.10 crore for the year ended March 31, as compared to Rs 1123.27 crore for the year-ago period. The total income (net of excise) increased to Rs 10,076.05 crore for the year from Rs 8106.35 crore previous year. Income attributable to the group as per the consolidated results for the quarter ended March 31, was Rs 377.39 crore as compared to Rs 357.34 crore for the corresponding period last year. Net income from operations increased to Rs 2,589.50 crore for the quarter from Rs 2,297.52 crore in the year ago period.