news about Bajaj Auto Finance Plans To Emerge As Rs 4,500 Cr Firm

Bajaj Auto Finance Plans To Emerge As Rs 4,500 Cr Firm

2005/12/13

Bureau

Rahul Bajaj, chairman of Bajaj Auto, said he has plans to make Bajaj??s financial business, Bajaj Auto Finance, a Rs 4,500 crore power house. This business combined with the Bajaj Auto??s cash reserves and equity of the subsidiaries ?? the 76% in the two insurance ventures with Allianz, the stake of Bajaj Auto in Maharashtra Scooter will be transferred to the proposed investment company, he said.

The demerger talk at Bajaj Auto for splitting the company into two separate business ?? manufacturing and investment ?? has been going on for the last two years but the family separation has forced the company to put this on the back burner. The proposed investment arm of the Bajaj Group will not happen immediately.

??It will take about one and a half to two years for it to happen. The family settlement has to happen before this. Though a defacto agreement has been reached, this will only be final by June 2006,?? Mr Bajaj said. These plans were in no way connected to the family separation or succession plans, he said. He said Bajaj Auto Finance will be raising Rs 950 crore and this expansion of equity will give the company an ability to raise debt in the ratio of 1:4 and all the big initiatives will be done by BAFL. Bajaj has already announced that the free cash in the company will be used to launch multiple initiatives in the next five years and fuel growth of the company. The market value of the portfolio as on March 31, 2005 was Rs 5,300 crore and is now worth Rs 6,500 crore.

Bajaj Auto Finance is seeking shareholder nod for these expansion plans in January 12, 2006 but has not set a timeline for the same. The company will issue up to an 80,00,000 equity shares/ warrants of the company on a preferential issue basis to its promoter Bajaj Auto Ltd and a few other financial investors.

he funds are to be raised through instruments such as equity shares, non-convertible debentures and warrants on a rights basis to its shareholders and this will be decided later.

Rahul Bajaj bids to raise valuation via spinoff

MUMBAI: A new company carved out of Bajaj Auto Ltd will be used as the vehicle to make forays abroad.

The Rs 5,000 crore Bajaj Auto, with interests in two-wheelers, three-wheelers and in the insurance sector, is setting up outposts in Latin America, Nigeria and Pakistan. The investments for this would be made by the new company, Rahul Bajaj (pictured), chairman, told DNA. "It is neither a holding company nor an investment company," he said. Bajaj said he'll have to first get approval from German insurance major Allianz before deciding on spinning off the insurance ventures into the new company. "This is not a succession planning exercise. I've been talking about it for a long time," he said, adding. "I am talking about it for two years now," he said.

The plan envisages creating a new company with an investible corpus of Rs 2,500 crore. Bajaj Auto holds an enviable investment corpus of about Rs 6,000 crore in its balance sheet. While the cash comes in handy during price wars and acquisitions, it is also a double-edged sword at times: financial ratios suffer and it compares poorly against peers such as Hero Honda, who do not carry such a load of cash in their books. Bajaj Auto has wrestled with this problem on past occasions too. When criticism from foreign investors mounted, the company some years ago decided to make a generous buyback offer that saw about Rs 700 crore utilised. "It's a clever move to improve share valuations," an analyst tracking Bajaj Auto said. Asked about whether a dividend bonanza or a buyback was considered, Bajaj said those shareholders who still felt that the company was not adequately valued could sell the shares of the new company in the stock market when they are listed. On the role and duties of his two sons in Bajaj Auto, Rahul Bajaj said: "Woh duties aaj bhi divided hain, aur kal be divided rahega". Rajiv Bajaj, the eldest son, is the CEO of the company and in charge of production and marketing, while Sanjiv, the younger son is managing the finances of the company. The plan to hive off a new company, Bajaj said, is his "personal opinion". It has yet to pass the muster of the company board. The board, with eminent independent directors such as Naresh Chandra - he of corporate governance report fame, will consider the plan when the proposal is placed. "But we'll first tackle the family division," Bajaj said.

His relations with brother Shishir are now very cordial but the decision to buy out his stake in Bajaj Auto and Shishir's move to buy the rest of the family's stake in Hindustan Bajaj will happen as soon as the tax experts and legal experts give their nod. The ownership of Bajaj Auto Finance will also go to the new company, which is as yet unnamed. Rahul Bajaj said Bajaj Auto Finance cannot raise more debt as it has touched its maximum borrowing limits. "Our second priority after the family separation is to raise resources for Bajaj Auto Finance. We'll take up the formation of the new investment company by the fag end of 2006," he said. Meanwhile, Bajaj Auto Finance Ltd today informed the BSE that the board of directors of the company at its meeting held on December 10, has decided to augment resources and raise resources up to Rs 950 crore through the issue of various instruments on a rights basis.

The BFL Board has also decided to issue 8,000,000 equity shares warrants of the Company on a preferential issue basis to its promoter Bajaj Auto Ltd and few other financial investors. Further the company has informed that an extraordinary general meeting of the members of the company will be held on January 12, 2006.

MUMBAI: One of India??s oldest business families and the second largest motorcycle maker, Bajaj Auto Ltd. will be split into manufacturing and investment companies, a newspaper said.

The economic Times, quoting Chairman Rahul Bajaj said Rajiv Bajaj, managing director of Bajaj Auto will head the manufacturing unit, while his younger brother Sanjiv, currently executive director, will head the investment company, called the Bajaj Auto Finance. "The splitting of the company is very important but not urgent," he said. "However, the sooner it happens, the better." The investment company will also handle the overseas activities of the manufacturing unit and look after local high-end retailing, the newspaper said. Bajaj Auto's 24 percent stake in Maharashtra Scooters Ltd. would go to the investment company, as would the 74 percent stake in two insurance joint ventures, Bajaj Allianz Life insurance and Bajaj Allianz General Insurance, the paper said.

No succession plans for sons: Bajaj

Denying that he was charting out succession plans for his two sons, Bajaj Auto chairman Rahul Bajaj said today that work was being divided between the two brothers - Rajiv and Sanjiv - for operational efficiences.

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