Bajaj Auto board will soon take up a proposal to split the company into separate auto and finance enitities.
The move, which is a prelude to giving independent roles for the Gennext, will help the group to utilise the company's cash surplus.
The cash surplus of Bajaj Auto has now grown to about Rs 8,000 crore from about Rs 3,000 crore about three years back when plans were originally mooted to hive off the financial services and investments to utilise the surplus. The demerger plan would help Bajaj Auto Chairman Rahul Bajaj's younger son Sanjiv Bajaj (37) to take up control of the financial services business.
According to sources, growing differences between Rahul Bajaj's elder son Rajiv Bajaj and Sanjiv Bajaj have forced Bajaj Auto to step up the demeger plan. Ex-citibanker Nanoo Pamnani, who is also a member of the Bajaj Auto board, is quietly working with the family members to expedite the smooth split of businesses.
Sources said that investment banker Nimesh Kampani is preparing a final blue-print for the demerger plan. "The plan will be finalised after the Budget," said an investment banker close to the transaction. Speaking to HT, Bajaj Auto chairman, Rahul Bajaj said: "The demerger is mainly for unlocking shareholder value. We have been thinking about it for quite some time now. I cannot put a time-frame for it. However, the demerger is a must."
Shares of Bajaj Auto surged by over Rs 163 at the Bombay Stock Exchange, fuelled by rumours that the group is planning to carve out their auto and finance arms into two separate entities.
The scrip touched an intra-day high of Rs 3,171.90 gaining Rs 163 or five per cent in early trade but spared some gains at the end of the day to close at Rs 3,047.10, up Rs 38.89 or 1.29 per cent on the BSE. The Bajaj Auto stock has underperformed on the benchmark BSE Sensex in the last three and a half quarters. In the meantime, the Sensex has gained 12.1 per cent since October 19, when the Bajaj Auto stock started its downward trend.
The demerger will give Sanjiv Bajaj an opportunity to grow the financial services business.
Rajiv Bajaj has already resuscitated the fortunes of the auto business. Sources said that Sanjiv Bajaj is working on plans to create a financial services business. "The Bajaj group has only a small financial services business. Sanjiv has to grow the business. The growth of Reliance Capital's financial services business is a classic example of how the growth can be achieved in a short span of time," said an investment banker.
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