Bajajs head for three-way demerger
The impending demerger of Bajaj group flagship Bajaj Auto might result in up to more than two independent companies jointly promoted by the four Bajaj family members: Rahul, Madhur, Shekhar and Niraj.
In an interview to the Hindustan Times Niraj Bajaj, a director of Bajaj Auto and cousin of group chairman Rahul Bajaj, said, “The company could be split into more than two companies.”
According to sources close to the development, the demerger would see the manufacturing, non-banking finance and insurance businesses emerging as separate companies. The board members will be more or less the same for all the companies.
“News that the company is being divided between Rahul Bajaj’s sons is factually wrong,” the Harvard-educated Niraj Bajaj told the Hindustan Times. “Even if there was a split, it would be between the four cousins, including Rahul Bajaj, who jointly owns Bajaj Auto. Rajiv and Sanjiv do not own the company,” he added. Bajaj Auto recently announced that a final decision on the demerger would be taken at its board meeting on May 17. The demerger will also result in Bajaj Auto transferring a part of its surplus funds of Rs 8,000 crore to the demerged entities.
The Bajaj group was founded in 1926. Rahul Bajaj took charge of the business in 1965. Under his leadership, the turnover of Bajaj Auto has gone up from Rs 7.2 crore to Rs 4,616 crore.
However, Rajiv and Sanjiv, sons of Rahul Bajaj, had contributed tremendously to the growth of Bajaj Auto and would be on the boards of all the companies, Niraj Bajaj said.
“The question of compensation arises only if the split in question is creating distinct companies that are owned by different promoter groups, so there is no question of Sanjiv being compensated,” he added.
The demerger process was first proposed by foreign institutional investors with holdings in Bajaj Auto, said Niraj Bajaj. The holding structure in Bajaj Auto is immensely complex, with a maze of companies and Bajaj group members together holding close to 44 per cent in India’s largest two-wheeler manufacturer.
Bajaj Allianz is one of the fastest growing finance and insurance businesses in the country. According to latest reports, the life insurance arm of the business has reported the highest profit among private life insurance players. The general insurance joint venture has recorded profits of Rs 73 crore, highest among non-life players. Bajaj Allianz is a joint venture between the Bajaj group and Allianz AG of Germany.