— PHOTO: PAUL NORONHA

UNLOCKING VALUE: Rahul Bajaj (right), Chairman, with Madhur Bajaj (centre), Vice-Chairman, and Sanjiv Bajaj, Executive Director, Bajaj Auto, at a press conference in Mumbai on Thursday.

MUMBAI: The much talked about demerger has finally happened. Bajaj Auto, a leading two and three-wheeler manufacturer with global scale of operations, announced a demerger scheme at its board meeting on Thursday. The company, which also has presence in wind energy, insurance and finance sectors, has considered it timely and appropriate to demerge these activities into separate entities, each of which can focus on these core businesses and strengthen competencies.

The demerger will result in the formation of two subsidiaries — Bajaj Holdings and Investment Ltd. (BHIL) and Bajaj Finserv Ltd. (BFL).

The company is now involved in five core activities that include two and three-wheeler manufacturing, wind energy through its wind power project, insurance business through its joint ventures Bajaj Allianz Life Insurance Company Ltd. (BALICL) and Bajaj Allianz General Insurance Company Ltd. (BAGICL) and consumer finance through associate company Bajaj Auto Finance Ltd. (BAFL).

BAL has subscribed to 43.5 million shares of Rs 10 each of BHIL amounting to Rs 43.50 crore and 43.5 million shares of Rs. 5 each of BFL amounting to Rs. 21.75 crore.

The demerger will ultimately create three separate entities — auto, wind power and financial services and primary investment company.

Rahul Bajaj, Chairman, Bajaj group, announced here at a press conference that there would be no change in the management structure of the company. "We are considering in the future that international marketing, which is being handled by Sanjiv Bajaj today, will be handed over to Rajiv Bajaj in about 12 months. This is because in addition to existing functions, Mr. Sanjiv Bajaj is responsible for Bajaj FinServ, which will not have much activity in the first couple of years,'' he said.

The auto business along with all assets and liabilities, including investments in PT Bajaj Auto Indonesia and in a 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.

The wind power project, the investments in the insurance companies, that is, BALICL and BAGICL, and investment in the consumer finance company, BAFL, along with the relevant assets and liabilities would be transferred to BFL. In addition, a total of Rs 800 crore in cash and cash equivalents would be transferred to BFL. The remaining assets and liabilities, including investments in group companies and balance cash and cash equivalents would be retained in the existing BAL.

As part of the scheme, Bajaj Holdings and Investment Ltd. (which would be the new auto company) would be renamed as Bajaj Auto Ltd. and the existing Bajaj Auto Ltd. would be renamed Bajaj Holdings and Investment Ltd. (which would act as the primary investment company). All shareholders in the existing BAL on the record date would become shareholders in each of the new companies and would be issued shares of the two new companies in the ratio of 1:1.

After the issue of shares by the new companies, the authorised share capital of BHIL (existing BAL) would be Rs. 150 crore (face value is Rs.10 per share) and the issued capital Rs. 101.18 crore. Bajaj Auto Ltd. (new) would have an authorised capital of Rs. 150 crore (face value is Rs. 10 per share) and an issued capital of Rs. 144.68 crore. Bajaj Finserv would have an authorised capital of Rs. 75 crore (face value is Rs 5 per share) and an issued capital of Rs. 72.34 crore.

The provisions of the scheme would be applicable and come into operations from the closing hours of March 31, 2007, but the demerger process is likely to be completed by the end of calendar 2007.

Net at Rs. 1,237 cr.

For 2006-07, BAL reported a 10 per cent growth in the net profit at Rs. 1,237.10 crore. (previous year Rs. 1,123.30 crore) on a 24 per cent higher turnover of Rs. 10,076 crore (Rs. 8,106.40 crore).

The board of the company has recommended an unchanged dividend of Rs. 40 per share.

The company's gross profit for the year was at Rs. 1,967.30 crore (previous year Rs. 1,794.30 crore).

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