News: Bajaj Auto ups stake in ICICI Bank

(DNA 08/07/2006) Mumbai - Bajaj Auto Ltd (BAL), the motor cycle and auto rickshaw manufacturer, on Friday revealed its penchant for ICICI Bank shares, when it struck two mega deals on the BSE and the NSE, increasing its stake in the largest private-sector bank to 4.13%.

With the two deals, BAL, increased its stake in the bank by 1.42% at a cost of Rs 633 crore. It also became the single-largest Indian investor in the bank.

The Pune-based auto maker has an investment portfolio of about Rs 6,000 crore, and the significance of the deal stems from its plans to hive off the company’s investment and financial services business, which include a non-banking financial corporation and insurance (general and life) businesses, into a separate entity.

Speaking to DNA Money, Sanjiv Bajaj, executive director, BAL, who’s in charge of the big-ticket financial investments of the auto major, repudiated any other motive to the investment except that of ICICI Bank shares being a good financial investment.

“We are long-term shareholders of the bank and we believe in the long-term future of the bank,” he said.

BAL’s investible surplus of Rs 6,000 crore is invested in a slew of mutual funds, bonds, equities and group holdings.

To understand how much Bajaj Auto fancies ICICI Bank stock can be gauged by the amount of funds invested in the ICICI bank equity. The market value of ICICI Bank shares held by Bajaj Auto as on date is Rs 1,838 crore, while in Bajaj Auto Finance, the group NBFC, the market value of its investment is about Rs 262 crore.

“We like the ICICI stock,” Sanjiv explains. Bajaj Auto has been a savvy investor having bought and sold the bank shares, cleverly averaging its costs lower as it does.

The top management of ICICI Bank also acknowledges the importance of Bajaj Auto. After all, Indian public shareholding in the bank is pegged at 6%, while an overwhelming percentage of about 73.87% are owned by foreign investors.

A couple of years ago, K V Kamath, ICICI Bank managing director and CEO, along with his senior management team, visited Bajaj Auto’s Pune headquarters to make a presentation of the bank’s performance.

Sanjiv Bajaj confirms that company officials meet ICICI bank officials informally to know how it does.

At the time of the merger between ICICI Ltd and ICICI Bank, Rahul Bajaj, BAL chairman, had expressed reservations on the merger ratio, which was more in favour of the bank.

But the merger went through, and later the progress of the bank in implementing its retail banking and now the rural foray seems to have Bajaj’s nod. Nothing else can better explain why Bajaj Auto ploughed in another Rs 633 crore in hiking its stake in ICICI Bank by a further one percentage point.