News: Demerger yes, split no - Bajaj

(DNA 10/02/2007) Mumbai - Bajaj vs Bajaj? An empire to be carved-up between two sons? Rahul Bajaj, chairman and patriarch of Bajaj Auto Ltd (BAL), on Friday rubbished reports of rivalry between his eldest son Rajiv and second son Sanjiv, even while admitting differences in approach and a four-year-old plan to bifurcate the company into two. "The Bajaj family are not a family of chamchas. We have our own individualities, and our own integrity. We love each other," he asserts, evidently bristling with indignation. He recently conceded the managing director's post to Rajiv Bajaj, who has won his spurs by taking Bajaj Auto's market share threateningly close to No 1 Hero Honda. But the markets celebrated reports about the impending split between the two-wheeler company and its treasury and financial operations. The shares of Bajaj Auto and Bajaj Auto Finance - the two companies which will be affected the most if the insurance and treasury businesses are spun off - surged. The shares rose on expectations that the board of the automobile major will "within months" consider a proposal to spin off its insurance and treasury businesses from Bajaj Auto. In a telephonic interview to DNA Money, Rahul Bajaj confirmed what he's been saying for the past four years about Bajaj Auto. "The board will take up for consideration in the next six months the matter (of spinning off the cash assets of the company)," he said. Apparently, the broad framework of the split is already blueprinted. Bajaj Auto holds cash and cash equivalents of about Rs 9,000 crore.It also has two aggressive joint venture insurance businesses with Allianz, which a research report has valued at Rs 900 per share. "It's a good move and we've been hearing this for some time now", says Avinash Gorashakar, head of research at Emkay Share. The restructuring exercise will help the balance-sheet to get leaner and improve the return on capital employed by BAL, said Avinash. Marketmen expect the financial assets to be spun into Bajaj Auto Finance, and later be used to acquire a small bank. With the stock markets on a roll, Bajaj's insurance business is growing faster than the industry and its bread-and-butter automobile business is prospering. But ask Rahul Bajaj whether the relationship between his sons is "frosty", he immediately goes on the offensive. "Rajiv and Sanjiv are my sons, they are not my clones. And we are not jokers or idiots," the patriarch ripostes. Rajiv has impressively turned around operations of Bajaj Autoby introducing new motorcycle models that have turned into best-sellers. If the sales uptrend continues, Bajaj may overtake Hero Honda over the next few months. "We have our differences," admits Rahul Bajaj. "Rajiv wanted to set up a plant in Chakan, and I put my foot down on the proposal. I wanted Rajiv to use the 400 acres of land that were already available with us in Aurangabad for the project, but he argued about the need for a new mindset in a state-of-the-art facility at Chakan. He persisted and eventually he won," the father said. The patriarch said Rajiv's move to Chakan paid rich dividends for Bajaj Auto. Bajaj Auto Finance shares rose by an impressive 17.40% to Rs 432.20 from its overnight close of Rs 368.15 on Friday, while Bajaj Auto, the flagship company, gained 1.29% to Rs 3,047.10 from Rs 3,008.25, a gain of Rs 38.85. Last month, DNA Money had reported on the much-speculated split in Bajaj Auto. Rahul Bajaj says everyone will benefit. "The financial institutions and foreign investors always wanted the company to spin off its financial business into another entity to unlock shareholder value," he said. A business TV channel said Nanoo Pamnani, the former CEO of Citibank India, will be overseeing the exercise of spinning out the financial businesses.