Family feud not to hit Bajaj Auto demerger

The proposed demerger of Bajaj Auto, under which separate investment and financial services companies may be created, will not be affected by the renewal of hostilities between chairman Rahul Bajaj and nephew Kushagra.

Niraj, one of Rahul Bajaj's cousins, all of who have been largely quiet during the five-year settlement dispute in the family, today told Business Standard that the demerger was to be handled by the board of Bajaj Auto alone.

"A decision to this effect will be the prerogative of the Bajaj Auto board. If the board decides to demerge, it will be aimed at enhancing and unlocking the shareholders' value. There is no connection between this and the settlement involving the Bajaj family members," he added.

It is speculated that the demerger will involve transferring Rs 6,000 crore of the Rs 8,000 crore surplus cash on Bajaj Auto's books to the new company as share capital to oversee its non-automobile business.

Niraj Bajaj also said that the notion that Bajaj Auto would be divided between Rahul Bajaj's two sons, Rajiv and Sanjiv, was completely false. "They (Rajiv and Sanjiv) are managing the company while the Bajaj family is the promoter of the company. I must say that they are managing the company extremely well. Under their management, the market capitalisation of the company has gone up by 800 per cent in last three-and-a-half years and we are beneficiary of their efforts. I am thankful to God for giving us such wonderful nephews (Rajiv and Sanjiv)," he added.

Niraj and his brothers, Shekhar and Madhur, hold 16.67 per cent each in the main family investment vehicle, Bajaj Sevasharm. Rahul Bajaj and brother Shishir hold 25 per cent each.

The Company Law Board (CLB) has asked the two holding companies of the group, the other being Jamnalal Sons, not to hold their board meetings to induct additional directors until the family settlement is disposed of.

Niraj said he had his brothers were on the side of Rahul. "We love and adore Rahul Bhai. Shishir Bhai wants to get out of the group. We don't feel happy seeing Shishir Bhai going out. However, we want to settle the issue as soon as possible," he said.

The issue dates back to 2002 when discussions began on splitting the Bajaj group. In March 2003, the Shishir Bajaj faction filed a petition before the CLB, which asked the family to resolve the issue and ordered status quo.

Three months later, both the factions signed an agreement after family friends S Gurumurthy and D S Mehta chalked out the split formula. However, the agreement has not materialised yet. In September last year, Rahul Bajaj's lawyers claimed that an oral pact has been reached, which deviated from the original agreement. Shishir Bajaj though denied it. The Shishir Bajaj faction filed an application with the CLB last week after Bajaj Sevashram and Jamnalal Sons proposed to induct new members of their boards. CLB yesterday said it would hear the case on May 28 and 29. "No board meeting (of these investment companies) will be held till the petition is disposed of," CLB ruled.

Some analysts interpreted that the CLB ruling might defer the demerger of Bajaj Auto. It was previously indicated that the Bajaj Auto board might meet in March or May to discuss the demerger.