Bajaj plans new investment firm

Sanjiv Bajaj may head the firm

Bajaj Auto, the Rs 6,500 crore auto empire, is exploring options to float a new investment company as part of its ongoing expansion programme.

The company will take a final decision on this full-fledged investment arm by June 2006, after complying with legal requirements and seeking clearance from the capital market watchdog, Sebi.

"Bajaj Auto is a cash rich company with Rs 6,500 crore in its kitty. We need to spin off a new company to offload the surplus and fund the major expansion plans including international foray, new product development and competitive pricing admist cut-throat competition in the global arena," Chairman Rahul Bajaj said.

The company may offload Rs 2,500 crore to the proposed investment company, which would be a mirror image of Bajaj Auto. Bajaj Auto executive director Sanjiv Bajaj may head the proposed investment company, while Rajiv Bajaj would continue as managing director of Bajaj Auto.

"This is a preliminary thought and the change will happen gradually. We need to take permission of the board as well as the shareholders for a venture like this. Creating a new company will be a sensible thing as we want to unlock shareholders' value and gain better price earning multiples," Bajaj said. However, he clarified that there is no proposal for buyback of shares.

"This will not be a real company in the actual sense as the shareholders of Bajaj Auto will remain shareholders for this new investment arm too. Even I may transfer my equity stake in Maharashtra Scooters, Auto Finance and insurance joint ventures in the new investment company. However, nothing has been finalised. This is just a thought," he said.

The new investment company will be floated after the settlement of asset distribution between the Bajaj scions - Rahul Bajaj and Shishir Bajaj even though there is no apparent connection between the settlement between the cousins and setting up of a new investment arm. Asked about Sanjiv Bajaj heading the new company, Bajaj said that the idea is premature and no decision has been taken on this regard.

"But Sanjiv has the qualification to head the investment company, while Rajiv will continue to head Bajaj Auto," Bajaj added.

Earlier in March, Bajaj Auto had decided to elevate Rajiv, the elder brother, to the post of managing director for a five-year term - from April 1, 2005. As part of his new responsibilities, Rajiv was entrusted with handling production, marketing, supply chain, manufacturing and production engineering.

Sanjiv, executive director (finance) of Bajaj Auto manages the company's international operations and exports, finance, costing, legal services and treasury operations. He is also on the board of directors of Bajaj Auto Finance.