Mumbai/New Delhi, May 17 (IANS) One of India’s oldest business houses, the Bajaj Group, Thursday announced its plans to split into three separate core businesses of auto, financial services and new businesses but its patriarch denied there was any rift between his two sons.
Rahul Bajaj, the chairman of its flagship company Bajaj Auto Ltd. (BAL) and a member of the Rajya Sabha, stressed that “de-merger” was important to tackle its expanding business to remain focused and competitive. He denied the company had been split between his two sons.
The world’s fourth-largest two- and three- wheeler manufacturer announced the creation of two subsidiaries – Bajaj Holdings and Investment Ltd (BHIL) and Bajaj Finserv Ltd. (BFL).
Bajaj Auto shareholders will get one share in each of the two newly formed companies for every share they hold, the company said in a press release.
The de-merger, which will thus create three separate entities, will see no change in the existing management structure, as Rahul Bajaj brushed aside reports of a feud between his two sons, Rajiv and Sanjiv.
“There will be no change in the management structure of the company. There is no question of any separation here,” said the 69-year-old chairman of BAL and grandson of Jamnalal Bajaj who founded the group during the 1930s.
“It is necessary to separate the business in order to be more focused in this competitive environment,” he added.
Rahul Bajaj said that while his elder son Rajiv would continue to remain the managing director and chief executive of the motorbike business, his younger son Sanjiv would continue as executive director of the group’s financial services and its international operations.
The news of the de-merger did not however augur well for the stock markets that saw its shares fall by 10.5 percent but recovering a little over 2 percent.
The company Thursday also reported a decline in its profits by 11.12 percent at Rs.3.08 billion for the quarter ending March 2007.
It said that once new shares would be issued, the existing shareholders of BAL would hold about 70 percent shares in the new companies in the same ratio as their current holding, with the remaining about 30 percent being held by BHIL.
The company has appointed JM Morgan Stanley Pvt. Ltd. and J.Sagar and Associates as the advisors for the restructuring.
The de-merger, which comes into effect from March 31, is subject to approvals as may be required including that of stock exchanges, Bombay High Court and shareholders of the company.