20240429 Calibre April 2024 Investor Presentation.pdf
Demerger of Bajaj Auto
1. Demerger of Bajaj Group
Presented By:
MBF Group 5
January 21, 2014
CA.Salil Mishra
CA. Rohit Kr. Modani
CA. Vikesh Bansal
CA. Rakhee Garg
CA. Pawan Kr. Gattani
CA. Bineet Sundriyal
3. Contents
Company Profile
Objective & Purpose of Demerger
Motivation behind Demerger
Group Structure (Pre & Post Demerger)
The Scheme
Implications – Accounting
Implications – Tax
Value GAP
Key Take Away
4. Company Profile
Company
–
Bajaj
Auto
Limited
is
India’s
largest
manufacturer of scooters and motorcycles with a market
share of 31%. Bajaj is also engaged in the generation of
wind-energy, Insurance Business & Consumer Finance
Founder – Jamnalal Bajaj
Headquarter – Pune, Maharashtra, India
Leadership – Rahul Bajaj, Rajiv Bajaj, Sanjeev Bajaj
5. Objective & Purpose of Demerger
Considering the growth opportunities in the auto, wind-energy, insurance and
finance sectors, it was considered timely and appropriate to de-merge these
activities into separate entities, each of which can focus on these core businesses
and strengthen its competencies.
The demerger scheme created three separate entities with management focus on
clearly laid out objectives, pursuant to which: a. the auto company would focus on auto business; [Bajaj Auto Limited]
b. the wind power and financial services company will focus on wind-energy
generation, insurance, consumer finance and new initiatives in financial services
space; [Bajaj FinServ Limited] and
c. the primary investment company will focus on new business opportunities. [Bajaj
Holding Investment Limited]
6. Objective & Purpose of Demerger
The two new companies will be able to tap (on an arm’s length basis) into the cash
pool of the investment company to support future growth initiatives, if required.
The demerger will enable the investors to hold separate focused stocks
The demerger will facilitate more transparent benchmarking of the companies with
its peers in their respective industries.
The demerger unlocks value for the shareholders and would also benefit the
employees and other stakeholders
7. Motivations for Demerger
Mobilising India – by supplying 4 million motorcycles out of a projected
market of 10 million.
Globalising India – by rapidly enhancing exports and international facilities to
become among the three largest global player in two-wheelers.
Financing India – by ramping up the group’s financial operations.
De-Risking India – by expanding the group’s life and general insurance
business across the land.
Regarding ‘Financing India’ and ‘De-Risking India’, the de-merger that occurred
in the course of 2007-08, and the consequent formation of Bajaj FinServ
Limited, should enable the group to unlock greater value by widening its
financial reach and portfolio.
[From the Vision Statement by the Chairman]
8. Structure of Demerger
Bajaj Auto Ltd.
Bajaj FinServ Limited (BFS)
Bajaj Holdings and Investment Limited (BHIL)
9. Structure – Pre & Post Demerger
Structure prior to demerger
Post demerger structure
11. Event Ladder
Sr. No. Events
Date
1
Appointed Date
01.04.2007
2
Approval by Board of Directors
17.05.2007
3
Approval by Shareholders/Creditors
18.08.2007
4
Approval by Court to Demerger Scheme
18.12.2007
5
Effective Date [Scheme filed with RoC, Pune]
20.02.2008
6
Record date for allotment of shares
25.03.2008
7
Listing Date of the 2 Demerged Companies
26.05.2008
12. Key elements of the Scheme
Prior to the finalization of the Scheme:
Erstwhile Bajaj Auto Ltd. (BAL) formed two subsidiaries in April 2007 viz.
Bajaj Holdings & Investment Limited (BHIL) and Bajaj FinServ Limited (BFS).
Erstwhile BAL subscribed to the shares of the two companies as under :BHIL (new BAL) - 43.5 million shares of Rs. 10 each i.e. Rs. 435.0 million.
BFS - 43.5 million shares of Rs. 5 each i.e. Rs. 217.5 million.
13. Key elements of the Scheme
The Auto business of the company along with all assets and liabilities pertaining
thereto, including investments in PT Bajaj Auto Indonesia and in a few vendor
companies, are transferred to BHIL (i.e. the current BAL). In addition, a total of
Rs.15,000 million (market value) in cash and cash equivalents are also
transferred to this company.
The wind power project, investments in the insurance companies viz. Bajaj
Allianz Life Insurance Co Ltd., Bajaj Allianz General Insurance Co. Ltd. and
investment in the consumer finance company Bajaj Auto Finance Ltd. along with
relevant assets and liabilities are transferred to BFS. In addition, a total of Rs.
8,000 million (market value) in cash and cash equivalents are also transferred
to BFS.
The remaining assets and liabilities including investments in group companies
and balance cash and cash equivalents are retained in BHIL (formerly BAL).
14. Shareholding Pre & Post Demerger
Pre & Post Demerger Shareholding Pattern - Applicant Company [BHIL (earlier BAL)]
Pre Demerger Post Demerger
Particulars
Promoter and Promoter Group
Shares
% age
Shares
% age
30,465,154
30.11
30,465,154
30.11
Public
70,718,356
69.89
70,718,356
69.89
Total
101,183,510
100.00
101,183,510
100
Pre & Post Shareholding Pattern - Resultant Company 1 [BAL (earlier BHIL)]
Pre Demerger
Particulars
Promoter and Promoter Group
Public
Total
Post Demerger
Shares
% age
Shares
% age
43,500,000
100.00
73,965,154
51.12
-
-
70,718,356
48.88
43,500,000
100.00
144,683,510
100
Pre & Post Shareholding Pattern - Resultant Company 2 [BFSL]
Pre Demerger
Particulars
Promoter and Promoter Group
Public
Total
Post Demerger
Shares
% age
Shares
% age
43,500,000
100.00
73,965,154
51.12
-
-
70,718,356
48.88
43,500,000
100.00
144,683,510
100
15. Accounting treatment in the books of
the Demerged Company:
Assets and the Liabilities of the Demerged Company transferred to the
respective Resulting Companies at values appearing in the books of accounts
of the Demerged Company as on March 31, 2007.
Difference between the value of assets and value of liabilities reduced from the
Capital Redemption reserve and balance will be reduced from the General
Reserve of the Demerged Company.
Mark-to-market diminution in value of Fixed Income Securities debited to
General Reserve.
16. Accounting treatment in the books of
the Resulting Company:
Respective Resulting Companies record the assets and liabilities comprised in
Demerged Undertakings transferred at the same value appearing in the books of
Demerged Company as on March 31, 2007.
Respective Resulting Companies credited Share Capital Accounts with the
aggregate face value of the new equity shares issued to the shareholders of
Demerged Company.
Excess or deficit, if any, remaining after recording the aforesaid entries shall be
credited by the respective Resulting Companies to their respective General
Reserve Account or debited to goodwill, as the case may be.
17. Tax Implications – on Demerger
Tax impact of the Demerger::
As per the Income Tax Act 1961, a transaction of Demerger per se has no tax implication
on the shareholders. Hence, when the shareholders of Bajaj Auto Ltd. are allotted the new
shares in each of the three companies, there would be absolutely no tax implication
whatsoever. The tax implication will only arise when either the shares of Bajaj Auto Ltd.
(now BHIL) or the shares of the new resulting companies are sold.
Tax implications when shares are sold:
When the shares of any of the companies are sold, it would give rise to capital gains tax
liability. The three issues that arise are:
Whether the new shares (in the resulting companies) are long-term assets or shortterm: To find out whether or not shares in the Resulting Companies are long-term or
not, the holding period of the original Bajaj Auto Ltd. shares will be included in the
period of holding of the new shares
18. Tax Implications – on Demerger
Tax implications when shares are sold:
Indexation of the capital gains: The indexation will start from the date of allotment of
the new shares and not from the date of acquisition of the original Bajaj Auto Ltd.
Relevance of indexation is only for working out the capital gain amount if the same
has to be set off against capital loss.
Cost of acquisition of various shares after the demerger transaction: To calculate
capital gains when the shares are sold, a vital piece of information is the cost of
acquisition. Your original cost of acquisition of Bajaj Auto Ltd. shares will change
now on account of the demerger. Plus, there will be a new cost accorded to the new
shares of the resulting companies.
19. Value Gap
Bajaj Auto
Bajaj Auto had has grown at a CAGR of 16.4% since 2008 after demerger with
31% market share.
Pursuant to the Scheme of Demerger, the GDR programs for Bajaj Auto Limited
(BAL) and Bajaj Finserv Limited (BFS) have got established on 21 August 2008
EBIDTA margins have grown from 14.3% to 19.6%
The installed capacity of the Company has grown by more than 50% up to 2014.
Partnered with Kawasaki for gain in the Asian region and partnering with
Taiwanese companies to gain access to the Chinese Markets.
Bajaj Allianz
Ranks 2nd in terms of market share (22%)
The Company has a revenue of 140 Cr for March 2013 with a CAGR of 12%.
21. Different Share Prices
Bajaj Auto Ltd
(“BAL”)
Bajaj Holding
and Investment
Ltd (“BHIL)
Bajaj FinServ
Ltd (“BFL”)
At Demerger
605
598
515
2008 End
391
242
149
2009 End
1762
620
345
Current Price
1928
924
682
22. Key Takeaway
Bajaj Auto Limited unlocked value for shareholders - Auto Division;
Bajaj FinServ Limited (BFSL) and Bajaj Holding & Investments Limited (BHIL)
showed negative EVA, indicating that capital was not being properly used by them;
Demerger done at a right time can give an organization a competitive edge;
Empowering management adequately in time can lead to consistent growth of group
companies;
The Market Capitalization of the companies post listing of the resultant company was
Rs. 22,245 crs as compared to Rs. 21,036 crs in the consolidated company as at the
last date of trading of the consolidated company;
23. Key Takeaway
The Manufacturing Business and Strategic Business separated were put in charge of
the 2 brothers thus taking care of the family needs in future;
Focused investment via FII – as the business specific investments could be made in
separate companies.
How the demerger affects the shareholders
Minority Shareholders’ stakes devalued post demerger;
Larger equity base of the new Bajaj Auto and Bajaj FinServ to dilute Earnings Per
Share (EPS);
Holding Company stake unlikely to get fair value;
Holding Company discount allows promoters to hike their stake cheaply.
24. Thank You
CA. Navin Dhanji Thakkar
CA. Rakhee Garg
CA. Pawan Kr. Gattani
CA. Bineet Sundriyal
CA.Salil Mishra
CA. Rohit Kr. Modani
CA. Vikesh Bansal
Hinweis der Redaktion
2 new Subs entities formation- 30 Apr 2007Board Meeting approving demerger into 3 separate entities on- 15 May 2007Effective date- 20 Feb 2008Appointed date under the scheme is beginning of 1 April 2007 and the scheme would take retrospective effect from that date. Record date to decide the entitlement of shares is 25 March 2008, based on the effective date and as per stock exchange requirements. Listing of shares of the two new companies, i.e. the new BAL and BFS, after allotment is expected to take place by end of April 2008. Changes in boards with effect from effective date, i.e. 20 February 2008