Bajaj siblings relist only to disappoint
Bajaj Auto and Bajaj Finserv shares ended their first day of trade after relisting on a disappointing note.
By TNN |
MUMBAI: Bajaj Auto and Bajaj Finserv shares ended their first day of trade after relisting on a disappointing note. On Monday, the former lost over a third of its opening price by the end of the trading and closed at Rs 604.5 against the opening price of Rs 945.
In comparison, Bajaj Finserv lost over a quarter of its market capitalisation in intra-day trading. The stock closed at Rs 514.7 per share, after opening at Rs 700. Interestingly, it briefly touched a high of Rs 999, but couldn���t hold on to the gains.
The relisting followed a restructuring, which split the two-and-three wheeler manufacturing functions into Bajaj Auto and financial services (including auto finance and insurance) businesses into Bajaj Finserv.
It was an equally disappointing day for the shareholders of Bajaj Auto Holdings & Investments. The company, which is vested with the cash and investment business of BAL, lost over 11% of its market value to close at Rs 598.
This was a bad opening for investors who expected to make money from the split, thinking sum of the parts would be more valuable than the whole.
In contrast, the three siblings of erstwhile Bajaj Auto is now worth less than its value before the demerger. At the end of the first day of listing of the three companies ��� Bajaj Auto, Bajaj Finserv and Bajaj Holdings & Investments ��� their combined value is just Rs 1,791 per share as against the pre-demerger price of Rs 2,050, when Bajaj Auto last traded as a single entity. That translates into a negative return of nearly 13% over one-and-a-half month.
Market is worried about the slowing two-wheeler demand and as such investors beat down the share price of Bajaj Auto on the first day of its re-listing. Post-demerger, Bajaj Auto is vested with the automobile business of the company.
Group chairman Rahul Bajaj rang the opening bell on trading to mark the listing of Bajaj Auto on the Bombay Stock Exchange, while group vice-chairman Madhur Bajaj listed Bajaj Finserv on the National Stock Exchange. BAL was listed for the first time in 1966 to raise less than Rs 1 crore. Analysts estimated the listing price of BAL to be in the range of Rs 650-700 a share and Bajaj Finserv to be around Rs 700-800 a share.
Bajaj Holdings and Investments has 30% stake each in BAL and Bajaj Finserv. Rahul Bajaj said he expected sales to be flat this financial year because of tight liquidity conditions. To protect margins, the company plans to increase sales of more premium bikes, the above 125cc category and through the four new bike launches of Kawasaki and KTM this year. Exports are expected to compensate for the drop in domestic sales.
Mr Bajaj also said if the government allows higher FDI in insurance, then its German partner Allianz has the call option to raise it from the present 26% to 49% in the insurance joint venture.
In comparison, Bajaj Finserv lost over a quarter of its market capitalisation in intra-day trading. The stock closed at Rs 514.7 per share, after opening at Rs 700. Interestingly, it briefly touched a high of Rs 999, but couldn���t hold on to the gains.
The relisting followed a restructuring, which split the two-and-three wheeler manufacturing functions into Bajaj Auto and financial services (including auto finance and insurance) businesses into Bajaj Finserv.
It was an equally disappointing day for the shareholders of Bajaj Auto Holdings & Investments. The company, which is vested with the cash and investment business of BAL, lost over 11% of its market value to close at Rs 598.
This was a bad opening for investors who expected to make money from the split, thinking sum of the parts would be more valuable than the whole.
In contrast, the three siblings of erstwhile Bajaj Auto is now worth less than its value before the demerger. At the end of the first day of listing of the three companies ��� Bajaj Auto, Bajaj Finserv and Bajaj Holdings & Investments ��� their combined value is just Rs 1,791 per share as against the pre-demerger price of Rs 2,050, when Bajaj Auto last traded as a single entity. That translates into a negative return of nearly 13% over one-and-a-half month.
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In contrast, investors have always made gains on major corporate splits and spin-offs in the recent past, the most famous being the division in Reliance Industries. This is partly due to the current bearish trend in the market ��� the Sensex was down nearly 2% and the poor outlook of the automobile industry. Market is worried about the slowing two-wheeler demand and as such investors beat down the share price of Bajaj Auto on the first day of its re-listing. Post-demerger, Bajaj Auto is vested with the automobile business of the company.
Group chairman Rahul Bajaj rang the opening bell on trading to mark the listing of Bajaj Auto on the Bombay Stock Exchange, while group vice-chairman Madhur Bajaj listed Bajaj Finserv on the National Stock Exchange. BAL was listed for the first time in 1966 to raise less than Rs 1 crore. Analysts estimated the listing price of BAL to be in the range of Rs 650-700 a share and Bajaj Finserv to be around Rs 700-800 a share.
Bajaj Holdings and Investments has 30% stake each in BAL and Bajaj Finserv. Rahul Bajaj said he expected sales to be flat this financial year because of tight liquidity conditions. To protect margins, the company plans to increase sales of more premium bikes, the above 125cc category and through the four new bike launches of Kawasaki and KTM this year. Exports are expected to compensate for the drop in domestic sales.
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Besides unlocking shareholder value through the demerger, there was also an immediate need to help Bajaj���s two sons nurture their respective ambitions. Post-demerger, Rajiv Bajaj will continue as MD of the auto operations and Sanjiv Bajaj will handle the financial services business as MD.Mr Bajaj also said if the government allows higher FDI in insurance, then its German partner Allianz has the call option to raise it from the present 26% to 49% in the insurance joint venture.
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