Mah Scooters

This Bajaj company has been hitting new highs – on 26th and 27th Nov at Rs.1608. Yesterday, it did not hit a new high but remained in the green, up less than 1%. The company has a market cap of over Rs.1700 crore. And all this for a company whose other income at Rs.52 crore for Q2FY16 surpassed net sales of Rs.3 crore, a pitiable topline for the given market cap. Its net profit for the quarter was at Rs.49 crore and its H1FY16 net profit of Rs.51 crore is already 93% of FY15 bottomline. The pittance of net sales comes from sale of the pressure die casting dies, jigs and fixtures, meant primarily for two and three-wheelers. The company used to earlier make the Bajaj flagship scooters – Super and Chetak but it stopped this this 2006. Its main source of income, the ‘other income’ comes from the dividend it earns from its group company holdings.

As at 31st March 2015, the company owned 18.97 lakh shares of Bajaj Finance, 67.74 lakh shares in Bajaj Auto, 37.25 lakh shares in Bajaj Finserv and 33.87 lakh shares in Bajaj Holding Investment Company. The value of these holdings currently stands around over Rs.4000 crore. And this is the sole reason why the stock enjoys so much fancy.

The sudden spike up in the stock price is on hopes that the minority shareholders might get more strength for liquidation of the company. The company had sought RBI approval in July to become a Core Investment Company (CIC). The minority shareholders are against this and want to liquidate the company. Western Maharashtra Development Corporation (WMDC) holds 27% stake and Bajaj Holdings has 24% stake. The latter has the first right of refusal to buy WMDC’s stake and thus the two have been locked in a legal battle for years now. In May’15, the Bombay High Court ruled that Bajaj Holding would have to pay 18% simple interest for over nine years on the Rs.47 crore it owes to WMDC to acquire stake in Maharashtra Scooters. The HC also upheld Bajaj’s valuation of Rs.151.63 per share to buy out the stake. And thus there is hope that this long winding legal battle could soon see an end.