Investing 101

Bajaj Holdings & Investments: In-depth analysis of this holding company from the Bajaj Group!

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Bajaj Holdings & Investment Limited (BHIL)

BHIL is registered with RBI as Non-Banking Financial Institution and is categorized as NBFC-Investment Credit Company.

Brief History:

Bajaj Holdings & Investment Limited (BHIL) erstwhile known as Bajaj Auto Limited was formed by carrying out demerger of various companies of Bajaj Auto Limited which included its Manufacturing Business currently known as Bajaj Auto Limited & Bajaj Finserv which is Financial Services & wind farms business. Both of the companies viz Bajaj Auto Limited (BAL) & Bajaj Finserv Limited became Associate companies of BHIL. Bajaj Auto Holdings Limited, another subsidiary of BHIL was later held by BAL. BHIL also had a joint venture with WMDC in a company named Maharashtra Scooters Limited.

The following chart will summarize the structure of BHIL (Updated: Q1FY20):

Pursuant to the demerger, BHIL held a strategic stake in group companies also the company functions primarily as an investment company with investments in various Listed, Unlisted equities, Debt instruments, and other assets.

Investment Policy: BHIL follows a balanced risk approach with an adequate returns policy. Its allocation to equities (other than strategic investments) is capped at 60% of its surplus funds as mandated by the board of the company & Minimum of 40% allocation to fixed income securities (other than strategic investments).

Following are the value of investments held by BHIL as on 31st March of respective years:

Information regarding investments held by the company was published in a granular manner including the name of companies and number shares held in them until 2018. But since 2019, The same was not disclosed in a granular manner but only the summary of investment in various avenues and their market values were disclosed, however, the company does provide details about major entry and exits made by the company in listed and unlisted equities.

Here are some cuts from the Annual Report 2019 of the company:

Further details regarding the yield on fixed income portfolio can be found in the Annual Report of the Company.

The following table shows BHIL stake over the years in its group companies:

It can be clearly seen that BHIL has been continuously increasing its holding in the group companies showing their confidence in the business prospects of these companies.

Promoters of the company are also consistently increasing the stake in BHIL, the following table shows the Promoters stake in BHIL over the years:

The following table shows the dividend history of BHIL after demerger:

Summary of Subsidiary & Associate Companies:

  • Bajaj Auto Limited (BAL) – BAL is leading manufacturer of 2-Wheeler Motorcycles under the brand Pulsar, Discover, Platina, Dominar, V. Company is also a market leader in the 3-wheeler segment with over 50% market share. BAL holds 48% in KTM Austria the owners of KTM sports bike brand and thus also sells KTM in sport segment bikes.
  • Bajaj Finserv Limited – Bajaj Finserv Limited is the Financial Business Arm of Bajaj Group. Bajaj Finserv holds 54.81% stake in Bajaj Finance Limited which is into lending business and 74% stake in each Bajaj Allianz Life Insurance Company (life assurance business) & Bajaj Allianz General Insurance Company (general insurance business). The company also owns wind farms, revenue generated from these farms are through the sale of electricity generated.
  • Maharashtra Scooters Limited (MSL) – Maharashtra Scooters Limited is a joint venture between BHIL (24%) & WMDC (27%). Details of investment held by MSL are given below:
At the time of demerger, WMDC offered to sell its stake in MSL to BHIL as per the price determined by the arbitrator with the understanding that arbitral award would be final and binding. However, after the determination of the fair value of the stake, WMDC was not satisfied and thus challenged the same in Bombay High Court. This matter went through several hearings and in 2019, Honorable Supreme Court of India passed an order directing WMDC to transfer its 27% stake in MSL to BHIL and price determined by Supreme Court. MSL became subsidiary of BHIL as WMDC transferred the stake as per Supreme Court’s order.
  • Bajaj Auto Holdings Limited – Bajaj Auto Holdings Limited is 100% subsidiary of BHIL. Bajaj Auto Holdings Limited holds 2,09,500 shares of Bajaj Finserv Limited.

BHIL being a listed company trades at a substantial discount to its market value of investments. It is quite normal that an investment company trades at such huge discount to value of its investments due to the following reasons:

  • Company has major stake in its group companies (strategic stake) which it may not sell, hence the real value of those investments would not be realized.
  • Since the company runs a treasury division which makes investment decisions on a daily basis, it is quite difficult to find out the value of the investment held by BHIL on daily basis.

Although it is quite difficult to calculate the value of investments held by the company at any point in time, it can be seen that major portion of the value of its investments is from the Group companies. The details regarding the movement of investments in group companies are disclosed in quarterly results published by the company. I have compiled the data in google sheets where I update the value of investments held by the company on a quarterly basis. You can visit the sheet here.

For convenience as per the closing prices of 30 Sept, here is the snapshot of the holding company and its underlying investments value.

The sheet also has details about investments of Maharashtra Scooter Limited & Bajaj Finserv Limited. All the figures in the sheet are from real-time market data with a lag of 15-20 minutes. The sheet also calculates the percentage discount at which BHIL trades at that point of time.

The Company has been paying dividend consistently and the portfolio of investments in growing at a decent pace. One who wishes to hold to invest in Bajaj Group companies along with other conservatively diversified portfolios can look at this company.

The article has been prepared by Rohit Jethanand Gyanchandani. He is a CA, CWM and B.Com. I thank Rohit on behalf of the readers of this blog for his detailed research and analysis.

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1 Comment

  1. Wow!!! Great analysis… Thanks!

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