The Hindu Business Line : Proposed share sale to Bajaj Auto — Maharashtra Scooters shareholders seek fair returns

Mr C.V. Desai (right), an investor in Maharashtra Scooters Ltd, with Mr R.M. Mehta, Chairperson of Maharashtra Scooters Minority-Shareholders Association, addressing a press conference in Mumbai on Thursday. - Paul Noronha

Mumbai , March 11

THE Maharashtra Scooters Minority-shareholders' Association (MSMA), representing small investors aggrieved by the State's proposed sale of equity in the company to Bajaj Auto Ltd (BAL), has called for safeguards to ensure equitable returns to all shareholders.

The Western Maharashtra Development Corporation (WMDC) owns 27 per cent stake in Maharashtra Scooters Ltd (MSL) while BAL as co-promoter owns 24 per cent. The balance 49 per cent is with the public. In 2002, BAL offered to buy out WMDC at Rs 50 per share, revised a year later to Rs 75, the MSMA functionaries said. The issue went into arbitration few months ago.

At a press briefing, Mr C.V. Desai, Chairman & Managing Director, CD Equisearch Pvt. Ltd and an MSMA functionary, said, in 1996-97 MSL had made a single year investment of Rs 42.36 crore in Bajaj Group companies, equalling about 37 per cent of the joint sector scooter manufacturer's total net worth. Representing a 3.4 per cent shareholding in BAL, this investment was made at an average price of Rs 926.15 per share, he said.

Such levels have been touched by the Bajaj scrip only in recent bullish times at the bourses. "Until 2003, that investment was giving negative returns,'' Mr Desai said.

While the investment decision itself is being questioned by MSMA, in a different context they argue MSL's 3.4 per cent shareholding in BAL and its huge mutual fund investment (said to be near Rs 100 crore) should be reflected in the sale price, which in BAL's best quote was Rs 75 per share.

When contacted, senior BAL officials declined to comment saying the matter is sub-judice. Mr Rahul Bajaj is the Chairman of both BAL and MSL. "I have nothing against the private promoter, he is a businessman. The Government directors should have been watchful,'' Mr Desai, who owns more than five per cent in MSL, said.

Legally, he agreed, the sale process as indeed any dispute on the same can be treated as an issue between WMDC and BAL since they are co-promoters and the law does not require an open offer under such circumstances.

"But the law must have assumed the transaction would be at market price,'' he said, contrasting BAL's last offered Rs 75 to MSL's prevailing scrip price of around Rs 156.

Further, both he as well as Mr R.M. Mehta, Chairperson, MSMA, said, a previous valuation by Crisil had pegged the MSL scrip at above Rs 200, while more recently ICRA at MSMA's behest established the value at Rs 425.

Critically both the agencies, Mr Desai said, concur that MSL with less than five per cent of its assets in manufacturing (it was assembling Bajaj scooters) should be treated as an investment company and not a manufacturing outfit.

The view therefore is that BAL's lower price could be the product of a manufacturing-driven approach to MSL. Interestingly, even as the company made the transition to being a successful motorcycle manufacturer, MSL remained in geared scooters, market for which was steadily shrinking.

The association appears trifle grey on solutions. On the one hand, there is suggestion of a broad-based invitation of bids as in any PSU divestment process, which may pass on the WMDC stake to parties other than BAL. Alongside, there is also rather conflicting observation that the ideal solution will be to merge MSL with BAL.

In another option, the association wants MSL shareholders to get proportionately distributed shares of BAL (they reckon, three shares of BAL for every 10 of MSL).

"Disinvestment by WMDC should be done only after such an unlocking of shareholder value,'' MSMA's statement said. The final option is to de-link just the BAL block of shares and restructure a de-merger of MSL, "similar to what was done in the case of IBP and Balmer Lawrie, where Balmer Lawrie Instruments Ltd was formed.''

Mr Desai attributed the delayed publicity for deeds done in 1996-97 to his late entry into shareholding at MSL. It is coincidence that the briefing is amidst an election count down, but he does have long term plans for a body to represent investors' grievances (the city already has one in Investors' Grievances Forum).

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