The Hindu Business Line : Bajaj Auto shares fall by over 6%

Mumbai May 17 Shares of Bajaj Auto today plunged on the bourses by over 6 per cent on news that the joint venture partner of the company's insurance business, Allianz SE, has the right to exercise certain call options and increase its stake to 74 per cent (currently foreign companies can hold only 26 per cent equity).

Analysts said the value of the insurance business will go down substantially if these options are exercised in the future.

The stock of Bajaj Auto lost 6.71 per cent to close at Rs 2,500.30 on the BSE. The stock was up intra-day and fell only in the last half hour of trading after the announcement.

Bajaj Auto Ltd announced the demerger of the company into two companies; Bajaj Holdings and Investments Ltd and Bajaj Finserv Ltd.

"If the stock price is calculated on the basis of the call option (if exercised by Allianz), the value comes to Rs 535 per share which is much lower than the current estimated value of the insurance business between Rs 700- 750 per share," said Ms Vaishali Jajoo, auto analyst, Angel Broking.

An analyst said, "Going by the growth in the insurance business, Allianz should hike its stake as and when the FDI norms are relaxed."

However, analysts do not expect the share to drop below this level. They maintain `hold' rating on the stock.

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