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For a company that stopped any significant manufacturing for nearly a decade, till recently incurred operational losses on whatever little manufacturing happened and had a top-line of less than ₹7 crore for FY15, a galloping share costing over ₹ 1,000 apiece, could leave market observers quite perplexed.
On Friday, the Maharashtra Scooters Ltd (MSL) stock touched a 52-week high of ₹1,608 apiece, keeping up a momentum which saw it gain over ₹600 in a one-month period.
MSL is promoted by Maharashtra State body Western Maharashtra Development Corporation (WMDC) that holds 27 per cent stake and Bajaj Holdings and Investments (BHIL) that owns 24 per cent.
With Bajaj holding first right of refusal to buy the former’s share, the two are locked in a legal battle.
The key to the unprecedented rise in MSL’s share price could lie in a growing clamour by minority shareholders to liquidate the company that, thanks to its equity investments in various Rahul Bajaj Group companies and fixed assets (land, machinery), has a net worth of around ₹4,000 crore.
The 2015 balance sheet reveals that MSL owns 18.97 lakh equity shares of Bajaj Finance (price ₹5,500 today), 67.74 lakh shares of Bajaj Auto (over ₹2,400), 37.25 lakh shares in Bajaj Finserv (₹1,980 apiece) and 33.87 lakh shares in BHIL (₹1,725).
The total money invested in these four companies is around ₹155 crore, which, given today’s market price of these shares, runs into thousands of crores.
While during FY15, MSL’s income from operations stood at ₹6.95 crore, other income was ₹62.91 crore. In the quarter ended September 15, thanks to dividend income, the two figures stood at ₹2.66 crore and ₹52.24 crore, respectively.
Clamour for liquidation The liquidation clamour arose when during this year’s AGM in July, shareholders were informed by the MSL board that the company had filed an application to the RBI to become a Core Investment Company (CIC).
According to one investor, shareholders’ approval ought to have been sought for this move and hence arose the suggestion that the best course would be to liquidate the company and cash in their chips.
In addition to the market value of its equity investments is the fact that MSL owns 70 acres in Satara apart from machinery and other fixed assets.
Tussle for control Since 2003, the two promoters of the company have been locked in a legal battle for control. WMDC has contested both the buy-out share price and the validity of the first right of refusal to BHIL (pre-demerger, the promoter was Bajaj Auto). The matter also went for arbitration.
In the latest development, in September, six months after a ruling by a two-member Bench of the Bombay High Court in favour of the Bajaj Group, WMDC filed a special leave petition in the Supreme Court challenging the ruling.
In an email reply, S Ravikumar, President, Business Development, Bajaj Auto, said, “WMDC preferred an appeal (SLP) against the Bombay HC Division Bench Order.
“The SLP’s admission is yet to be decided, as the Supreme Court Bench that heard WMDC’s SLP is awaiting orders from another Bench of the SC, before which hearings are ongoing in a matter involving similar questions,” he added.
The SLP is expected to come up for admission before the Supreme Court in January.
In May this year, the Bombay High Court has ruled that BHIL would have to pay 18 per cent simple interest per annum for over nine years (from January 14, 2006, the date of the arbitration award) on ₹46.78 crore due to WMDC to acquire its stake in MSL. The Bench upheld the arbitrator’s valuation of ₹151.63 per share.
Speaking to BusinessLine after this, Bajaj Group Chairman Rahul Bajaj had said he was delighted that the 120-page judgment had upheld the price, but was not happy with the imposition of 18 per cent interest, saying 12 per cent would have been reasonable.
MSL, an erstwhile manufacturer of Bajaj scooter brands Super and Chetak, stopped making scooters in 2006. Current manufacturing activity is restricted to the pressure die casting dies, jigs and fixtures, meant primarily for two and three-wheelers.
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