Will Bajaj reward its shareholders in the grand Reliance way?

The Bajaj family has finally ended the long awaited feud between its brothers, akin to Mukesh-Anil saga. The result would be 3 companies comprising of Bajaj Auto, Bajaj Finserve and Bajaj Holdings.

Investors are piggying back hopes on the gains from demerger as all these are zero-debt companies and the large land bank, whose value is not reflected in its books. But after the news of demerger, the shares fell nearly 9% from the day’s high owing to the call option available with the Bajaj insurance partner - Allianz, which is at a meagre Rs. 13.42 per share.

Reliance demerger in early 2006, saw a windfall gain for its investors whose wealth multiplied with the increase in value of the demerged companies. But Bajaj seems a different case and one can’t expect such gains, unless Bajaj diversifies itself in the sunrise sectors of the Indian economy.

Unlike the Tatas, Birlas, Ambanis, Mittals; Bajaj has been a relatively underperformer in diversifying itself. Its financial services offering constitute only general & life insurance and consumer loans. But it has still not gone into mutual funds, broking, demat among others. Moreover, it has kept itself away from the booming sectors such as telecom, retail and real estate, thus depriving it from the growth phase in the company’s life cycle.

Gone are the days, when one had to wait for 38 years to get delivery of a scooter after booking. The company has virtually exited from scooter manufacturing business, the space in which ‘Honda’ motors has taken a leap. Its motorcycle business has faced stiff competition from Hero-Honda and things are not as easy today.

So take your call, is it really time to buy Bajaj Auto shares? (Seeing its print and television ads, one would be tempted to, after all its “Hamara Bajaj”)