In the ongoing tussle between stakeholders Bajaj Auto and WMDC, the recent HC ruling against Bajaj Auto has given the shares of Maharashtra Scooters a big boost
Despite being a dormant company for years, the share price of Maharashtra Scooters Ltd (MSL) has been surging. MSL shares have zoomed 67% since January this year. This phenomenal run on the bourses is only due to an ongoing tiff between two of its stakeholders over the valuation of the company.
For a while now, MSL has been dormant. It was forced to shut down operations ever since Bajaj Auto Ltd decided to stop production of scooters. Bajaj Auto and the Western Maharashtra Development Corp (WMDC) each have a stake in the company. Bajaj Holdings currently owns 24% while WMDC owns 27% stake in MSL. Both entities had entered into an agreement, which stipulated that in case if any one partner intended to either part with or transfer its shareholding in the company, the other would have the first option to purchase such shares.
A few years ago, Bajaj Auto intended to become a majority shareholder in MSL, for which it sought to buy WMDC’s stake in the company. However, the two parties had differences over the correct valuation and the matter went in for arbitration. At that time (January 2006), the Arbitral Award valued MSL’s shares at around Rs151 per share, when the prevailing market price was around Rs315.
This valuation obviously didn’t go down well with the state government agency and it subsequently appealed against the Award in the Bombay High Court (HC).
Recently, the High Court set aside the Award given by Justice Sawant, ruling in favour of WMDC and preventing Bajaj Auto from buying WMDC’s stake at around Rs152 per share.
Interestingly MSL has significant holdings in Rahul Bajaj group companies like Bajaj Auto, Bajaj FinServ, Bajaj Auto Finance and other group companies. As such, it has strategic significance for the Bajaj family. At current market prices, these investments in Bajaj group companies are worth around Rs1,000 crore.
WMDC has a higher number of representatives in the Maharashtra Scooters Board. This, along with the HC court ruling means that WMDC is under no obligation to sell its stake to Bajaj Auto and can offload the shares in the market at the prevailing price.
This has sent the company’s stock into a frenzy. Currently it is trading at Rs371. Other than the value of its investments, MSL has no business operations to support this upsurge in its stock price. An analyst with Anand Rathi said, “There is absolutely no manufacturing happening at the company’s end. In this situation, the stock price has run up too high. There is no value whatsoever at this level. Who will buy the stock at this value?”
A senior analyst with Enam Securities said, “MSL is basically a shell company. Its business has been wrapped up for a long time; it only has investments in various Bajaj entities, which it wants to sell. If it sells these investments, it will make a lot of money. That’s why the stock price is moving up so much.”
Bajaj Auto did appeal against the HC ruling, but the hearing ended with the same result. Bajaj Holdings has now appealed to the Divisional Bench of the Bombay HC. The matter is likely to come up for hearing at the court on 19th March.
There appears to be no end in sight to this saga. Bajaj Auto is unlikely to rest on its back and will continue to appeal to higher authorities.
A shareholder with one share of Rs10 will end up with 10 equity shares of Rs2 each
Gold loan company Manappuram General Finance and Leasing Ltd has said that its board of directors has decided to go for a stock split and bonus issue of 1:1. Every equity share of Rs10 will be split into five shares of Rs2 each, it said in a release.
"This split is aimed to provide further liquidity to the company's stock. Recently, the company had raised Rs245 crore by way of qualified institutional placement (QIP) from a group of domestic and international investors. Against this backdrop, the board felt it was the right time to reward its loyal investors," said VP Nandkumar, executive chairman, Manappuram Group.
With the bonus issue and after the stock split, the company's outstanding shares will increase from 34.04 million shares of Rs10 each to 340.38 million shares of Rs2 each, the release added.
SAIL will provide the land and POSCO will put in the required investment and the technology for the plant
Disappointed with the tardy progress of its proposed venture in Orissa, South Korean steel giant POSCO is looking for new opportunities and has now teamed up with state-owned Steel Authority of India Ltd (SAIL) to set up a Rs15,000-crore steel plant in Jharkhand.
"SAIL and POSCO have entered into an in-principle agreement to set up a half-a-million tonne plant in Bokaro. The steel mill using POSCO's FINEX technology will initially attract an estimated investment of Rs15,000 crore," an official in the know of the development told PTI.
POSCO, the world's fourth-largest steel producer, is likely to hold 60% stake in the joint venture while the rest could be with SAIL. The plant's capacity could be increased to 3-4 million tonnes at a later stage.
"There will be no cash transaction in buying the equity. SAIL will provide the land and POSCO will put in the required investment and the technology for the plant to manufacture steel which will be further taken by SAIL for making special products like auto-grade steel," the official said.
The POSCO team, led by its chief executive Chung Jun-Yang, attended a dinner with the top brass of SAIL and the steel ministry on Monday where the deal was formalised.
Thereafter, the POSCO team went for a tour of the plant site in Bokaro on Tuesday. POSCO officials have visited Bokaro earlier too, the official said.
When contacted, POSCO India's general manager for external relations, Simanta Mohanty confirmed the development, but said that details for the same are still awaited.
The government official added, "POSCO is keen on a joint venture plant with SAIL in Bokaro. The FINEX technology uses iron ore fines and low quality coal to produce high grade steel, which could be further processed by SAIL to make specialised steel."
When contacted, Jharkhand mines and industries secretary NN Sinha, however, said both SAIL and POSCO officials have not contacted the state government in this regard as yet.
POSCO's Rs54,000-crore plant in Orissa has failed to take off for the past four years mainly due to problems in acquiring land.
Meanwhile, POSCO had been looking for opportunities in states like Jharkhand, Karnataka and Maharashtra.
Steel minister Virbhadra Singh had in January said that SAIL is keen on setting up a new plant in Bokaro in a joint venture format with a global player. SAIL already runs a 4.5 million tonne per annum (MTPA) plant which it is expanding to 7.5MTPA as part of its Rs70,000 crore expansion programme.
POSCO and SAIL are already in a pact for supply of technology and technical knowhow.