Bajaj set to buy 27% in Maharashtra Scooters

The three-year old impasse over the acquisition of the Maharashtra government's 27 per cent stake in Maharashtra Scooters Ltd seems to be over.

This is after Bajaj Auto, the state government's joint venture partner in the company, agreed to buy out its shareholding for Rs 151.63 a share, a discount of over 54 per cent on Tuesday's close of Rs 331.10 on the Bombay Stock Exchange.

Retired Justice Arvind Sawant, appointed arbitrator by the state government, has come out with a valuation of Rs 151.63 a share for the shareholding of Western Maharashtra Development Corporation. The corporation is the investment arm of the state government.

Confirming this, Bajaj Auto chairman Rahul Bajaj said, "I am ready to buy it as early as tomorrow. But I think, the MSL board may convene a meeting before selling the stake to us. It is a win-win proposition for all."

Bajaj is also the chairman of MSL.

According to the valuation, Bajaj Auto requires to pay Rs 46.78 crore (Rs 468 million) to WMDC for acquiring its 27 per cent stake. After the acquisition, Bajaj Auto's shareholding will go up to 51 per cent from the current 24 per cent.

MSL's investment in various Bajaj group companies as well as in other instruments stood at Rs 174.27 crore (Rs 1.74 billion) on March 31, 2005.

MSL's investments in the Bajaj group include 3.38 million shares in Bajaj Auto, 1.02 million shares in Bajaj Auto Finance and 1.25 million shares in Bajaj Hindustan. Last year, it posted a net profit of Rs 10.67 crore (Rs 107 million) over net sales and had other income amounting to Rs 46.85 crore (Rs 467 million).

Sources in the industry said the state government might have some reservations on selling its stake at this price. When asked, Bajaj said the arbitrator's valuation would be binding on both the parties. WMDC managing director RN Joshi was not available for comments.

In 2003, Bajaj Auto had offered to pay Rs 50 for a share for the state government's stake. Later, it revised the price to Rs 75. Unhappy with the price, the government then appointed Crisil which valued the stake at Rs 232 a share.

A Kolkata-based jute industrialist, Jai Kankaria, had expressed interest in  buying the state government stake in MSL for Rs 200 a share. After this, the state government appointed the arbitrator.

Bajaj said Bajaj Auto would "most probably" not come out with an open offer for the retail shareholders of MSL as the proposed transaction would be an inter-se transfer among promoters. But, if demanded, he was ready to launch an open offer, Bajaj added.

Market analysts said an open offer at Rs 151.63 did not make sense as the ruling market price was much higher than this. The MSL stock lost 5.48 per cent to close at Rs 331.10 on Tuesday against Monday's close of Rs 350.30 on the BSE.

Bajaj said he would have to chart a future course for MSL. The company no longer manufactures the Chetak scooter for Bajaj Auto. It has nearly 700 employees.