THE HINDU BUSINESS LINE
Financial Daily
from THE HINDU group of publications

Wednesday, August 01, 2001

• AGRI-BUSINESS
• CORPORATE
• FEATURES
• LETTERS
• MACRO ECONOMY
• MARKETS
• NEWS
• OPINION
• VARIETY
• INFO-TECH
• CATALYST
• INVESTMENT WORLD
• MONEY & BANKING
• LOGISTICS

• PAGE ONE
• INDEX
• HOME

Corporate | Next | Prev


Bajaj brand name fetches Rs 45 crore from Allianz

Shyam G. Menon

MUMBAI, July 31

BAJAJ Auto Ltd (BAL), which recently marked its

domestic foray into insurance partnering Allianz, received a ``goodwill'' payment of Rs 45 crore from the German company for using the Bajaj brand.

The BAL-Allianz joint venture in general insurance commenced operations on July 1, 2001. Projected investment here is Rs 110 crore, the initial capital being shared on a 74:26 ratio with BAL holding the majority.

A proposed second joint venture for life insurance, involving an investment of Rs 150 crore, is currently being processed. Domestic insurance regulations require that companies engaged in general and life insurance be separate.

BAL received the goodwill payment from Allianz in the first quarter of 2001-2002, which was reflected in the

rise in other income for the period to Rs 101.57 crore from the previous Rs 90.44 crore, Mr Sanjiv Bajaj, Vice-President

(Finance), BAL, said.

In the first quarter, BAL's sales and income from operations had dipped to Rs 914.88 crore (Rs 927.52 crore), but its other income and receipts from windpower generation rose, the latter to Rs 5.87 crore (Rs 53 lakh). Total income, therefore, increased m arginally from Rs 1,018.49 crore to Rs 1,022.32 crore.

While the goodwill payment to BAL is believed to be not the first of its kind in emergent private insurance forays, it is unique for being hosted on the accounts of a business group's listed company permitting that much transparency. Other similar deals in the Indian insurance sector, did not reportedly command such a size of payment.

Mr Bajaj, however, declined comment on whether the Rs 45-crore paid by Allianz includes goodwill payment for the life insurance foray as well, given the separate status of both ventures. The amount paid in the first round, was `` based on negotiations,'' he said, when asked if BAL had done a benchmark valuation of its brand to justify the size of payment.

BAL's first quarter other income, besides benefitting from the Allianz payment, was up also due to the Rs 800-crore

expense from cash reserves last fiscal for the company's share

buyback. From a pre-buyback size of Rs 2,500 crore, BAL's reserves

had settled to Rs 1,700 crore, after the exercise.

Mr Bajaj said reserves had since risen by ``a couple of hundred crores,'' though they were yet to breach the Rs 2,000-crore mark.

BAL's usually big cash reserves have always been a point of debate with equity analysts, many of whom see its low yielding pattern of deployment as a drag on the company's overall

earnings.

For some time now and possibly for some time into the future, BAL would avoid equity investments while deploying these surplus funds, Mr Bajaj said. Besides the general slide in the capital market, the company's investment team also saw an exit of

personnel which requires BAL to play safe until the loss in staff

is made up.

In the interim, BAL's investment mix would give greater weightage to fixed income instruments, returning the investment ratio between such instruments and equity instruments back to the 70:30 level from the 65:35 level it reached a while back, Mr Bajaj s aid.

Return on investment of surplus would not be adversely hit by these factors, he said, pointing out that the current state of the capital market anyway justified keeping a safe distance from equity.

Windpower generation, receipts from which rose in the first quarter, is estimated to fetch Rs 20-22 crore over the full

fiscal.

BAL has commissioned 40 MW out of the proposed 60 MW, the entire quantum (representing 85 per cent of BAL's power needs) capable of earning the company - at current tariff - Rs 32-33 crore annually. All 60 MW will be commissioned by March 2002.

On the issue of settling the cross holding of equity in Bajaj Tempo Ltd (BTL) and BAL by their respective promoters, Mr Bajaj said no further progress had been made.

Comment on this article to BLFeedback@thehindu.co.in

Send this article to Friends by E-Mail


Next: US-64 leans heavily on other schemes
Prev: Coromandel Fertilisers net profit at Rs 5.67 crore
Corporate

Agri-Business | Corporate | Features | Letters | Macro Economy | Markets | News | Opinion | Variety | Info-Tech | Catalyst | Investment World | Money & Banking | Logistics |

Page One | Index | Home


Copyright © 2001 The Hindu Business Line.

Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line.