Bajaj Electrical decides to separate Power T&D business. Makes perfect sense.

A board decision has been taken to look for the best possibilities and parallely a wholly owned subsidiary to be created to provide a ready vehicle for restructuring.

Key points to note –

  • Bajaj Electrical (BE) is present in two segments
    • Consumer Products (CP) – appliances, fans, consumer lighting
    • Engineering Procurement and Construction (EPC) – Power Transmission & Distribution, Illumination Projects
  • CP is what investors like about BE. It’s profit making and more predictable. EPC on the other hand is volatile both in terms of topline and bottomline. During 6 mths ended September 2021, CP contributed 80% of revenues and the entire profits. EPC contributed the balance 20% and was loss making (though marginal).

Given the underlying dynamics it makes perfect sense to separate the two.

  • Ensures that investors can pick and choose the business that they like; and
  • Separate corporate entities would ensure separate management focus and accountabilities

Initially the business may just get shifted to a wholly owned subsidiary. However, I personally believe that BE would like to derisk themselves from the EPC business and hence would look for every opportunity to dilute – by inviting strategic partners, preferential allotments, stake sale etc.

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