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.