Bajaj Auto loses nearly 21% in six trading sessions
Bajaj Auto declined for the sixth consecutive session since it declared a scheme of demerger along with its poor set of results during trading hours on 17 May 2007.
Disappointment about the post-demerger structure and lack of clarity about future business plans triggered a flurry of rating downgrades by brokerage houses.
The stock lost 1.07% to Rs 2,160 today, 24 May 2007. It has eroded 20.60%, from Rs 2718.60 on 11 May, till today.
Prior to this, Bajaj Auto was on a losing streak, declining a little under 19% in the previous four trading sessions after the surprise revelation that Allianz Bajajs partner in its two insurance ventures has a call option to buy up to 74% at a nominal price. This was the biggest disappointment in the demerger plan.
Most analysts expected Bajaj Auto to remain the majority partner, while allowing Allianz to raise its stake up to 49%. They see a high possibility of the government raising foreign investment limit in insurance sector to 74% and Allianz exercising the option to hike the stake.
The insurance business of Bajaj Auto was valued at around Rs 800 per share. But going by the new structure, the value has been trimmed to Rs 300 per share. So the fall was more of a realignment to its fair value of Rs 2,250.
Bajaj Auto declined for the sixth consecutive session since it declared a scheme of demerger along with its poor set of results during trading hours on 17 May 2007.
Disappointment about the post-demerger structure and lack of clarity about future business plans triggered a flurry of rating downgrades by brokerage houses.
The stock lost 1.07% to Rs 2,160 today, 24 May 2007. It has eroded 20.60%, from Rs 2718.60 on 11 May, till today.
Prior to this, Bajaj Auto was on a losing streak, declining a little under 19% in the previous four trading sessions after the surprise revelation that Allianz Bajajs partner in its two insurance ventures has a call option to buy up to 74% at a nominal price. This was the biggest disappointment in the demerger plan.
Most analysts expected Bajaj Auto to remain the majority partner, while allowing Allianz to raise its stake up to 49%. They see a high possibility of the government raising foreign investment limit in insurance sector to 74% and Allianz exercising the option to hike the stake.
The insurance business of Bajaj Auto was valued at around Rs 800 per share. But going by the new structure, the value has been trimmed to Rs 300 per share. So the fall was more of a realignment to its fair value of Rs 2,250.
