I

n June 2013, when Sanjiv Bajaj put in an ap-

plication with Indias banking regulator
to transform his growing consumer-loan
company into a bank, it created a mild flut-
ter at brother Rajivs auto business. Sanjivs
finance company is one of the main provider of
loans to customers who buy Rajivs motorcycles,
and the regulator is particular that Indian banks
limit such inter-group transactions.
Its partly why the Mahindra Group, even with
its impeccable credentials and its interest in
financial services, cried off. But Sanjiv didnt.
Although he lost out in the first round of licences,
Sanjiv remains keen on banking, and the brothers
might still have to deal with the maths at some
point of time.
At the Bajaj Group, a difference of opinion be-
tween family members on approach and strategy
is alright, acceptable. How they choose to express
it is another matter. Straight-talking father Rahul
Bajaj and even more straight-talking son Rajiv can
respectfully disagree on national TV, and make
for great viewing.
But equation between the two brothers was dif-
ferent. Even when there was no meeting of minds,
neither Rajiv, 46, nor Sanjiv, 44, would voice it pub-
licly. They never have. And, family insiders say,
they never will. (Rajiv declined to participate in
this story, while Sanjiv declined comment on ques-
tions about his brother.)
After 2006, they also have less reason to. Eight
years ago, when father Rahul carved out two dis-
tinct businesses from a monolith called Bajaj Auto,
and handed operational control of one apiece to
the brothers, he did so on the pretext of unlocking
shareholder value. With that one corporate stroke,
he also managed to quell the possibility of familial
discord harming businesses and reputation.
Eight years on, the move has proven to be smart
from multiple standpoints -- succession planning,
ambition management, business growth and
shareholder wealth creation -- and makes a tell-
ing statement about family businesses: a division
can be good.
The sum total of the Bajaj parts shows a 70%
growth in revenues and a seven-fold increase in
net profit. Theres a five-fold increase in wealth
creation, with the combined market worth nearing
Rs 1,00,000 crore. The parts have together deliv-
ered a compounded annual shareholder return
of 28.4%, against the 8.5% delivered by the BSE
Sensex index (See graphic).
Rajiv and Sanjiv have taken forward the busi-
nesses built by their father in their own ways. The
kids are similar (to their father) in determination,
commitment and ethical values, says Niraj Bajaj,
an uncle to the brothers, and chairman and MD
of Mukand. But they are also different from each
other.
Sanjiv and Rajiv remain united by blood, but di-
vided by personality. They dont share the closest
of professional relationships, but they reconcile
to that truth well and let the other be. In a sense,
they would kill for each other, says Niraj Bajaj.
But taking help in business decisions, that would
be a rarity.
Yet, the Bajaj family keeps this complex set up
simple. The two disparate parts are thriving -- and
they sum up well, as their 76-year-old father would
have liked them to when, after a fair amount of
consideration, he gave his assent to break up the
family business.
The Demerger
In 2006, Rahul recommended to the board of Bajaj
Auto -- back then, the entity where the entire busi-
ness interests of the group were housed -- that the
company begin the process of creating parts from
the whole. The main objective, says Rahul, was to
unlock shareholder value. Many FIIs (foreign
institutional investors) had been telling me that
Bajaj Auto has a lot of cash/cash equivalents on
its balance sheet, and this is putting pressure on
its return on capital employed and return on net
worth, he recounts.
Although Rahul maintains the demerger was not
done to tackle inheritance and succession issues,
it addressed them implicitly -- and succinctly.
Before the demerger, Rajiv was in charge of
vehicle manufacturing, engineering, R&D
and domestic marketing/sales, while Sanjiv
looked at finance and vehicle exports.
This separation of responsibilities was
largely in line with their respective
interests, and the subsequent carve-
up maintained those alignments. It
also opened up new possibilities.
The demerger also allowed them
to attract best-in-class managers
for each business, which may
not have happened if it was one
combined conglomerate, says
Manish Kejriwal, the son-in-
law of Rahul.
Separating the businesses
has worked and it perfectly
matches their (the broth-
ers) DNAs, says Anil
Singhvi, founder and di-
rector of Institutional
Investor Advisory
Services, a proxy
shareholder-advi-
sory firm. This
was one of the
f ew demerg-
ers that has
worked very
well. It has
been equal-
ly good for the family (promoters) and minority
shareholders.
But there was a time when the chairman was
wavering and wanted to put the demerger on the
backburner, according to Kejriwal. It took a bit of
challenging the status quo with Rahul, by Kejriwal
and others, to revive it, own it and see it through.
Father and Sons
It was one of the smoother family handovers seen
in India Inc. And part of the reason was the au-
thoritative hand and the progressive mindset of
Rahul, who took charge of Bajaj Auto after his
father, Kamal Nayan Bajaj, passed away in 1972,
and turned it into an iconic Indian two-wheeler
company.
When the time came, he could hand over the reins
to his two sons. Some in the older generation dont
transfer governance to the next generation till
its too late, feels Kejriwal, who is the managing
partner at Kedaara Capital, a private equity fund
that, among other things, helps family-owned busi-
nesses unlock value. Rahul Bajaj has the unique,
and often under-appreciated, ability to let go, and
to have passed the leadership baton to the next gen-
eration very early and at the right time.
More importantly, in the balance between free-
dom and control, between stepping in and staying
a bystander, Rahul has struck different equations
with each of his two sons. They are different per-
sonalities, says Niraj, of the two brothers. Sanjiv
is soft-spoken, while Rajiv is sober and not easily
excitable, he says.
Their approach to the demerger process was
quite different. According to Niraj, though Rajiv
was fully aware of the demerger process, he was
not too involved as temperamentally he is not in-
terested in routine stuff. By comparison, Sanjiv
was spearheading the demerger, along with Rahul
and Kevin DSa, a senior executive who has been
with the group since 1978 and who works with both
brothers but primarily in Rajivs company.
They have different sets of friends: Rajiv has a
close-knit group, while Sanjiv is more inclined
to socialising. Sanjiv is the more extrovert of
the two, spending a lot of time with outsiders
and investors. He goes on roadshows, says DSa.
While Sanjiv stays in the family house, with his
father, in the factory premises at Akurdi, 25 km
from Pune, Rajiv moved out a few years ago and
stays in Pune city with his family. Because of that
locational proximity, and also the nature of their
relationship, Sanjiv seeks out his father more
often than Rajiv does. My father and I share an
excellent relationship and he is also my fondest
critic, says Sanjiv.
Rahul feels both brothers are managing their
respective companies well. Further, Rahul adds,
unless he wants to bring a particular issue to
their attention, he gives them ad-
vice only when asked. Both
are highly competent and,
with the help of their out-
standing management
teams, are doing a great
job, he says. I try not
to interfere in their func-
tioning, but they are
account abl e t o t hei r
respective boards and
the chairman.
Rajiv:
His Own Man
That chai r man i s
Rahul himself and he
has changed from the
time he was running
the show. In those days,
the joke among senior
managers was that they
needed the approval of
Bajaj senior to even
order a newspaper in
the company. From
being something
of a terror, with
an overpowering personality and demanding
nature, Rahul has mellowed.
From being totally hands-on in the business, he
has stepped back as chairman, but he is not totally
hands-off either. He is an active chairman and has
the last word on major policies of the Bajaj Group
of companies, says Niraj. He can be tough, but
he has a heart of gold. He calls a spade a spade. He
has a sharp mind and encourages participative
discussions. He is open to dissent and different
points of view.
Perhaps the most high-profile, and public, in-
stance of dissent came when Rajiv took the call
in 2009 for Bajaj Auto to exit the scooters business
-- the very two-wheeler segment on which his father
built the company -- and focus on motorcycles. RL
Ravichandran, who was then a senior business
leader at Bajaj Auto working closely with Rajiv,
saw that disagreement from close.
In those days, he often ended up mediat-
ing between father and son, and saw facets
in their personas that told him why differ-
ences between the duo were not necessarily
breakpoints. I have seen many areas of dis-
agreement between them, but Rahul Bajaj
accepts the true logic of a decision in the
companys interest, says Ravichandran,
currently a whole-time director at Eicher
Motors. Rahul is very vocal in his ex-
pression, whereas Rajiv is measured and
to the point. Rahul can be emotional,
but Rajiv is precise and rational.
Those qualities were demon-
strated amply when Rajiv made
two contrarian calls: to convert
Bajaj Auto into a specialist mo-
torcycle company and to go be-
yond the Bajaj brand. Once
he decides a strategy, Rajiv
is the most focused and de-
termined individual, and
will stay on that path
regardless of a million
conflicting opinions,
says R Balakrishnan,
chairman and chief
creative officer of
Lowe Lintas India,
who worked on the
Hamara Bajaj campaign with the father and also
later with Rajiv.
Some see Rajivs stubbornness as a weakness.
Rajivs firmness in not seeking advice (not
working with as many consultants as other auto
majors) is perhaps not helping Bajaj Auto grow,
feels Mahantesh Sabarad, deputy head (research),
institutional equity, SBICAP Securities. Rajiv
was very particular about protecting and grow-
ing Bajajs market share, and would discredit any
analysis that doubted it. Now, with Honda pulling
away in market share, he has retreated into a shell.
According to Ravichandran, Rajiv is well-versed
in all aspects of manufacturing, product develop-
ment, low-cost innovation; he is focused on profit-
ability and productivity; and while he is optimis-
tic, he is cautious on investments. He is very, very
sharp in business analytics, and a smart controller
of the game, he says. Adds Harsh Goenka, chair-
man of the RPG Group and who knows the family
well: Rajiv is one of the finest managers around
and an institutional builder.
Sanjiv: From The Shadows
Those are the two men who precede Sanjiv -- the
lesser known of the two siblings, in charge of the
lesser-known Bajaj business. He (Sanjiv) is caught
between the towering personality of Rahul and
a hands-on, no-nonsense, practical, precise and
sharp Rajiv, says Ravichandran. Sanjiv is very
selective and diplomatic in his expressions. Yet,
being the youngest of the family, Sanjiv enjoys a
soft corner with both Rajiv and Rahul.
Since the demerger, Sanjiv has assembled a solid
financial services business, spanning consumer
loans, insurance and wealth management. The
next leap, as he sees it, is banking. The banking
license was very important for us but not urgent,
says Sanjiv. When the next set of regulations come
about, we will be in a better position to again evalu-
ate the licence.
Its a long way to come for an engineer and
Harvard MBA graduate who cut his teeth in
manufacturing -- first in Tata Motors and then
in Bajaj Auto. Bajaj Finserv is the holding com-
pany for three group companies in the financial
services business, namely Bajaj Allianz Life
Insurance, Bajaj Allianz General Insurance, and
Bajaj Finance.
Against a loss of Rs 33 crore in 2007-08, Bajaj
Finserv posted a net profit of Rs 1,544 crore in 2013-
14. In the same period, Bajaj Autos net profit has
grown from Rs 756 crore to Rs 3,243 crore. With
great entrepreneurial skills, Sanjiv has managed
to create a huge financial empire from nothing,
says Goenka.
Sanjivs philosophy is to focus on the long term
without losing sight of profitability. So, for in-
stance, while most life insurers initially focused
on larger cities, Bajaj Allianz Life fanned out to 850
cities and towns. Similarly, in order to build the
largest consumer-durable lending business, Bajaj
Finance used technology and processes to reduce
loan approval time from three days in 2007 to on-
the-spot loans now. Not only is Bajaj Auto Finance
reaping the benefits of healthy consumer demand,
it is among the few companies doing well in this
space, says Sunesh Khanna, analyst at Motilal
Oswal Securities, an equity research firm.
Long-term thinking also runs through Sanjivs
ambition of banking. A banking licence, in the
short term, would have resulted in a drop in RoE
(return on equity) for our financing business, in-
creased our regulatory and compliance require-
ments, and diluted promoter group shareholding,
he says. But we went for it because we believe it is a
significant long-term value-creation opportunity.
While Rajiv and Sanjiv are firmly in control of
their respective companies, the promoter share-
holding is scattered and not with them. For ex-
ample, as of March 2014, the promoter holding in
Bajaj Auto was divided between Rahul and his
three cousins (Niraj, Madhur and Shekhar),
directly and through investment companies.
Both Rajiv and Sanjiv remain on the board
of the others company. Yet, they maintain
a healthy respect for the operational lines
carved out and remain focused on their
respective businesses. I never felt even
for a minute that the demerger should
have been done differently or that it
should not have been done
at all, says Rahul. Such
a thought never crossed
my mind.
lijee.philip@
timesgroup.com
Bajaj Group Special Feature
They are united by blood, but divided by personality. They dont share the closest of professional relationships, but they let the other be. Eight years after
father Rahul Bajaj split his business group between them, brothers Rajiv and Sanjiv have made the divided parts bigger, better and more valuable than
the undivided whole. Lijee Philip breaks down how the Bajaj family keeps this complex set up simple and effective
ANIL SINGHVI
Founder and Director, Institutional Investor
Advisory Services
Separating the
businesses has
worked and it
perfectly
matches their
(the brothers)
DNAs. This was
one of the few demergers that
has worked very well
NIRAJ BAJAJ
Uncle to the brothers, and
Chairman and MD of Mukand
In a sense, they
would kill for
each other. But
taking help in
business deci-
sions, that would
be a rarity
Divided, We Rise
Undivided Bajaj Group
(On Mar 13, 2008, a day before demerger) 21,042
Divided Bajaj Group
(On June 26, 2014) TOTAL 94,402
Financials show consolidated numbers in Rs cr
Rajiv Bajaj
Auto Business (Bajaj Auto)
Revenues Net profit
2007-08 9,164 750
2013-14 20,840 3,380
Revenues Net profit
2007-08 12,225 -33
2013-14 15,554 1,544
Sanjiv Bajaj
Financial Services Business (Bajaj Finserv)
Growth, Profitability
MARKET CAPITALISATION (` cr)
& Shareholder Returns
Undivided Bajaj Group
(on March 13, 2008, a day before demerger)
Divided Bajaj Group
(on June 26, 2014)
21,042
Appreciation between March 13, 2008 & June 26, 2014,
on a compounded annual basis
28.4%
Appreciation in
BAJAJ GROUP
8.5%
Appreciation in
BSE SENSEX
Bajaj Auto 66,122 Bajaj Holdings 13,724
Bajaj Finserv 14,556
Total 94,402
RAHUL BAJAJ
Chairman, Bajaj Auto
I never felt even for a minute
that the demerger should
have been done differently or
that it should not have been
done at all. Such a thought
never crossed my mind
Market capitalisation in ` cr
16
THE ECONOMIC TIMES | NEWDELHI | TUESDAY | 1 JULY 2014
Product: ETNEWDelhiBS PubDate: 01-07-2014 Zone: DelhiCapital Edition: 1 Page: ETDCST User: sachink2110 Time: 06-30-2014 21:43 Color: CMYK