India Inc. at Digital Inspiration

What happens next after Bajaj Auto demerger?

Posted: 16 Apr 2008 06:55 AM CDT

Post demerger of Reliance industries Ltd., the next demerger to happen in Indian corporate is the demerger of Bajaj Auto Ltd (BAL).

The record date fixed for demerger was March 25, 2008 as a consequence of which shareholders of the Bajaj Auto will receive shares of the three demerged new companies in the ratio of one share each for every one share held in Bajaj Auto.

The 3 new companies formed as a consequence of the merger are along with their business activities and individual acquisition costs are as under:

1. Bajaj Auto Ltd (BAL) - auto business (22.1%)
2. Bajaj Finserv Ltd (BFSL) - wind energy generation, insurance, consumer finance (21.4%)
3. Bajaj Holdings & Investment Ltd (BHIL) - investments and new business opportunities (56.5%)

Also the name of listed Bajaj Auto Ltd has been changed to Bajaj Holdings & Investment Ltd.

The shares of the newly formed companies is expected to list around end of April and there would be no tax implication for shareholders on receiving the new shares.

The only tax liability that would arise for shareholders is when these shares are sold and that would depend on the time period of holding of the original Baja Auto shares.

After calculating the acquisition cost of individual shares according to the percentage mentioned above, the capital gains tax would be calculated. If period of holding is more than 1 year, then all gains would be tax free. If shares are sold within one year of purchase of Baja Auto shares, then shareholder would have to pay 15% short term capital gains tax.

Historically, demerger has led to creation of wealth for shareholders as has been recently seen in two successful cases of demeger of Reliance Industries and Indiabulls.

Though it remains to be seen how the Bajaj management approaches with the new companies as in this the demerger has not gone well with market as can be seen from the share price trends of Bajaj Holdings Ltd. Link

What happens next after Bajaj Auto demerger? - Digital Inspiration | FAQ | RSS

What does entry of Virgin Mobile means to Indian consumers?

Posted: 16 Apr 2008 04:28 AM CDT

For the last one month, there has been lot of buzz created around with the launch of Virgin Mobile into the Indian market, and many people have been comparing it with the likes of another UK telecom major, Vodafone.

However Virgin Mobile does not have neither the network nor the spectrum to start its mobile operations. It is just an agreement with Tata Teleservices wherein Virgin Group has a brand franchise arrangement targeted primarily at the youth segment.

Neither is the arrangement under MVNO (Mobile Virtual Network Operator) format. Under this format, companies buy airtime in bulk from service providers for resale to consumers. Virgin Mobile is just using Tata’s distribution network and complement its existing brand Tata Indicom.

According to a Morgan Stanley report, the offerings of Virgin Mobile are cheaper by 25-30% than similar schemes of competitors. Also, it has launched innovative schemese such as paying customers 10 paise for every minute of incoming calls they receive, contrary to olden days when you had to pay for an incoming call.

Even the TV advertisiements of Virgin Mobile have struch a cord with viewers owing to its smart placements and humour.

The Virgin Mobile service is currently available in select cities only and has been strategically focussed on high street stores and malls where there is more orientation towards youth.

In future, the offering may widen to cover more cities but the scale of operations and offers may be limited such as to have a niche customer base and also not to overlap with existing setup of Tata Indicom services.

What does entry of Virgin Mobile means to Indian consumers? - Digital Inspiration | FAQ | RSS