Bajaj holdings and investments ltd.
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Article published as on Thursday, 29th July, 2021
at 9:00 a.m.
(YouTube link for the
Proceedings of the AGM)
Here is the detailed
summary of Q&A at the AGM.
The AGM was held on Thursday, 22nd July 2021 as at
4:15 p.m
Shekhar Bajaj the chairman began the AGM with the introduction
of the board member, a brief about the financial perform ace, detail on the
resolution, and then began the Q&A session with the shareholders
Q&A session
Arunkumar Boppana:
Appreciated and complemented the management on running the
company well.
Requested for Split of the shares.
Concluded saying:
‘Best time to plant a tree was 10 years ago, the second-best
time is now,
Likewise owning Bajaj holding share, we have not bought earlier, the best time to buy is now’
Dinesh Gopaldas Bhatia:
Congratulated the Bajaj holdings management and its team for the
financial performance and dividend declared.
Also requested to split the share, also explained how it would
help create liquidity and wealth thus benefitting small shareholders as well as
the promoter/management.
Yusuf Rangwala:
Which companies do we invest in (maybe the question is what the
investing style is)
(Also expressed how immensely happy he is on meeting the
management,
(Lagta hai management ko milke inka Dil bagh baagh ho gaya)
Pooja beria:
Had 3 questions to ask:
Given the recent changes in taxation on dividends,
Not passing 100% dividends received in Bajaj holdings would be
very tax-inefficient.
Example:
If Bajaj finance declares the dividend and Bajaj Finserv
receives it,
If in the very same year if the Bajaj Finserv doesn't pass this
dividend to shareholders, it would be taxable income for the Bajaj Finserv.
And later on when
Bajaj Finserv passes these dividends to the holding level (Bajaj Holding) and
again if the holding company doesn’t pay in the same year, it shall be taxed on
the holding level. And again when it pays to the investors it shall be taxed in
the hands of investors.
There are 2 – 3 instances where the tax is paid which are very
inefficient
There is a simple solution:
Design a policy which states that ‘all dividends streamed
through associated will be passed on, the very point we receive it.
So the question is
What stops us to adopt this very simple principle? Which is the
most logical, the most shareholder value accretive, and the most tax-efficient.
Second question:
The dividend policy of Bajaj finance, Bajaj auto have been
changed recently, but we have avoided changing the dividend policy at the
holding company level
(That is BHIL, Maharashtra scooter, and Bajaj Finserv)
The question is: why is there a delay in a change in dividend
policy at holding level when it should have been very straightforward, as
mentioned in point number 1.
I am also a shareholder of HDFC and I remember Deepak Parekh
announcing the very next day the change in dividend taxation that all dividends
streamed shall be passed onto shareholders to make it tax efficient.
This is my humble request to the board please try to look into
this and try to commit to distributing 100% of the dividends from associates,
because it would be very shareholder (value) accretive. And it will be
beneficial to minority shareholders as well as the promoters as well.
Third question:
Asked if we could change the investment mandate, (which states
that 40% in fixed income securities and 60% in diversified equity, excluding
the strategic investment, more details on page no. 28 of FY 20-21 annual report)
We would have been better off if we invested in the group
company’s stocks, so could we change the investment mandate trying to garner
more details here.
Thank you!
Amit Mantri:
Part of the question would repeat as per the earlier speaker
said,
Bajaj holdings shall receive dividends of over 1400 crores
(these are dividends already paid so far in FY22)
However, Bajaj holdings as of now you have only announced a
dividend of 450 crores to shareholders
So the question is:
Does the company plan to announce further dividends in the year,
so that dividend received by it are passed on to shareholders, or does it plan
to retain these dividends?
As earlier speaker mentioned, if Bajaj does not pass on these
dividends it will have to pay taxes on the dividends that it retains.
Example:
If it has received 1400 crores of dividends and passes only 450
crores and retains 950 crores. Then at 25% tax, it would result in
approximately 200 crores of taxation.
This would result in huge tax inefficiencies, so I would request
the company that at least those dividends that are received by its holdings are
passed onto shareholders, to ensure that there is no tax inefficiency due to
double taxation on the same dividend in the hand of the company and the
shareholders
The second question
and the request is:
Bajaj Holdings to buy back its shares, because currently, it
trades at over 65% discount to the value of its underlying holding.
So means that every 1 rupee of buyback would create 2.5 Rupees
of value even after you consider 20% buyback tax.
So the company has a large cash balance with which it is buying
other stocks, including stocks such as Bajaj Auto and Maharashtra scooters.
So the question
would be why not buy your own stock?
When it is so
undervalued.
It will solve a dual purpose, the buyback itself is very value
accretive, and secondly, buyback announcement will itself result in
substantially narrowing of Holdco discount.
Yesterday I had raised a similar point in Maharashtra scooters
AGM and the management has responded that Holding company discount is something
that we can worry about. Because the stock price is determined by the actions
of the minority shareholders, it is not the promoter who is selling the stock,
it is really the minority shareholders who are selling the stock.
I would disagree strongly with that comment, it is clearly in
our hands that any tax inefficiently exists gets completely eliminated, through
passing on entire dividends, it is also in our hands, that if we have
substantial capital available at the Holdco company to buy back stock, to
buyback are shares which will result in value creation to all shareholders, so
it just cannot be said that we cannot be held responsible if the stock is
trading at a discount. There are several steps that can be taken to ensure that
the discount gets narrowed.
Thank you very much!
The moderator moved to the next speaker
Vasudha Dakwe:
What is the impact of covid-19 on the permanent as well as
contractual staff?
Are you following any layoff policy?
When was the last bonus declared? And in what ratio, and when
can we expect the next bonus to shareholders?
I support all the resolutions, thank you very much!
Celestine Elizabeth Mascarenhas:
How many of our staff were affected by Covid, were that any
fatalities? And what is the level of vaccination drive?
(Also explained the need of split of share with the example)
Supported all resolutions, and praised and blessed the Bajaj
group for prosperity.
Thank you very much, for giving me a patient hearing!
Chairman requested MD/CEO Sanjiv Bajaj to respond to the queries
along with CFO Anant Marathe.
Response from the management
CFO: Anant Marathe
Questions raised regarding dividends by Mr. Mantra and Beria,
their questions are almost similar to that they have asked in Maharashtra
scooter AGM, and their answers are also similar.
BHIL had a profit of 200 crores in FY 20-21 and declared a
dividend of 445 crores.
This was declared partially out of retained earnings to maintain
the steadiness of dividends.
This is as per the dividend policy of the company to keep the
dividend stead, we also have at the back of our mind the tax efficiency thereof.
2 shareholders also mentioned that BHIL shall receive the
dividends of 1400 crores, BHIL’s board will deal with payment of dividend in
the next year’s basis the dividend policy of the company, and we will keep tax
efficiency in mind. Tax efficiency at not only dividend level, tax efficiency
at full financials of BHIL
And we shall consider this in next year’s board approvals for
dividends.
Question by Mr. Bopanna regarding investment ideology if the
company
Investments are basically focused on the value of the investee
companies.
In light of covid, our life has changed but it has also thrown a
lot of opportunities.
We always look for companies that have navigated the pandemic
better and invested in that space,
So those investments are in consumer, Financials, and technology
space. Over 2 years which is the period that broadly corresponds to the Covid,
the CAGR returns of non-group equity of BHIL was 21.2% as compared to Sensex
returns of 15.4%. Which is an outperformance of 5%. This clearly reflects our
Covid strategy of investing in the Non-group portfolio of BHIL.
There were 2 questions on Covid's impact on employees.
BHIL being a holding and investment company has only 18
employees, there were 2 employees who were affected by Covid and they are doing
well, there were no casualties.
And we have successfully been working from home as well as on a
need basis from office, and its working fine.
Training needs of employees, and especially keeping the past
decade performance and how it will span over next decades. The staff of BHIL is
trained regularly for the regulatory and operating environment, also we invite
external experts and professions to give their views on the external evolvement
of economy, industry, sectors, and companies, which help our employees to
upskill themselves and act towards to best interest of the company.
2 questions related to split and buyback.
We are a holding and investment company and so there is no
proposal for split or buyback with the board and what is important, this is a
holding company that is valued at a discount to NAV, despite discount to NAV,
the shareholders who have entered into this company, over the long term BHIL
has delivered significant value to its shareholders, over 10 years the CAGR of
BHIL is 15.3% compared to 9.8% of Sensex, over 5 years CAGR is 17.6% versus
14.3% of Sensex.
Also, BHIL has
always been strong on dividend payments.
Post demerger BHIL has not made any bonus issue or split.
That is done by the operating companies in the BHIL group.
Finally, I thank
shareholders for their time and good words on the progress and performance of
the company and especially kind words for our secretarial and Karvy team.
MD/CEO: Sanjiv Bajaj
let me
address 1 or 2 other questions that had come in.
Question sent by Harsh Visharia: Any plans to merge Maharashtra
scooters (our subsidiary) into the Bajaj holdings.
Answer) there is currently no such plan that has come to the
board, however, the board looks at all possible relevant options, and if
something like this comes up in the future, then naturally at the right time it
would be shared with you and the larger public.
Although tax efficiency is relevant, but it is not the only
factor for us to consider the dividend.
Dividend policy is you must keep in mind is of a holding
company, its different for different operating companies and hence the board
has cleared the dividend policy where we strive to pay out the dividend that is
half of the standalone profits, the rest as we are investment company is used
to invest.
(Also Sanjiv Bajaj clarified and explained queries relating to
buyback, and if there is any relevant proposal of buyback or otherwise, it is
something that would come to the board.
And That the aim of the company is the create wealth in the
medium to long term and not get caught up with artificial ways to try and take
care of the price increase price.)
With this, all queries were answered and the control was handed
back to the Chairman
With this, the AGM
meet concluded.
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