Bajaj Auto Ltd (BAL) has announced that the Board of Directors of the Company at its meeting held on May 17, 2007, has approved the Scheme for Demerger ('Scheme') of the businesses of the Company. The demerger of (1) the two and three wheeler manufacturing undertaking ('Manufacturing Undertaking') and (2) its Strategic Businesses comprising the generation of wind-energy using wind-farms, the insurance business conducted through its joint ventures Bajaj Allianz Life Insurance Company Ltd and Bajaj Allianz General Insurance Company Ltd, financial products distribution business conducted through Bajaj Allianz Financial Distributors Ltd and interests in retail / consumer finance business conducted by Bajaj Auto Finance Ltd. (collectively, the 'Strategic Business Undertaking') to two newly incorporated subsidiaries, Bajaj Holdings and Investment Ltd ('BHIL') and Bajaj Finserv Ltd ('BFL'). The Manufacturing Undertaking shall vest in BHIL and Strategic Business Undertaking shall vest in BFL. The demerger will be subject to all the requisite statutory, regulatory and corporate approvals, including approvals of the RBI, stock exchanges, the respective boards and shareholders. The board has unanimously approved the proposed demerger of the undertakings of the Company as above, with effect from the closing hours of March 31, 2007, the Appointed Date. After the demerger, each shareholder would, for every share held in the Company, a. continue to hold one share of the Company of face value of Rs 10 each fully paid up, b. be allotted one share of BHIL of face value of Rs 10 each fully paid up and c. be allotted one share of BFL of face value of Rs 5 each fully paid up As part of the restructuring, BHIL shall be renamed as 'Bajaj Auto Ltd' and the existing Bajaj Auto Ltd shall be renamed as 'Bajaj Holdings and Investment Ltd'. - The Scheme as cleared by the Board is subject to approvals as may be required including that of the Stock Exchanges, Bombay High Court, and shareholders of the Company. Background 1. BAL is a leading two and three-wheeler manufacturer with a global vision. It is well known for its R&D, product development, process engineering and low-cost manufacturing skills which have enabled it to grow its market share in the motorcycle segment from 22.9% in 2001-02 to 33.5% in 2006-07. With such comparative advantages, the Company is uniquely poised in its pursuit of being among the three largest global producers in two-wheelers by 2010. Currently, it is the largest exporter of two and three-wheelers in the country with exports forming 18% of its total sales. It has recent started operations in Indonesia through its subsidiary PT Bajaj Auto Indonesia. 2. BAL is also engaged in the generation of wind-energy through its wind power project. The Company has set up a total of 138 windmills at a capital expenditure of Rs 2.94 billion. The total installed capacity of the wind-power project is 65.2 MW. 2. BAL is engaged in the insurance business through its joint ventures Bajaj Allianz Life Insurance Company Ltd (BALICL) and Bajaj Allianz General Insurance Company Ltd (BAGICL). Both these Companies are growing rapidly and are already ranked second in their respective fields among private insurers in India, With favorable demographics and a low insurance penetration compared to other countries, India represents a huge growth opportunity for the insurance businesses. Both these joint ventures are well placed to exploit this opportunity. 3. BAL is engaged in the consumer finance business through its associate Company Bajaj Auto Finance Ltd (BAFL). BAFL is a leading NBFC in auto finance & consumer durables finance and is now expanding into other areas of consumer financing including personal loans, etc., with plans to become a full-fledged consumer finance Company offering a complete range of finance products. Objective of the demerger: 1. Considering the growth opportunities in the auto, wind-energy, insurance and finance sectors, the Board has considered it timely and appropriate to de-merge these activities into separate entities, each of which can focus on these core businesses and strengthen competencies. 2. The demerger will create three separate entities with management focus on clearly laid out objectives, pursuant to which: a. the auto Company would focus on auto business. b. the wind power and financial services Company will focus on wind-energy generation, insurance, consumer finance and new initiatives in financial services space; and c. the primary investment Company will focus on new business opportunities. 3. The two new Companies will be able to tap (on an arm's length basis) into the cash pool of the investment Company to support future growth initiatives, if required. 4. The demerger will enable the investors to hold separate focused stocks. 5. The demerger will facilitate more transparent benchmarking of the Companies with its peers in their respective industries. Key elements of the Scheme The Scheme would operate as under: 1. BAL has formed two subsidiaries viz. i. Bajaj Holdings and Investment Ltd (BHIL) and ii. Bajaj Finserv Ltd (BFL). 2. BAL has subscribed to the shares of the two Companies as under: BHIL - 43.5 million shares of Rs 10 each i.e. Rs 435.0 million. BFL - 43.5 million shares of Rs 5 each i.e. Rs 217.5 million. 3. The auto business of the Company along with all assets and liabilities pertaining thereto, including investments in PT Bajaj Auto Indonesia and in a few vendor Companies, would be transferred to BHIL. In addition a total of Rs 15,000 million in cash and cash equivalents would be transferred to BHIL. 4. The wind power project, investments in the insurance companies viz, BALICL, BAGICL and investment in the consumer finance Company BAFL along with relevant assets and liabilities would be transferred to BFL. In addition a total of Rs 8,000 million in cash and cash equivalents would be transferred to BFL. 5. The remaining assets and liabilities including investments in group Companies and balance cash and cash equivalents would be retained in the existing BAL. 6. As part of the Scheme, Bajaj Holdings and Investment Ltd (which would be the new auto Company) would be renamed as Bajaj Auto Ltd and the existing Bajaj Auto Ltd would be renamed as Bajaj Holdings and Investment Ltd, (which would act as the primary investment Company). Requisite changes would be made in the respective charter documents of these companies. 7. All shareholders in existing BAL on the record date would become shareholders in each of the new Companies and would be issued shares of the two new Companies in the ratio 1:1. After such issuance, each shareholder would, for every share held in existing Bajaj Auto Ltd. a. continue to hold. one share of BHIL (existing BAL) of face value of Rs 10 each fully paid up. b. be allotted one share of the new BAL (existing BHIL) of face value of Rs 10 each filly paid up and c. be allotted one share of BFL of face value of Rs 5 each fully paid up. 8. After the above issue of shares by the new Companies the share capital position in each of the companies would be as under. i. Bajaj Holdings and Investment Ltd (existing BAL) Authorized No of shares (Mn.): 150.00 Face Value Rs: 10 Amount (Rs Mn.): 1500.0 Issued No of shares (Mn.): 101.18 Face Value Rs: 10 Amount (Rs Mn.): 1011.8 ii. Bajaj Auto Ltd (New) Authorized No of shares (Mn.): 150.00 Face Value Rs: 10 Amount (Rs Mn.): 1500.0 Issued No of shares (Mn.): 144.68 Face Value of Rs: 10 Amount (Rs Mn.): 1446.8 iii. Bajaj Finserv Ltd: Authorized No of shares (Mn.): 150.00 Face Value Rs: 5 Amount (Rs Mn.): 750.0 Issued No of shares (Mn.): 144.68 Face Value of Rs: 5 Amount (Rs Mn.): 723.4 5. After the issue of new shares, the existing shareholders of BAL would hold about 70% shares in the new Companies in the same ratio as their current holding, with the remaining about 30% being held by Bajaj Holdings and Investment Ltd. The proposed transaction reinforces the commitment of the Bajaj Auto Ltd Group to the businesses of the new Companies BAL and BFL. The transaction structure will also enable the new Companies to tap into the cash pool of BHIL to support their future growth initiatives even while enabling BHIL to participate in the growth of the auto business and the financial services business. 6. The provisions of the Scheme would be applicable and come into operation from closing hours of March 31, 2007. The demerger process, which is subject to statutory and regulatory procedures, is expected to be completed by end of calendar year 2007. Bajaj Auto Ltd has informed BSE that the Hon'ble High Court of Judicature at Bombay, vide order dated December 18, 2007 received by the Company on February 19, 2008 has sanctioned the Scheme of Arrangement between the Company, Bajaj Holdings & Investment Ltd and Bajaj Finserv Ltd and their respective shareholders and creditors Further the Company has informed that, the 'Effective Date' and the 'Record Date' will be intimated soon by the Company after the filing of the order with the office of the Registrar of Companies. (As per BSE Announcement Website dated on 19/02/2008) Bajaj Auto Ltd has informed BSE that the Hon'ble High Court of Judicature at Bombay has sanctioned the Scheme Arrangement between Bajaj Auto Ltd, Bajaj Holdings & Investment Ltd and Bajaj Finserv Ltd and its respective shareholders and creditors. This marks the successful completion of the demerger process, which was initiated by the Company with the Board approval on May 17, 2007. The demerger reinforces the commitment of Bajaj Auto Ltd group to the businesses of the resulting Companies. Pursuant to the Scheme, Bajaj Auto Ltd is re-named as Bajaj Holdings & Investment Ltd. Highlights of the Scheme of Demerger as well as certain changes made in the composition of the Board of the directors of the three Companies are given in the following paragraphs (I) Highlights of the Scheme of De-merger Bajaj Auto Ltd (BAL) formed two wholly owned subsidiaries, viz. Bajaj Holdings & Investment Ltd and Bajaj Finserv Ltd on April 30, 2007. Bajaj Auto Ltd (BAL) at its Board meeting held on May 17, 2007 decided to demerge its undertakings into three separate entities as under: (a) Bajaj Auto Ltd (the new name of Bajaj Holdings & Investment Ltd under the scheme) to focus on auto business. (b) Bajaj Finserv Ltd (BFS) to focus on wind energy generation, insurance, consumer finance, financial products distribution business and new initiatives in financial services space and (c) Bajaj Holdings & Investment Ltd (the new name of Bajaj Auto Ltd under the scheme) will function primarily as an investment Company and focus on new business opportunities. The share capital of the three Companies as on May 17, 2007 was as under: - BAL Rs 101.18 crores (equity shares of face value of Rs 10/- each) - BHIL Rs 43.5 crores (equity shares of face value of Rs 10/- each) - BFS Rs 21.75 crores (equity shares of face value of Rs 5/- each) Under the scheme, every shareholder in BAL would be entitled to receive one equity share each in the two new resulting Companies for every equity share held by him in BAL. The share capital of the three Companies post demerger, after allotment of shares as above would be as under :- - BAL (renamed as BHIL) Rs 101.18 crores (equity shares of face value of Rs 10/- each) - BHIL (renamed as BAL) Rs 144.68 crores (equity shares of face value of Rs 10/- each) - BFS Rs 72.34 crores (equity shares of face value of Rs 5/- each) The holding of BHIL post demerger in the two resulting Companies would come down from 100% to 30%, while the holding by the existing shareholders of erstwhile BAL would be the remaining 70%. In this manner, the shareholders of the demerged Company shall directly and indirectly hold 100% share capital of the resulting Companies. Effective date when the scheme takes effect is February 20, 2008, i.e. the date of filing of the certified copy of the order of the Court with the Registrar of Companies, Pune. Appointed date under the scheme is beginning of April 01, 2007 and the scheme would take retrospective effect from that date. Record date to decide the entitlement of shares is March 25, 2008, based on the effective date and as per stock exchange requirements. Listing of shares of the two new Companies, i.e. the new BAL and BFS, after allotment is expected to take place by end of April 2008. (II) Changes in boards with effect from effective date, i.e. February 20, 2008 (a) BHIL _ listed (erstwhile BAL) The Board of BHIL (erstwhile BAL) gets pruned to an eight member board from the current sixteen member board and hence, the following eight directors resign from this board: - Shri. Shekhar Bajaj - Shri. Niraj Bajaj - Shri. D S Mehta - Shri. Kantikumar R Podar - Shri. J N Godrej - Smt. Suman Kirloskar - Shri. Naresh Chandra and - Shri. P Murari The four whole-time directors herein named resign from their executive positions. Of the four, Shri. Rahul Bajaj takes over as Non-executive Chairman and the remaining three, viz. Shri. Madhur Bajaj, Shri. Rajiv Bajaj and Shri. Sanjiv Bajaj become Non-executive Directors. Shri. V S Raghavan is appointed as Manager under the Companies Act, 1956 with the designation of CEO (Operations). The new Board is therefore as under: - Shri. Rahul Bajaj, Chairman - Shri. Madhur Bajaj - Shri. Rajiv Bajaj - Shri. Sanjiv Bajaj - Shri. Manish Kejriwal - Shri. D J Balaji Rao - Shri. S H Khan - Shri. Nanoo Pamnani (b) New BAL - unlisted (formerly BHIL) The Board of new BAL will consist of the same sixteen members as in the erstwhile BAL. The new Board with twelve additional directors is as under: - Shri. Rahul Bajaj, Chairman - Shri. Madhur Bajaj - Shri. Rajiv Bajaj - Shri. Sanjiv Bajaj - Shri. Shekhar Bajaj - Shri. Manish Kejriwal - Shri. D J Balaji Rao - Shri. S H Khan - Shri. Nanoo Pamnani - Shri. Niraj Bajaj - Shri. D S Mehta - Shri. Kantikumar R Podar - Shri. J N Godrej - Smt. Suman Kirloskar - Shri. Naresh Chandra and - Shri. P Murari Four existing directors take up executive positions as under; - Shri. Rahul Bajaj is the Executive Chairman - Shri. Madhur Bajaj is the Executive Vice Chairman - Shri. Rajiv Bajaj is the Managing Director - Shri. Sanjiv Bajaj is the Executive Director (c) BFS - unlisted The Board of BFS, which currently comprises four members gets expanded to a seven member board, by induction of three additional directors. The new Board is as under: - Shri. Rahul Bajaj, Chairman - Shri. Madhur Bajaj - Shri. Rajiv Bajaj - Shri. Sanjiv Bajaj - Shri. S H Khan - Shri. D J Balaji Rao - Shri. Nanoo Pamnani - Shri. Rahul Bajaj is the Non-Executive Chairman. - Shri. Nanoo Pamnani is the Non-Executive Vice Chairman. - Shri. Sanjiv Bajaj, the current NED, becomes the Managing Director. (As per BSE Announcement Website dated on 20/02/2008) SUB. :- Scheme of Arrangement of Bajaj Auto Ltd. (Scrip Code 500490) Trading members of the Exchange are hereby informed that, Bajaj Auto Ltd. has fixed the Record Date for the purpose of determining entitlement to the shareholders of the company pursuant to the Scheme of Arrangement of the company. COMPANY NAME CODE Bajaj Auto Ltd. 500490 & 600490 RECORD DATE 25/03/2008 PURPOSE Scheme of Arrangement: - 1. Demerger of Manufacturing Undertaking of Bajaj Auto Ltd. into Bajaj Holdings & Investment Ltd. Upon this scheme becoming effective, in consideration of the demerger including transfer and vesting of the Manufacturing Undertaking of Bajaj Auto Ltd. to and in Bajaj Holdings & Investment Ltd. (BHIL), BHIL will issue and allot in the ratio of ONE fully paid up equity share of Rs.10/- each of BHIL for every ONE Equity Share of Rs.10/- each held in Bajaj Auto Ltd. EX-ENTITLEMENT DATE 14/03/2008 DR-244/2007- 2008 The scrip will be No Delivery from 14/03/2008 (DR-244/2007-2008) to 24/03/2008 (DR-248/2007-2008). (As Per BSE Notice Dated on 25.02.2008)