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Bajaj ends decades-old alliance with Force Motors

From strategic investment four decades ago to being reduced to a treasury investment some months earlier, the Bajaj Group has made a complete exit from vehicle manufacturer Force Motors thanks to a series of share sale by the former.

The Rahul Bajaj-led Bajaj Group, which once controlled the company founded by Gandhian Navalmal Kundanmal Firodia set up to make three-wheelers, has unloaded its balance shares in Force Motors encashing on the 83% (in three months) appreciation in share price.

As per disclosure made to Bombay Stock Exchange, by August 1, Bajaj Holdings and Investment had 4.04% stake in Force Motors compared to 9.32% held as on July 23. This stake stood at nearly 23% by end of the first quarter last year financial spread between group companies, Bajaj Holdings, Bachhraj and Co and Jamnalal Sons.

However, according to latest bulk deal disclosures on the BSE it is learnt that Bajaj Holdings has sold its final tranche of 532,695 shares in Force Motors thus officially pulling the curtains on a partnership that spanned more than four decades. Promoter entities of Force Motors bought the shares as per the disclosures.

Niraj Bajaj, director, Bajaj Group, said, “We have been off-loading shares in Force Motors since the past many months. We thought we are getting a good price (on the sale). Though we have no direct business relations we share a very cordial relationship with the Firodia family. This is a normal treasury transaction, there is no arrangement with the Firodia family here”.

Though the Bajajs charted their own path under managing director Rajiv Bajaj, both groups post independence worked to pave the way for finding mechanised mass transport solutions. While N K Firodia tied up with a German company Vidal & Sohn Tempo Werke to make passenger three-wheelers, Bajaj Auto joined hands with Italy’s Piaggio to build geared scooters.

Bajaj Group then controlled one-fourth of shares of Force Motors which was known as Bajaj Tempo then due to its control. Force Motors held more than 9% stake in Bajaj Auto during earlier years. N K Firodia was once the chief executive of Bajaj Auto before Rahul Bajaj took the reigns in early 1970s.

Relationship between the two group hit an all-time low when the two fought with each in court rooms over usage of the Bajaj brand. The Firodias wanted to do away with the Bajaj brand when Daimler, which controls the Tempo brand, exited Bajaj Tempo. But the Bajaj camp petitioned against this move urging that the brand be retained.

Ultimately Bajaj Tempo, a household name popular for making Matador mini buses, was renamed Force Motors in 2005. While Force Motors expanded to making sports utility vehicles, light trucks and buses, ambulances and tractors, Bajaj Auto focussed on two and three-wheelers with over 40% of revenues coming from overseas.

Bajaj’s decision to become a specialist in its segment has paid rich dividends. The company, which created the Pulsar brand after giving up Chetak, became the second largest manufacturer of two-wheelers and the largest three-wheeler maker in India.

Bajaj Auto’s net profit of 2013-14 at Rs 3,243 crore was 60% higher than the turnover of Force Motors for the same year. Force Motors holding of over 10 million shares in Bajaj Auto at Rs 2,200 crore (as per BSE) is higher than the turnover of Force Motors clocked last year which stood at Rs 2021 crore.

Force Motors tried its hand in the premium heavy truck segment collaborating with Germany’s MAN. However, with fewer launches and little headway in sales the Pune-based group sold itself out of the joint venture.

Prasan Firodia, managing director, Force Motors declined to comment if the company would also like to monetise its holdings in Bajaj Auto. The company is keen on the SUV and MUV segment for future growth.


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