Background
Bajaj Holdings & Investment Ltd. (‘BHIL or ‘the Company) is registered with the Reserve Bank of India as a Non-Banking Financial Company – Investment and Credit Company (NBFC-ICC). As per RBIs ‘Scale Based
Regulations (SBR), the Company is classified as NBFC - Base Layer (NBFC-BL).
BHIL is a part of BSE 100 and Nifty 100 index of top 100 companies listed in India.
BHIL is essentially a holding and investment company and does not have any other operations of its own.
The Companys investments consist of: a. Strategic investments in group companies and b. Financial investments in capital markets and investment in properties. a. Strategic investments in group companies: As on 31 March 2023, BHIL and its subsidiaries, held strategic stakes of
• 36.64% in Bajaj Auto Ltd. (BAL),
• 41.63% in Bajaj Finserv Ltd. (BFS),
• 51% in Maharashtra Scooters Ltd. (MSL), and
• other group companies such as Bajaj Electricals Ltd., Mukand Ltd. and Hercules Hoists Ltd. b. Financial investments in capital markets and investment in properties: As on 31 March 2023, the Company held investments in equity and debt securities and investment in properties to the tune of H 10,830 crore at market value.
The market value of the investment portfolio comprising of strategic and financial investments of BHIL stood at
H 132,034 crore as compared to cost of H 10,542 crore as on 31 March 2023.
BAL which manufactures and sells motorcycles and commercial vehicles, is ‘The Worlds Favourite Indian.
It participates in the electric vehicle market through its 100% subsidiary Chetak Technology Ltd. Through its
49.90% holding in Pierer Bajaj AG, it has tie-up with premium European motorcycle brands KTM and Husqvarna. Further, it has partnership with the largest British motorcycle brand Triumph.
BFS is the holding company for various financial services businesses under the Bajaj group. Its vision is to be a diversified financial services group with a pan-India presence and, thus, offer life-cycle financial solutions for its various customers. It participates in the consumer finance and lending business through its 52.49% holding in Bajaj Finance Ltd. (BFL) and in the protection and savings businesses through its 74% holding in two unlisted subsidiaries, Bajaj Allianz General Insurance Company Ltd. (BAGIC) and Bajaj Allianz Life Insurance Company Ltd. (BALIC). BFS also has other subsidiaries – an asset management company, a digital marketplace for loans, insurance and investments and a digital health tech venture. BFL has two subsidiaries –
Bajaj Housing Finance Ltd., a housing finance company and Bajaj Financial Securities Ltd., a stock broking and wealth management company.
BFS and BFL are included in the benchmark BSE Sensex and Nifty 50 index of large cap stocks, while BAL is included in Nifty 50 index. MSL is listed too.
The two large associate companies of BHIL continue to grow resulting in a market capitalisation of
H 109,896 crore and H 201,706 crore of BAL and BFS respectively as on 31 March 2023. The annualised return of BAL and BFS since initial listing 15 years ago stood at 18.4% and 24.6% respectively as compared to 8.9% of Sensex for the corresponding period – a commendable long-term growth.
Over the last two years, BHIL has further increased the distribution of dividend to its shareholders. The strong financial position after considering various factors including investments (other than strategic investments) available with BHIL, requirements of funds for strategic purposes and performance of associates has allowed the Company to grow the dividend payouts.
Over the years, BHIL has delivered significant value to its shareholders through dividend and capital appreciation.
Economy and markets
Financial Year 2022-23 (FY2023) began on a mixed note. On the positive side, after two years, the impact of the Covid-19 pandemic on lives and livelihoods started receding — thanks to a successful mass immunisation programme and the advent of a less virulent variant called Omicron. However, the impact of inflationary trends, supply chain disruptions emanating from China, and the Russia-Ukraine conflict have been impacting commodity prices.
In FY2023, the Indian economy faced multiple challenges. The countrys retail inflation indicator, Consumer Price Inflation (CPI) went above the RBIs tolerance range of 6% in January 2022. It remained above this range for almost ten months, right up to October 2022. Rising international crude prices coupled with inimical domestic weather conditions kept food prices high, fuelling retail inflation. The government cut excise and customs duties and restricted exports to cool off inflation. Like other central banks, the RBI raised the monetary policy rates and reduced excess systemic liquidity. Major areas of concern were elevated commodity prices, higher retail inflation, depreciation of the Indian rupee and a rising current account deficit (CAD).
However, despite these challenges, India emerged as the fastest growing major economy in the world.
The second advance estimate of national income released by the Central Statistics Office (CSO) on 28 February
2023 expects real GDP growth in FY2023 to be 7.0%. Private consumption has showed some signs of slowdown. However, the Central Government led capital expenditure has continued to be an important driver of the economy with gross fixed capital formation (GFCF) expected to
32.7% of the GDP in FY2022.
The RBI increased the policy repo rates by 250 basis points (bps) during FY2023.
The Government of India budget for the FY2024 tried to strike balance between fiscal consolidation and growth by continuing its focus on capital expenditure. It has set a target of reducing the Central Governments fiscal deficit to 5.9% of the GDP in FY2024 from 6.4% (revised estimate or RE) in FY2023. It has budgeted for H 10 lakh crore towards capital expenditure for FY2024, an increase of 33% year-on-year.
On balance, we believe that the Indian economy has weathered the external shocks reasonably well. The proof of it is that the country has emerged as the fastest growing major economy in the world. The general expectation is that Indias GDP for FY2024 would record a growth in excess of 6%. There are some potential headwinds. First, the world saw yet another set of banking turmoil in the USA and Switzerland, and the global financial sector remains jittery. Second, much depends on monsoons in FY2024. The risk of monsoon falling below normal levels (after four consecutive years of normal rainfall) remains a wildcard and could hit agricultural production and impact food prices.
The Indian bond markets witnessed sharp reduction in duration spreads due to sharp rate hikes by the RBI in less than a year. The shorter end yields moved higher compared to longer end.
In the equity markets, Nifty 50 Index ended FY2023 almost flat compared to 18% increase in FY2022. This was driven by sale of USD 5.3 billion by Foreign Institutional Investors (FIIs). Domestic Institutional Investors (DIIs) invested USD 32.3 billion, providing support to the markets.
Performance Highlights
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
Standalone | ||
Total income | 1,937.01 |
1,833.16 |
Profit for the year | 1,711.58 |
1,630.52 |
Investments, at cost | 10,542 |
10,158 |
Investments, at market value | 132,034 |
156,649 |
Equity | 15,665 |
15,388 |
Consolidated | ||
Total income * | 527.35 |
486.51 |
Profit for the year | 4,850.52 |
4,055.68 |
* Consolidated income is lower than standalone income due to elimination of intercompany dividends.
As at 31 March 2023, assets under management (AUM) of BHIL crossed H 130,000 crore at market value.
BHIL, being an investment company, its investment portfolio largely depends on the performance of stock and money markets.
The Company recorded an all-time high consolidated profit for the year of H 4,850.52 crore in FY2023 v/s H 4,055.68 crore in FY2022, on the back of a strong performance by the group companies.
Standalone results
BHILs focus is on earning income through dividends, interest and profits on investments held. The standalone results are given below:
Table 1: Standalone financials of BHIL
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
[a] Statement of Profit and Loss | ||
Interest on debt securities | 254.77 |
236.35 |
Dividend | ||
From associates and subsidiaries | 1,484.02 |
1,402.01 |
From others | 85.00 |
66.49 |
Profit on sale of debt securities (net) | 30.08 |
51.58 |
Rent from investment property | 18.37 |
20.03 |
Others | 64.77 |
56.70 |
Total income | 1,937.01 |
1,833.16 |
Total expenses | 158.16 |
132.04 |
Profit before tax | 1,778.85 |
1,701.12 |
Tax expense | 67.27 |
70.60 |
Profit for the year | 1,711.58 |
1,630.52 |
[b] Other comprehensive income | ||
Fair value change on equity instruments | 135.89 |
1,412.18 |
Other comprehensive income, net of tax | 68.29 |
1,187.38 |
[c] Total comprehensive income (a+b) | 1,779.87 |
2,817.90 |
As required by Ind AS, considering the Companys business model, mark to market gain/loss on equity
(other than in associates and subsidiaries carried at cost) and a significant part of debt securities of BHIL are reflected in other comprehensive income and not in Realised profit on sale of equity investments was H 238.39 crore in FY2023 as compared to H 147.45 crore during FY2022.
BHILs mark to market gain on equity investments for FY2023 stood at H 135.89 crore as compared to mark to market gain of H 1,412.18 crore for FY2022. This gain is reflected in other comprehensive income. The muted performance of the equity markets is reflected in lower mark to market gain.
Investments
Over the years, BHILs investments have reached a significant
Its strategic shareholdings in BAL, BFS and MSL have increased from 30%, 30% and 24% to 36.64%, 41.63% and 51% respectively over last 15 years.
Its financial investments have crossed H 10,000 crore at market value.
It does not have significant liabilities and has no constraints it has distributed significant part of its profits.
From this position of strength, BHIL seeks to gradually grow its portfolio with long-term orientation in its investments.
The objective of BHILs investments portfolio is to balance risk with adequate return. The Companys Board approved investment policy prescribes that a minimum of 35% of surplus funds at cost (excluding strategic investments) is to be invested in debt instruments and a maximum of 65% of surplus funds at cost (excluding strategic investments) is to be invested in equity and equity linked instruments. The Company monitors these limits at market value, too.
The investment portfolio is managed by an Investment Committee comprising the Managing Director & CEO and members of the Management. The Committee meets at least once a month. The Company also has a professional team of fund managers, research and credit analysts, that is led by Chief Investment Officer.
Research analysts are devoted to various sectors in listed space and separately for private equity. The investment portfolio of the Company is set out in Table 2.
Table 2: Position of investments held by the Company
(Rs. In Crore)
<td >6.84
FY2023 |
FY2022 | |||||
Particulars | Cost |
Market value |
% to Total surplus (At cost) |
Cost |
Market value |
% to Total surplus (At cost) |
a. Strategic investments - equities | 3,173 |
121,204 |
3,135 |
146,011 |
||
b. Financial investments | ||||||
b.1. Investments in equity | ||||||
instruments | ||||||
Other listed equities | 2,282 |
4,841 |
31.71 |
2,132 | 4,841 | 31.14 |
Unlisted equities and AIFs | 669 |
1,512 |
9.30 |
582 | 1,357 | 8.50 |
subtotal | 2,951 |
6,353 |
41.01 |
2,714 | 6,198 | 39.64 |
b.2.Investments in debt instruments | ||||||
Debentures and bonds | 1,880 |
1,856 |
26.13 |
1,854 | 1,880 | 27.08 |
Government securities | 673 |
656 |
9.35 |
761 | 753 | 11.12 |
Mutual funds | 1,199 |
1,184 |
16.67 |
1,219 | 1,222 | 17.81 |
492 |
492 | 298 | 298 | 4.35 | ||
subtotal | 4,244 |
4,188 |
58.99 |
4,132 | 4,153 | 60.36 |
Total (b.1.+b.2.) | 7,195 |
10,541 |
100.00 |
6,846 | 10,351 | 100.00 |
c. Investment in properties (cost net of | ||||||
depreciation) | 174 |
289 |
177 | 287 | ||
d. Grand total (a+b+c) | 10,542 |
132,034 |
10,158 | 156,649 |
Investments in equity instruments
Strategic / group investments
BHIL holds strategic / group investments, as set out in Table 3.
Table 3: Position of strategic/group investments held by the Company as on 31 March 2023
(Rs. In Crore)
FY2023 |
FY2022 | |||
Equity shares held in | Cost |
Market value |
Cost |
Market value |
[a] Bajaj Auto Ltd. | 1,929.79 |
37,576.05 |
1,929.79 | 35,334.39 |
[b] Bajaj Finserv Ltd. | 743.82 |
78,920.95 |
743.82 | 106,310.85 |
[c] Investments in other group companies | ||||
Bajaj Auto Holdings Ltd. | 0.25 |
0.25 |
0.25 | 0.25 |
Maharashtra Scooters Ltd. | 239.49 |
2,467.43 |
239.49 | 2,144.09 |
Bajaj Electricals Ltd. | 214.58 |
2,013.00 |
176.74 | 2,019.77 |
Mukand Ltd. | 32.98 |
114.73 |
32.88 | 114.32 |
Hercules Hoists Ltd. | 12.34 |
111.52 |
12.34 | 87.05 |
Mukand Engineers Ltd. | - |
- |
0.10 | 0.15 |
Sub total | 499.64 |
4,706.93 |
461.80 | 4,365.63 |
Total | 3,173.25 |
121,203.93 |
3,135.41 | 146,010.87 |
Other equity investments
BHIL invests in equities normally with a 5-year holding horizon or longer, based on its views on further growth potential, from public equity markets as well as opportunities in the private equity space. This helps in managing its liquidity risk while generating adequate returns.
At cost, BHILs exposure to other equities marginally increased to 41% by end of FY2023 from 40% in FY2022.
At market value, exposure to other equities remained at around 60%.
Chart A: Sectoral allocation of other equity investments (at cost)
Category | % |
Consumer Discretionary | 14 |
Consumer Staples | 13 |
Financials | 27 |
Industrials | 7 |
Communication services | 3 |
Others | 9 |
Real estate | 7 |
Technology | 12 |
Materials/energy | 8 |
Total | 100 |
The sectors which outperformed the Sensex in FY2023 were industrials, consumer staples, consumer discretionary and financials. While technology, real estate, materials and healthcare underperformed.
BHILs other equities portfolio comprises of its investments in listed and unlisted entities. Investments in listed entities dominate the pie with a 77.3% share of other equity investments, at cost.
In unlisted equities, BHIL continues to remain invested in National Stock Exchange (NSE) and Fabindia.
BHIL continues to invest in several Alternative Investment Funds (AIFs).
BHILs other equities portfolio generated a return of 4.1% for FY2023, better than the Sensex. BHILs unlisted equity investments and AIFs delivered much better returns than the Sensex for FY2023.
Chart B: Composition of equity investments (at cost)
Category | % |
Other unlisted equities/AIFs | 11 |
Other listed equities | 37 |
Strategic / group investments | 52 |
Total | 100 |
Investments in debt instruments
At BHIL, the focus is around optimising risk adjusted returns for the fixed income investments by investing in high quality debt instruments, managing interest rate risk and minimizing liquidity risk. The aim is to first provide safety of capital, liquidity and a reasonable return. Majority of the investments are into Government securities, high-quality AAA corporate bonds and debt mutual funds with similar underlying investments.
FY2023 was a reset year for the debt markets. Globally central bankers initiated the roll back of all major stimulus undertaken during Covid-19 and hiked interest rates substantially in a short span.
FY2023 began with a combination of excessive liquidity overhang, low rates, improving growth and elevated inflation. At the end of the year, liquidity normalised close to neutral as the RBI hiked the policy repo
250 bps.
Unlike the previous year where there was a higher duration spread and thin credit spread, FY2023 witnessed a gradual reduction in duration spreads (between 1 to 10 year) due to rate hikes and shorter end yield moving higher compared to longer end. Credit spreads remained thin during the year between Government securities and private sector issuers. 10-year benchmark G-sec yield moved up from 6.84% to 7.32%.
Due to above market factors, BHIL incrementally invested in the 3-year segment. The strategy helped in gaining higher accrual income while remaining protected from overall hardening of yields.
As a result, BHILs portfolio duration reduced to 2.9 years from 3.8 years and increased the portfolio yield from 6.3% to 6.7%.
For FY2023, BHILs realised yield on the fixed income portfolio was 6.0%. The total return (realised and unrealised) was 4.2% compared to CRISIL Bond Index return of 3.8%.
Break-up of fixed income investments is presented in
Chart C: Composition of debt investments (at cost)
Category | % |
Mutual funds | 28 |
12 | |
Government securities | 16 |
Corporate bonds | 44 |
Total | 100 |
Consolidated financial results include consolidated
Table 4: Consolidated entity Bajaj Holdings & Investment Ltd.
Name of the company | % shareholding and voting power of BHIL and its subsidiaries |
Consolidated as |
a. Bajaj Auto Ltd. (BAL) | 36.64%* | Associate |
b. Bajaj Finserv Ltd. (BFS) | 41.63% | Associate |
c. Bajaj Auto Holdings Ltd. (BAHL) | 100% | Subsidiary |
d. Maharashtra Scooters Ltd. (MSL) | 51% | Subsidiary |
* Equity pickup of BHIL share in BALs profit is net of elimination of cross-holding of BAL in BHIL of 3.14%
Bajaj Auto consolidates its 49.90% stake in Pierer Bajaj AG.
Bajaj Finservs consolidated results include results of its lending arm Bajaj Finance Ltd. (BFL) and its two insurance subsidiaries – Bajaj Allianz General Insurance Company Ltd. (BAGIC) and Bajaj Allianz Life Insurance Company Ltd. (BALIC).
On a consolidated basis, BHIL recorded an all-time high profit for the year of H 4,850.52 crore v/s H 4,055.68 crore in FY2022, on the back of a strong performance by the group companies. More specifically, it was aided by excellent performance of BFL and BAL. The intercompany dividends received by BHIL and its subsidiaries, are eliminated in the consolidated results.
Table 5: Consolidated financials of BHIL
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
Total income | 527.35 |
486.51 |
Share of profits of associates | 4,667.01 |
3,893.67 |
Profit before tax | 5,011.51 |
4,225.90 |
Profit for the year attributable to BHIL | 4,850.52 |
4,055.68 |
Other comprehensive income, net of tax | (1,436.61) |
2,788.62 |
Total comprehensive income attributable to BHIL | 3,413.91 |
6,844.30 |
Results of subsidiaries and associates
Subsidiaries
Bajaj Auto Holdings Ltd. (BAHL)
The financials of BAHL are given below:
Table 6: Financials of BAHL
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
Total income | 1.41 |
0.95 |
Profit before tax | 1.39 |
0.93 |
yearProfit | 1.15 |
0.77 |
ttributable Profit to BHIL (100%) | 1.15 |
0.77 |
Maharashtra Scooters Ltd. (MSL)
financials of MSL are given below: The
Table 7: Financials of MSL
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
Total income | 217.75 |
194.46 |
Profit | 193.08 |
172.24 |
Profit | 195.29 |
142.71 |
Profit | 99.60 |
72.78 |
Associates
Bajaj Auto Ltd. (BAL)
The consolidated financials of BAL are given below:
Table 8: Consolidated financials of BAL
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
Total income | 37,642.90 |
34,428.85 |
Profit before tax | 7,841.98 |
7,651.68 |
Profit | 6,060.21 |
6,165.87 |
Profit attributable to BHIL (36.64%*) | 1,997.40 |
1,996.67 |
* Equity pickup of BHIL share in BALs profit is net of elimination of cross-holding of BAL in BHIL of 3.14%.
Bajaj Finserv Ltd. (BFS)
The consolidated financials of BFS are given below:
Table 9: Consolidated financials of BFS
(Rs. In Crore)
Particulars | FY2023 |
FY2022 |
Total income | 82,072.01 |
68,438.98 |
Profit before tax | 16,811.13 |
11,270.58 |
Profitfor the year | 6,417.28 |
4,556.77 |
Profit attributable to BHIL (41.63%) | 2,669.61 |
1,897.00 |
Significant ratios
The key financial ratios and details of significant changes in these ratios, to the extent applicable, as required by
SEBI (LODR) (Amendment) Regulations, 2018 are given below:
Table 10: Significant ratios BHIL standalone
Particulars | FY2023 |
FY2022 |
Current ratio | 2 |
2 |
Operatingprofitmargin % | 91.8% |
92.8% |
gin % mar Netprofit | 88.4% |
88.9% |
Return on equity % | 11.0% |
11.1% |
Internal control systems and their adequacy
The Company has effective internal control systems, which have been found to be adequate by the
Management of the Company. The Internal Auditors periodically bring to the attention of the Audit committee any deficiencies and weaknesses in the internal control systems, if any. The Audit Committee reviews and monitors the remedial actions to ensure its overall adequacy and effectiveness.
Cautionary statement
Statements in this Management Discussion and Analysis describing the Companys objectives, projections, estimates and expectations may be ‘forward looking within the meaning of applicable laws and regulations.
Actual results may differ from those expressed or implied. Important factors that could make a difference to the
Companys operations include global economy, political stability, stock performance on stock markets, changes in government regulations, tax regimes, economic developments and other incidental factors. Except as required by law, the Company does not undertake to update any forward-looking statements to reflect future events or circumstances. Investors are advised to exercise due care and caution while interpreting these statements.
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www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Copyright © IIFL Securities Ltd. All rights Reserved.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213, IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This certificate demonstrates that IIFL as an organization has defined and put in place best-practice information security processes.