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Saturday, December 6, 2008

Maharashtra Scooters - Hidden Gem from Bajaj Group

Maharashtra scooters used to produce scooters which they have stopped in 2006, but this company holds shares from all other Bajaj group companies and have good investment value in it.

Maharashtra Scooters is a Bajaj Auto group company. In fact, this company has been promoted by Bajaj Auto Ltd along with Western Maharashtra Development Corporation. Till about two years back, this company was manufacturing scooters and supplying it to Bajaj Auto. It was in fact an ancillary to Bajaj Auto, but this company stopped the manufacturing of scooters two years back. As of now, this company has got no business of its own.

This company has got an equity capital of Rs 11.5 crore and its book value as on March 31, 2008 was about Rs 172.

This company is totally debt-free, it has got absolutely no term loans or unsecured loans or working capital loans. It is a totally zero debt company. This company has got cash close to Rs 95-100 crore in its books.

It also holds shares of Bajaj Auto Ltd, which got demerged into three companies ‑ Bajaj Holdings, Bajaj Auto and Bajaj FinServ ‑ last year. So, this company was holding about 33.87 lakh shares of Bajaj Auto and it now holds 33.87 lakh shares in each of these three companies whose value at the current price comes close to Rs 225 crore.

Besides these three companies, this company is holding Bajaj Auto Finance and Bajaj Hindustan shares also, which are valued at close to about Rs 17-18 crore.

In all, this company has got the quoted investments whose value at the current market price is close to Rs 250 crore. All investments which this company is holding are trading very close to their 52-week lows whether it is Bajaj Auto, Bajaj FinServ, or Bajaj Auto Finance.

So, at the current price of Rs 65, you have a company whose market capitalisation is just about Rs 75 crore, which is holding cash of Rs 100 crore and quoted securities of Rs 250 crore. This company paid a dividend of 60% last year. So, at the current price, the dividend yield itself comes to about 9%, book value is Rs 171 as against which the stock is available at Rs 65.

In a market where there is so much of uncertainty, here is a company that is holding a lot of cash in the balance sheet. It is giving a good dividend yield to shareholders, and this seems to be a safe stock in an uncertain market like this.
Excerpts from Ashish Chugh's Interview on MoneyControl

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