Bajaj plans for Gen Next with a family settlement

Bajaj a rare family biz that has stuck together till 4th gen

MUMBAI:RAHUL Bajaj and his three cousins—shekhar, Madhur and Niraj—have signed an agreement that outlines how the family will jointly own group companies and establishes formal processes to deal with issues related to succession, ownership and conflict resolution.

The move confers on the Bajaj group the rare distinction of being India’s only large business family that has stuck together for four generations while ensuring a smooth transition for the fifth generation family members.

“The whole thing has a longterm logic. We don’t know what happens to our children and grand children. But, we know we want to be together. We are trying to see how we can strengthen our relationship,” Shekhar Bajaj, chairman, Bajaj Electricals said.

The agreement comes almost 18 years after a bitter family feud led to Rahul Bajaj’s younger brother, Shishir, carving out a part of the business empire. Shishir split in 2008 after a messy seven-year battle that was referred to India’s company law board to settle the dispute.

While details of the new family settlement agreement (FSA) have emerged only now, Rahul, Shekhar, Madhur and Niraj—who are third-generation Bajaj family members—signed the accord in June after a series of transactions held between August 2017 and April 2018 to establish each other’s ownership of companies such as Bajaj Holdings Ltd, Bajaj Electricals Ltd, Mukand Ltd, Hercules Hoists Ltd, Bajaj Auto Ltd and Bajaj Finserv.

In the process, they spent close to ₹8,863 crore in trading as many as 52.8 million shares of various group firms.

Rahul Bajaj continues to be the leader of the group. His elder son Rajiv runs Bajaj Auto and younger one Sanjiv runs Bajaj Finserv.

Shekhar’s only son, Anant, tragically died in August 2018. Niraj has one son, Nirav.

Family businesses world over are known to split by the third generation. As many as 60-70% of family businesses don’t last the third generation and 94% of them don’t last the fourth generation, according to Sunil Munjal, chairman, Hero Enterprise. Interestingly, the 6% that do last the third generation seem to go on generation after generation, Munjal had said in an earlier interview.

That underlines the significance of the agreement.

“FSA is a totally confidential agreement. It lays out the concept for future and how the joint ownership of the group will look. (It deals) with simplification of group structure, succession planning, just in terms of control of companies, etc. We are already into the fourth generation. Nobody knows the future. It is about what can we do—what precautions need to be taken, what decisions need to be taken,” Niraj Bajaj, chairman of Mukand Ltd, said in a phone interview.

To put the group’s businesses in context, Bajaj Group became the fourth-largest in the country with a combined market value of ₹3.8 trillion in 2018, more than other family business giants such as Aditya Birla Group, the Wadias, the Godrejs, the Mahindras and the Adanis. Only HDFC group, the Tata Group and Reliance Industries Ltd exceed Bajaj’s market cap.

The FSA also expands an already existing family council and gives voice to members of the extended family, who will together decide upon the leadership at its group companies.

The agreement also takes into account the next generation family members.

In India, a huge chunk of businesses is family-owned. Over time, families have had two influences—one is as the next generation comes in with their experiences, exposure and education which are quite different. They also have the ability and desire to question the status quo. They want to know why certain things are being done in a certain manner. In the older days, whatever the elder used to say was accepted as the norm, whether you liked it or not.

At Bajaj, it’s the amalgamation of both. MUMBAI: The minister of state for aviation, Jayant Sinha, said on Tuesday that four of the five issues related to the Pratt and Whitney engines on Airbus A320neo aircraft have been addressed.

The fifth issue, which is related to the engine’s gearbox, is being addressed, he said.

Domestic airlines such as Indigo and Goair have had several flights grounded during the last few months due to the Pratt and Whitney engine glitches. The engines were inducted in early 2016.

“The DGCA is expected to issue further directives regarding this shortly,” Sinha added.

The aviation minister was speaking at the governmentbacked Global Aviation Summit 2019 where the civil aviation ministry released a vision document for the civil aviation industry.

The Vision 2040 report said India’s air passenger traffic is expected to grow sixfold to 1.1 billion per year by 2040.

The report, prepared by consultancy firm KPMG and industry body Ficci, added that the Indian commercial air fleet is expected to be 2,359 by March 2040. India is also expected to have 190-200 operational airports by 2040. The report also said that Delhi and Mumbai could have three airports each.

It said India may consider investments of up to $2 billion for low traffic airports, excluding land acquisition costs. Besides, it recommends that a strong leasing industry for financing of aircraft and maintenance, repair and overhaul (MRO), should be established in India to prevent domestic airlines from going abroad for the facilities.

Aviation minister Suresh Prabhu said the Vision 2040 report will address the immediate challenges of the aviation sector. “We are working on getting aircraft financing and MRO industry in India, which will also increase jobs in the country.” At present, most airlines go abroad for MRO services and for raising capital to finance aircraft purchases.

The Indian government also proposed new amendments to the draft drone policy, including allowing drones beyond visual line of sight. MUMBAI:JET Airways (India) Ltd is working hard to fix its debt problems and its efforts could see results in a month’s time, a top Boeing executive said.

“A lot of activity is going on at Jet Airways; so I’m sure they will find a way. I am hoping that they resolve the situation in a month’s time or earlier,” said Dinesh Keskar, senior vice-president, sales, for Asia Pacific and India at Boeing Commercial Airplanes.

Keskar said Jet has not yet cancelled an order for 10 widebody 787 Dreamliner jets placed more than a decade ago.

“Jet Airways (first) ordered Boeing 787-8 aircraft and then converted them into 787-9 aircraft. A lot of stuff needs to be done in advance like seat selections, etc. (for conversion),” Keskar said.boeing 787-9s offer longer range than 787-8s, allowing an airline offer flights to more distant locations.

“They (Jet Airways) haven’t done anything on the order yet, so we haven’t built the planes for them. But, we expect this to happen in some time,” Keskar said. He said Vistara, which has signed a letter of intent with Boeing for a firm order for six 787-9 aircraft and purchasing rights for four more from the Dreamliner family, could take delivery of its first Boeing widebody plane by 2020.

“They don’t have an option to convert their first six aircraft order (Boeing 787-9) but they can think about converting their remaining four orders,” Keskar said.

He said Boeing’s latest widebody aircraft 777X, currently under production, will be rolled out by the end of this quarter.

AROUND 60-70% OF FAMILY BUSINESSES DON’T LAST THE THIRD GENERATION AND 94% OF THEM DON’T LAST THE FOURTH GENERATION