Bajaj Auto Employees Demand Stocks For Re 1!

The automobile industry has seen a number of issues on the labour front over the last few months. From the violent outburst at Maruti Suzuki’s Manesar plant to the strike at Hero’s Gurgaon unit, and now at Bajaj Auto’s Chakan plant, labour unrest has hit production and eventually the operations of these manufacturers. Scratch the surface and look at the demands made, and one gets a true sense of how unreasonable they can be.

Take Maruti Suzuki, for instance. News reports have indicated that the workers were striking for a raise in their basic salaries, as high as five times in some cases. They also demanded linking dearness allowance to basic pay, instead of receiving a fixed amount. These were only 2 of the 20 demands submitted to the management for consideration.

Following the events at Manesar, Maruti Suzuki announced the largest hike in the salaries of permanent workers in the company’s 30-year history. The company said that it would increase the salary of its permanent workers at its Gurgaon manufacturing facility by an average of Rs 18000 per month, with the range of hike in line with the seniority and experience of workers. Post this, the average salary of workers came to Rs 35000 to Rs 39000 per month – this is indication enough of the gravity of the situation.

What are the workers at Bajaj Auto demanding? Among the claims were a 25% wage raise, permanent employment for contractual workers, reinstatement of some suspended workers and bringing back some Chakan plant workers who were transferred elsewhere.

But the most striking was the demand that all Bajaj Auto workmen should be given an option to subscribe to 500 equity shares of the company at a discounted price of a rupee per share. Yes, a rupee. Considering the current share price of Bajaj Auto at Rs 1880 per share and a total of 1500 workers, Bajaj Auto would have to shell out Rs 141 crore. Moreover, this would amount to benefits of Rs 940000 per employee only from this demand.

Production at Bajaj Auto’s Chakan plant has been shut since June 25, 2013 on account of this. But the company does have 4-6 weeks of inventory on an average at the company and dealer level. An impact on the sales doesn’t seem to be likely in the near term.

The market reaction to this development has been rather interesting. Stock prices of Bajaj Auto have actually gone up by 7.19% (Against the 2.21% rise in the BSE Auto index) since the plant shut down. This can be because the impact on sales is not immediate, and furthermore, the demands from workers seem almost laughable.

The company will eventually start suffering a loss if the strike lasts more than a week or 10 days. However, the impact on the firm would be short-lived and there is no reason to worry or hastily sell the stock of Bajaj Auto.