Bajaj Auto chairman Rahul Bajaj said on Wednesday that plans are afoot to demerge the company, which is India's second largest two-wheeler maker, into two separate companies.

The plan is to create a separate investment company by taking out about Rs 1,000 crore (Rs 10 billion) from the cost surplus of Rs 3,000 crore (Rs 30 billion) of Bajaj Auto, he said.

"We are planning to do it to improve the P/E (price-earning) ratio of Bajaj Auto by creating a separate company. While Bajaj Auto will remain the manufacturing company, the investment company will be the holding company," he told reporters on the sidelines of an industry conference in New Delhi.

He, however, said the plan is yet to be taken up by the Bajaj Auto board.

Bajaj said post-demerger, the shareholding pattern of both the companies will remain the same.

The Bajaj group now has about 51 per cent shareholding in Bajaj Auto.

He declined to give any time-frame for the demerger saying, "It might take four months to two years."

Bajaj said the plan is subject to conformity with the corporate governance regulations and relatively high stamp duty in the state of Maharashtra.