Bajaj Raises its Stake in Austrian Manufacturer KTM

Bajaj Auto, India’s second-largest motorcycle maker has raised its stake in Austria’s KTM Power Sports AG by 1.21 per cent to 39.3 per cent.

Led by Managing Director Rajiv Bajaj, the Pune-based company has been consistently buying KTM shares from the open market. But CROSS Industries, the promoter group of KTM, has made it amply clear that it would not agree to a sell-out.

Since 2007, when it acquired a 14.5 per cent stake, Bajaj has spent more than Rs 1,000 crore to become the second-largest shareholder in the Vienna Stock Exchange-listed company. Rajiv Bajaj, who assumed a seat on the supervisory board of KTM four years ago, declined to outline the company’s strategy. CROSS Industries said it will continue to hold more than 50 per cent in KTM.

As of March, CROSS Industries had a 50.1 per cent stake, while other share holders, including HOFER Private Foundation, held less than five per cent. Free float and other investors had a little more than five per cent. The maker of the Pulsar range of commuter bikes, Bajaj plans to gain the management control of KTM by 2013. Its 39.3 per cent stake, or 3.97 million shares, in KTM is valued at close to Rs 1,400 crore.

The two companies are working together in areas of development of new bike models, engines, procurement of cheaper auto parts from India and expanding sales and marketing reach. They have developed motorcycles that will be sold under the KTM brand starting with Europe. These new bikes, the cheapest in the KTM range, will be manufactured at the Chakan plant of Bajaj Auto.

Apart from securing high-end technology and superior brand, Bajaj’s interest in KTM is also driven by the latter’s return to profitability after it was hit by the financial meltdown. Also, a brand like KTM will help it make a wider push into the global motorcycle market.

KTM’s turnover grew 30 per cent to 591.4 million last calendar year from 454.6 million in 2009. Net profit advanced to 14 million, compared to a loss of 81.4 million. Bajaj Auto International Holdings BV Netherlands, a 100 per cent subsidiary of Bajaj Auto, had bought 244,000 KTM shares last November to raise its stake to 38.09 per cent.

According to a report by UniCredit Research, “KTM’s top line growth and significant earnings improvement are mainly due to high volumes in the off-road segment, its core segment. Bajaj has increased its stake to 39.3 per cent and we would not exclude the possibility of this increasing in future.” To maintain its holding in the Austrian bike maker, Bajaj was forced to participate in a right issue floated last year by KTM.

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