Bajaj Auto, the second largest two wheeler manufacturer in the domestic market, has increased its stake in KTM, the well established Australian auto maker, by acquiring another 6.3 per cent share in the company. With this move, the Indian manufacturer has taken its total share in KTM to slightly more than 47 per cent.
According to market reports, Bajaj Auto recently gained this stake through an open market operation from one of the main stake holders of KTM. This transaction was carried out through Bajaj Auto International Holdings (BAIHBV), which is a Netherlands-based completely owned sub-division of Bajaj Auto.
A senior official of Bajaj verified this rise in shares but refused to discuss the details of this deal. The company is known as the second largest shareholder in KTM, whereas other big players like Stefan Pierer and Rudolf Knuenz account for more than 51 per cent. KTM and Bajaj Auto are presently working on some joint development projects.
Rajiv Bajaj, Managing Director, Bajaj Auto, expressed that the company does not intend to emerge as the major shareholder in KTM, which will be better for the Bajaj Auto. He further added, “We will be buying more shares to up our stake from 40%. However, we do not want to be the majority stakeholder as to convey the perception of exclusivity and premiumness."
In 2007, the company gained stake in KTM by purchasing 14.5 per cent shares for around Rs. 300 crores. Thereafter, Bajaj Auto has consistently expanded its stake in KTM by buying shares via open market operations.
Last year, KTM managed to expand its turnover in Europe and USA by 13.4 per cent by selling 526.8 million vehicles, even though these two markets shrank by 5 per cent. As far as total sales of the company are concerned, it marked a growth of 22.4 per cent by rolling out 81,200 units. Owing to these stupendous figures, the net profit of KTM amounted to 20.7 million, a growth of 30.2 per cent.
The supervisory board of KTM has granted permission to issue a five year bond, which will help the company raise 75 million, subject to the approval of regulatory authority.
Umesh Karne, Auto Analyst, BRICS Securities, said, “It is a positive move and in line with the company's stated intent of working closely with KTM. This increase in stake will develop further confidence among investors and boost their integration process.”
In the current scenario, both KTM and Bajaj Auto are working on developing new engines and platforms, which will facilitate both auto makers via advantages in terms of quality and cost. The two companies are also eyeing each other's sales networks to boost their sales volumes. This move will make India a prominent destination for manufacturing operations, which will be quite lucrative for KTM.
Bajaj Auto delivered around 11,000 of the 81,000 motorcycles that KTM retailed in 2011. This year, the company aims to take this figure to around 40,000 and, eventually, manufacture 50 per cent of KTM bikes by the end of 2015.
During January and February 2012, KTM surpassed BMW and became the largest selling brand in Europe due to the success of its new Duke 125 and 200. In this period, the former rolled out approximately 8,400 bikes as compared to the latter's 8,250-8,300 units. Stefan Pierer, the Chief Executive Officer of KTM commented that that it has set a target of 25,000-30,000 motorcycles in India in 2012 and aims to cross the 2,00,000 mark in the international arena by 2015.
In January 2012, Bajaj-KTM introduced the KTM Duke 200 in the domestic market, along with other nascent markets, such as Malaysia and Indonesia. Bajaj Auto entered a joint venture in 2008 and produced KTM 125 cc bikes in the country in order to sell the same in Europe.
