Bajaj Auto raises stake in KTM to 47 percent

Bajaj Auto, India's second-largest two-wheeler maker, has tightened its hold on KTM Power Sports by buying another 6.3%, taking it stake in the Austrian motorcycle to a little over 47%.

ET learnt that the company purchased this stake from one of the key stake holders through an open market transaction recently. The purchase was made through Bajaj Auto International Holdings ( BAIHBV), a Netherlands-based wholly-owned subsidiary of Bajaj Auto.

A senior Bajaj official confirmed the development, but declined to share the details, as the firm is bound by confidentiality agreement.

Bajaj Auto is the second-largest shareholder in KTM. Other large shareholders-Stefan Pierer and Rudolf Knuenz-hold more than 51% stake. Bajaj Auto and KTM are working on a few joint development projects.

In a recent interview to ET, Rajiv Bajaj, MD, Bajaj Auto, said that the company doesn't want to become the majority shareholder.

"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," he said. It's better that Bajaj doesn't become its majority stake holder, Bajaj added.

Bajaj Auto, which picked up a stake in KTM in 2007 by buying a 14.5% stake for about Rs 300 crore, has been consistently hiking its stake by buying more shares from the open market.

Even as the market for motorcycles in Europe and USA shrank by 5%, KTM successfully managed to increase its turnover last year by 13.4% to 526.8 million. The overall volumes for 2011 saw a jump 22.4% at 81,200 vehicles. Mirroring the rise in market share, the net profit has kept growing by 30.2% to 20.7 million.

The company's supervisory board has approved a five- year bond issue to raise 75 million subject to regulatory approval.

"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," said Umesh Karne, auto analyst at BRICS Securities.

Already both the partners are jointly working on a series of platforms and engines which will offer cost and quality benefits. Not only at the back-end, Bajaj Auto and KTM plan to use each others' global network to boost volumes and turn India into a significant manufacturing base, which will boost KTM's profitability.

Bajaj Auto supplied about 11,000 out of 81,000 bikes that KTM sold in 2011. This year the company plans to scale the numbers up to 40,000 KTMs and eventually produce 50% of all KTM motorcycles by 2015.

During the first two months this year, KTM pipped BMW as the largest selling brand in Europe, with its new Duke 125 & 200 doing wonders for the company.

During January and February, KTM sold close to 8,400 units against BMW's cumulative sales of around 8,250-8,300 units. KTM chief executive Stefan Pierer recently said the company aims to sell 25,000-30,000 motorcycles in India this year and over 200,000 units globally in 2015.

Bajaj-KTM have already launched KTM Duke 200 in India this January and are working towards foraying into Brazil and the other emerging markets such as Malaysia and Indonesia. Cross Industries and Bajaj Auto had entered a joint venture in 2008, having agreed for manufacturing the KTM 125cc motorcycles in India, and selling them in European markets.