Bajaj Auto is likely to sell its 48% stake in Austrian high-performance bike manufacturer KTM to the latter’s parent group Pierer Mobility AG, as it is aiming to further streamline its business.
Bajaj Auto has restarted its discussion with Pierer Industrie AG, the parent group of Pierer Mobility AG, again fuelling the possibility of a stake sale of Austrian high-performance bike maker KTM to the Pierer Group, which currently holds the controlling stake of the bike brand, at 51.7%. Bajaj Auto International Holdings BV, the Netherlands-based subsidiary on the other hand holds approximately 48% stake in KTM AG, which also makes products under Husqvarna and GasGas brands.
Both the companies were engaged in discussion in March 2019 as well. However, the transaction was not executed.
Preparing for this possible transaction, Pierer Industrie AG contributes its 60% stake in Pierer Mobility AG to “PTW Holding AG” through a contribution in kind, which will result in direct 60% shareholding of Pierer Mobility AG. Pierer Industrie AG currently holds more than 60% of the shares of Pierer Mobility AG.
In case the transaction takes place, Pierer Mobility AG will consider legal and economic requirements and conditions of a capital increase by contribution in kind from the existing authorised capital of the company.
The authorised capital enables a capital hike of up to 50% of the existing share capital. Post-transaction, Pierer Mobility AG’s stake in the KTM AG will increase from currently held 51.7% to approximately 99.7%. The discussions are currently at a very preliminary stage. Bajaj Auto will evaluate and decide on the proposal in due course, following due corporate processes such a deal entails.
KTM’s Bajaj ride
The granular details of the proposed realignment through KTM’s stake sale have not been shared by either company. However, once executed, this realignment would kick-start a new chapter in Bajaj-KTM’s 13-year long partnership that has spawned out jointly designed and developed products. Also, under the partnership KTM has been able to grab a significant chunk of the Indian premium bike market with local production using Bajaj manufacturing facility, resulting in competitive pricing.
On the other hand, the two companies have overseas distribution pact and joint marketing and sales agreement as well, resulting in mutual benefits.
KTM’s partnership with Bajaj Auto hs made the Austrian bikemaker the biggest premium bike maker in the world, leaving behind American marquee Harley-Davidson in terms of sales volume in 2018 and 2019.
Globally, KTM sold 280,099 units in 2019. The bikemaker aims to sell around 400,000 units in 2022 around the world, which requires nearly doubling the production at Bajaj Auto’s Chakan plant to 200,000 units from current 108,000 units.
In the first half of 2020, KTM has sold 90,331 motorcycles and 22% of them were manufactured and sold by Bajaj Auto in India and Indonesia. On the other hand, Bajaj has benefited from technology sharing and becoming the sole manufacturer of KTM and Husqvarna bikes outside of Europe, exports them to markets like the US, Japan and South Asia.
Both Bajaj and KTM are already working on electric two-wheelers, with the first range of them having power output between 3-10 kW, set to roll out from Chakan production line. KTM is working on a 4kW electric scooter under the Husqvarna brand, likely to launch in 2021. Post that, the company will bring Husqvarna E-Pilen, a 4kW/10kW electric motorcycle with a modular battery system, likely to hit showrooms in 2022.
KTM’s growth forecast
The discussion between Bajaj Auto and KTM restarts in less than two months after the Austrian brand increased its forecast for second half of 2020, witnessting sustained higher demands.
At the end of August 2020, Pierer Mobility AG’s management board announced increased sales forecast for H2 2020, amounting to over 850 million euros (previously 800 million euros). Presently, around 64% of KTM’s revenues come from Europe, followed by North America and Mexico with 17%.
Bajaj Auto posts 5% YoY sales growth in November 2020
Meanwhile, Bajaj Auto has registered 5% YoY growth in total sales at 4,22,240 units in November 2020, as compared to 4,03,223 units recorded in November 2019. Sequentially, the total sales of the two-wheeler major declined 17.54% in last month, as compared to October 2020, when it recorded 5,12,038 units.
Bajaj Auto’s total domestic sales dropped 4% to 1,98,933 units, while total exports grew 14% to 2,23,307 units in November 2020, as compared to the same month a year ago. With the November sales result out, Bajaj Auto’s share price increased by 1.21% to Rs 3,211 on 1st December 2020.
The two-wheeler major’s consolidated net profit slumped 21.6% to Rs 1,193.97 crore with 6.1% drop in net sales to Rs 7,041.48 crore in Q2 2020, as compared to Q2 2019.