Bajaj Auto Takes A Controlling Stake In KTM, Raises Rs 7,688 Crore!

Team Orange lives on! Bajaj Auto has officially announced its plans to take over a majority stake in KTM. This news comes just a day before the May 23 deadline for KTM to pay off 548 million Euros to its creditors. Through its international subsidiary, Bajaj is ensuring that KTM's operations continue to run smoothly.

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Bajaj Auto Takes A Controlling Share In KTM; Details

While we have all known that Bajaj Auto has owned a 49.9% stake in KTM, the details are a bit more complicated than that, and so we must try and understand the existing structure of the Bajaj-KTM business.

• Bajaj Auto has a wholly owned subsidiary in Netherlands called Bajaj Auto International Holdings BV (BAIHBV).
  
• BAIHBV holds a 49.9% stake in its associate, i.e., Pierer Bajaj AG (PBAG) in Austria. The remaining controlling stake is held by Pierer Industrie AG, owned by entrepreneur Stefan Pierer.
  
• PBAG holds 75% stake in its listed subsidiary, Pierer Mobility AG (PMAG).
  
• PMAG is the holding company of KTM AG (KTM Business), the leading manufacturer of offroad and street motorcycles marketed under the marquee brands of KTM, Husqvarna and GASGAS.
  
• Bajaj effectively holds 37.5% in PMAG/KTM, through the above chain, prior to this transaction.

The Indian bikemaker has now confirmed raising 800 million Euros, which will be used to pay off creditors and revive its operations. Of the total 800 million, 200 million Euros (about Rs 1,922 crore) have already been infused into the company, and the remaining 600 million Euros (about Rs 5,766 crore) are being done. With this, Bajaj Auto confirms its intentions to become a sole majority owner in KTM, but its exact share remains unspecified.

Through BAIHBV, Bajaj has also stepped in to take care of a Loan And Shared Pledges issue with Dabepo Holding GmbH. The firm had loaned a Pierer group company a total amount of 80 million Euros, and this is now being paid off by Bajaj, as failure to do so would have heavily impacted KTM's restructuring operations.

A few days ago, we reported that Bajaj Auto's internatioal subsidy had agreed to an unsecured loan of Rs 5,431 crore, or 566 million Euros with financial institutions such as JP Morgan Chase & Co, DBS Bank Ltd., and Citigroup Global Markets Asia.

Bajaj's next steps are now to secure the binding orders from the Austrian Court to end the self-adminisration process and settle all remaining debts. Additionally, after nearly two months of stoppage, the production of bikes and merchandise will also resume. Furthermore, changes in the governance framework are also expected to take place, and Bajaj now has to put togeher a new programme aimed at a turnaround for the Austrian bikemaker.

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