Bajaj Auto , the Indian two-wheeler giant, has made a significant move in the global motorcycle market by investing ₹7,200 crore in KTM, the renowned Austrian motorcycle manufacturer. This strategic investment has enabled KTM to resume full production at its Mattighofen plant in Austria, marking a turnaround for the company after recent financial challenges.

Production Resumes After Brief Suspension

KTM's Mattighofen plant, which produced over 210,000 units in 2023, had suspended operations in late April due to component shortages and liquidity problems. The resumption of full production is a positive sign for the company's recovery and future prospects.

Bajaj Auto's Strategic Investment

The ₹7,200 crore funding infusion announced by Bajaj Auto on May 22 includes a debt package aimed at ensuring KTM's business continuity. This investment was made through Bajaj Auto International Holdings BV (BAIHBV), a wholly-owned subsidiary of Bajaj Auto. The move is part of Bajaj's broader strategy to become the majority shareholder in KTM.

KTM's Recent Challenges

KTM had faced significant hurdles in recent times:

• The company entered self-administration following a financial crisis and declining global sales.
• An Austrian court concluded the company's restructuring process.

Production Plans and Partnerships

With the new investment, KTM is now gearing up to:

• Restart production of motorcycles, spare parts, accessories, and apparel across all sites.
• Continue its manufacturing partnership with CFMoto and Zeeho for electric two-wheelers.

However, it's worth noting that KTM has ended its distribution agreement for CFMoto and Zeeho electric two-wheelers in several European markets, effective June 1.

Impact on European Production

The revival of the Mattighofen plant is crucial for KTM's European production capabilities:

This resumption of full production is expected to significantly boost KTM's manufacturing output and market presence.

The substantial investment by Bajaj Auto not only demonstrates its commitment to KTM but also strengthens its position in the global motorcycle market. As KTM works to overcome its recent challenges, the partnership with Bajaj Auto could play a pivotal role in shaping the future of both companies in the competitive two-wheeler industry.

Bajaj Auto Limited , one of India's leading two-wheeler manufacturers, has announced a significant fundraising initiative through its subsidiary, Bajaj Auto Credit Limited. The move comes as part of a broader strategy involving the restructuring of KTM AG, the Austrian motorcycle manufacturer in which Bajaj Auto holds a substantial stake.

Fundraising Details

The Board of Directors of Bajaj Auto Credit Limited, a wholly-owned subsidiary of Bajaj Auto Limited, has approved a comprehensive fundraising plan totaling ₹8,750.00 crore. The plan includes:

1. Fresh issuance of Non-Convertible Debentures (NCDs) up to ₹5,000.00 crore
2. Enhanced limit for issuance of Commercial Papers up to ₹3,000.00 crore
3. Subordinated Debt (Tier-2) issuance limit up to ₹750.00 crore

This strategic financial move aims to strengthen the company's capital structure and provide flexibility for future growth initiatives.

KTM Restructuring and Bajaj Auto's Involvement

Simultaneously, Bajaj Auto is deeply involved in the restructuring of KTM AG, its European partner. Through its wholly-owned subsidiary, Bajaj Auto International Holdings BV (BAIH BV), the company has undertaken several significant steps:

1. Debt Funding: BAIH BV has provided a substantial debt package of €800 million (approximately ₹7,760.00 crore) to address KTM's liquidity challenges and fund its restructuring process.

2. Equity Acquisition: BAIH BV has entered into agreements to potentially acquire a controlling stake in Pierer Bajaj AG (PBAG), which would increase Bajaj Auto's effective ownership in KTM from about 37.4% to 75%.

3. Restructuring Support: The funds provided by Bajaj Auto have been crucial in meeting KTM's creditor obligations and maintaining the continuity of its operations during the restructuring process.

Strategic Rationale

Bajaj Auto's decision to support KTM's restructuring is driven by several strategic considerations:

• Protecting Existing Investment: The move safeguards Bajaj Auto's current investment in KTM, which had a carrying value of ₹4,820.00 crore as of March 31, 2024.
• Expanding Global Presence: By potentially gaining control of KTM, Bajaj Auto aims to enhance its access to developed markets and advanced motorcycle technologies.
• Leveraging Synergies: The company sees opportunities to extract synergies across R&D, manufacturing, and sourcing between Bajaj Auto and KTM.
• Continuation of India Business: The restructuring ensures the continuity of the highly profitable KTM business in India, which contributed significantly to Bajaj Auto's EBITDA.

Regulatory Compliance and Shareholder Approval

While the exigent circumstances of KTM's restructuring necessitated swift action, Bajaj Auto is now seeking post-facto approval from its shareholders for these material related party transactions. The company has emphasized its commitment to compliance and corporate governance, having obtained necessary corporate approvals and made full disclosures at every stage.

Looking Ahead

As Bajaj Auto awaits regulatory approvals for the change in control of KTM, the company is poised to play a more significant role in KTM's future. This includes revamping governance, implementing a turnaround strategy, and exploring synergistic opportunities between the two companies.

The fundraising initiative by Bajaj Auto Credit Limited, coupled with the strategic moves in KTM's restructuring, underscores Bajaj Auto's commitment to long-term growth and its ambition to strengthen its position in the global motorcycle market.

As these developments unfold, stakeholders will be keenly watching how Bajaj Auto leverages this enhanced relationship with KTM to drive innovation, expand its global footprint, and create value for its shareholders.