Bajaj Auto makes decisive move to take charge of rebuilding KTM

In a significant move underscoring its commitment to its long-term partnership with KTM and recognising the opportunity in the exciting world of premium/sports motorcycles given the brand's preeminent position, Bajaj Auto Limited, through its wholly owned subsidiary Bajaj Auto International Holdings BV (BAIHBV), intends to take control of the KTM business that is headquartered in Austria, subject to necessary regulatory approvals.

With this action and post requisite approvals coming through, Bajaj will shift gears from hitherto being a dormant minority investor to a majority owner in the global KTM company, whilst it continues to accelerate the thriving KTM business that is run out of India under the joint development program, where it develops, makes and sells in India as well as exports to 80 countries across the KTM network.

Simultaneously, BAIHBV has arranged a debt funding package of €800 million to enable the continuity of the KTM business by paying off the approved quota to the creditors in furtherance of KTM's debt restructuring with the approval of the competent Court in Austria and infusing funds into the company to revive its operations and working capital cycle. Of this total €800 million debt package, €200 million has already been infused into the company so far and the balance €600 million is being done now.

This twin move of taking ownership (subject to approvals) and paring down debt by providing liquidity at a crucial stage, positions Bajaj Auto as a driving force in shaping the future of one of world's most admired highperformance motorcycle companies.

Existing Structure

- Bajaj Auto Limited 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 in PBAG 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.

KTM's Restructuring Process

In November 2024, KTM AG and its subsidiaries, KTM Components GmbH and KTM F&E GmbH entered into a selfadministrative restructuring process, prompted by acute liquidity challenges that could not service the spiralling debt and working capital constraints that stifled routine business operations.

Key milestones in the process include:

- On November 28, 2024, KTM AG applies for the initiation of judicial restructuring proceedings with selfadministration over the assets of KTM AG and its two subsidiaries with an aim to agree a reorganization plan with the creditors within 90 days.

- On February 25, 2025, the creditors accepted the restructuring plan submitted by KTM AG. This plan provided for creditors to receive a cash quota of 30% of their claims in the form of a one-time payment to be deposited with the restructuring Administrator by May 23, 2025.

- In the event that the liquidity is not made available to and presented before the Administrator/Court latest by May 23, 2025, as per the law in Austria, the three entities are taken out of self-administration and moved irrevocably into an insolvency process.

- On sighting of the requisite liquidity in the escrow accounts and confirmation by the Administrator, the Court will confirm the restructuring plan by mid-June 2025 after offering a permissible objection period, post which the quota payment will be released to the creditors and the restructuring proceedings of KTM AG and its subsidiaries will be concluded with legally binding orders.

The Current Transaction

To address the KTM business' acute liquidity challenges and enable a structured revival of the brand that has a strong heritage and acclaimed position worldwide, Bajaj Auto outlines a set of strategic interventions.

The proposed equity acquisition by Bajaj of a controlling stake in PBAG and therefore, in PMAG/KTM (upon receipt of regulatory approvals) after exploring various other alternatives until recently, is a critical step in realigning governance to restore confidence among stakeholders, setting a path for operational restructuring of the business and creating flexibility for potential partnerships.

The debt package totalling €800 million seeks to address liquidity needs to meet creditor obligations pursuant to the approved restructuring plan and fund restart of operations.

Shares of Bajaj Auto Limited was last trading in BSE at Rs. 8733.75 as compared to the previous close of Rs. 8691.70. The total number of shares traded during the day was 10388 in over 3707 trades.

The stock hit an intraday high of Rs. 8781.10 and intraday low of 8515.15. The net turnover during the day was Rs. 89578138.00.

Source : Equity Bulls

Keywords

BajajAuto INE917I01010 Acquisition KTM