Bajaj buys 15% of KTM

India's Bajaj Auto Ltd. has acquired 15.23 percent of KTM Power Sports AG.

KTM will provide the know-how in the joint development of water-cooled four-stroke 125cc and 250cc engines, to be used as the basis for products from both companies, and will work to aid Bajaj in entering markets in Europe. Bajaj will take over the sales of KTM products in India and Southeast Asia, opening up the Asian market for the Austrian producer.

KTM Power Sports AG is the parent company of KTM-Sportmotorcycle AG and KTM-Sportcar GmbH. CROSS Industries AG — an investment vehicle run by KTM CEO Stefan Pierer and business partner Rudolf Knunz — is the principal shareholder of KTM Power Sports AG, with more than 50 percent of the voting rights.

Bajaj acquired the KTM stake through its Dutch subsidiary, Bajaj Auto International Holdings B.V. The company says it paid three billion rupees ($76.19 million) for the share, made via the purchase of free-floating stock traded on the Vienna Stock Exchange.

"KTM Power Sports AG appreciates this measure and sees in the cooperation a great chance to strengthen the KTM Group in its sustained growth strategy in a global environment," Pierer said when announcing Bajaj's investment.

"KTM's sharp brand positioning, differentiated designs, and hyper performance have inspired Bajaj to invest in this participation," Bajaj CEO Rajiv Bajaj said. "Bajaj is confident that this cooperation represents a long term win-win situation given the entirely complementary and conflict-free nature of the partners in brand positioning, market presence, product plans and supply chain structure."

KTM supplies 18 sales subsidiaries that distribute product to 1,400 independent KTM dealerships worldwide. The KTM Group earned revenue of Euro 566.1 million ($824.39 million) in its fiscal year ended Aug. 31, 2007. The company's worldwide motorcycle sales totaled 90,306 units, up 7 percent from the prior year.

The Society of Indian Automobile Manufacturers (SIAM) says 7,857,548 powered two-wheelers were sold in India in 2006, up from 7,052,391 units in 2005, 6,209,765 units in 2004 and 5,364,249 units in 2003. SIAM says motorcycles — models mostly sized between 100cc and 200cc — represented 83 percent or 6,553,664 units of the two-wheeler sales total in 2006.

Bajaj Auto Ltd. is India's second-largest producer of motorcycles — smaller than Honda Motorcycle Scooter India (HMSI) but larger than TVS Motor Company Ltd. The company is one of 27 subsidiaries of the Bajaj Group. Bajaj Auto's distribution network covers 50 countries, and the company claims a dominant presence in Sri Lanka, Colombia, Bangladesh, Mexico, Central America, Peru and Egypt.

Bajaj Auto's two-wheeler sales for the first seven months of its fiscal year totaled 1,289,642 units, down 11 percent from 1,457,133 units during the same seven-month period in the previous fiscal year. Exports for the period totaled 363,594 units, up 45 percent from 250,257 units in the prior year.

Bajaj Auto operates four motorcycle production facilities in India. In April, the company opened a 431,000 sq. ft., 600-employee plant capable of producing one million motorcycles annually.

Bajaj Auto entered a technical cooperation with Kawasaki Heavy Industries of Japan in 1986, a partnership that helped Bajaj Auto launch India's first real cruiser bike, the Kawasaki Bajaj Eliminator.

About 65 percent of Bajaj's motorcycle sales are in the 125-250cc motorcycle segment. Bajaj launched its latest model, the XCD 125 DTS-Si, in September. The company sold almost 63,000 units of the model in six weeks.

Various media outlets, citing unnamed sources, report Bajaj also is talking with Triumph Motorcycles about a distribution and technical collaboration.

SIAM IndiaMarketShare — Supplied by the Society of Indian Automobile Manufacturers

About Bajaj
The Bajaj Group is among the 10 largest companies in India, and claims that its Bajaj Auto unit is ranked as the world's fourth largest two- and three-wheeler manufacturer by production figures. Nevertheless, the Bajaj Group's footprint stretches over a wide range of industries, spanning automobiles and motorcycles, home appliances, lighting, iron and steel, insurance, travel and finance.

Bajaj was founded by Jamnalal Bajaj — a close confidant and disciple of Mahatma Gandhi — in 1926, at the height of India's movement for independence from the British.

Jamnalal's son, Kamalnayan Bajaj, took over the reins of business in 1942 at the age of 27. Kamalnayan Bajaj not only consolidated the group, but also diversified into various manufacturing activities.

The Bajaj Group's chairman and managing director, Rahul Bajaj, took charge of the business in 1965. Under his leadership, Bajaj Auto revenue climbed from Rs.72 million to Rs.46.16 billion ($936 million).