KTM is one of the most well-known motorcycle brands in India. The Austrian brand has been facing financial issues for some time and is under a lot of debt. Bajaj has previously helped KTM, and the Indian brand has come to the rescue again. However, this time, Bajaj has a few conditions to ensure that this issue does not occur again. Let’s dive into the details of the KTM Bajaj concern and what the outcome of it all is!
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Bajaj Takes Control Over KTM?
KTM is currently in grave trouble financially, and Bajaj is trying to help the brand out. The Austrian brand has to pay Rs 5330 crore to its creditors by May 23. If KTM are unable to pay the amount, it may move towards solvency. However, Bajaj has planned to help KTM out in this hardship. The Indian brand has taken up a few unsecured loans from JP Morgan Chase Co, DBS Bank Ltd, and Citigroup Inc. However, Bajaj Auto claims that it will try to acquire a majority stake in KTM. This will allow Bajaj to have more control over the operations and strategies that will be implemented during the restructuring process.
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Bajaj has shared the structure of its partnership with KTM. Bajaj owns a company called the Bajaj Auto International Holdings BV (BAIHBV). The BAIHBV holds a 49.9% stake in Pierer Bajaj AG, while the rest of the stakes are owned by Pierer Industrie AG, owned by Stefan Pierer, a businessman. Pierer Bajaj AG owns a 75% stake in Pierer Mobility AG, which is the parent company of KTM. So, Bajaj indirectly owns 37.5% of KTM.
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What Else?
Bajaj and its Netherlands-owned company have arranged Rs 7700 crore to help KTM out of this hardship. These funds will help KTM pay off its debts and restart its operations. This huge sum of money will be utilised in different ways. About Rs 1900 crore has already been given through convertible bonds and loans. Bajaj Auto International Holdings BV (BAIHBV) will be offering a secured loan to KTM worth Rs 4300 crore. And the rest of the amount (Rs 1500 crore) will be given through convertible bonds issued by Pierer Bajaj AG. Bajaj’s Dutch company (BAIHBV) will buy these bonds. PBAG will then lend this money to PMAG, and PMAG will pass it on to KTM AG to help with its operations.
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What’s Next?
KTM will seek approval from the official court of Austria to restructure the debt situation. Meanwhile, Bajaj will also be applying for approval from the Austrian government and regulatory authorities regarding increasing its stake holdings. While this is in process, the current ownership structure remains unchanged. Once the process is completed, KTM will get back to work and start the production of motorcycles and their parts.
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