Bajaj Auto, KTM in race to acquire bike-maker Ducati

PUNE: Bajaj AutoBSE 0.25 %, India's largest two wheeler exporter is likely to partner Europe's iconic motorcycle brand Ducati, encouraged by its existing partnership with KTM, Europe's largest motorcycle maker.

KTM, in which Bajaj Auto has about 48% equity stake is said to be closing in on the Ducati brand, which is on the selling block. The announcement is likely to be made in the next two weeks.

Almost all major brands like India right from Royal Enfield to Hero MotoCorp have been speculated to have shown interest in the Ducati brand. It was only last month Bajaj Auto along with KTM and Harley Davidson entered the race.

Addressing shareholders at the 10th annual general meeting, Rajiv Bajaj, MD of Bajaj Auto hinted, "We are very close to finalising a very promising alliance, it's not certain, that it will happen, but if it happens, it will open up enormous possibilities for the company. That is why we keep our money (cash on books) with us, so, once in a while, when an opportunity comes along, we are ready."

For the record, Bajaj Auto as on date held free cash of about Rs 13,250 crore.

Bajaj without sharing the specifics, explained the logic of adding another brand. He said KTM operates in the world of hard or sporty riding, which is meant for racing, but there are genres in the portfolio which were missing, "There is also a world of easy riding or lazy riding, it is a world of Harley Davidson, Indian motorcycle owned by Polaris, the world of Triumph, this segment so far has been missing from our puzzle. The only missing puzzle is the premium brand in this space. That is the f ..

Since Bajaj Auto acquired a significant stake in KTM, the maker of Duke motorcycle has seen its volumes grow from 65,000 per annum almost a decade back to 2.5 lakh units planned for 2017. And out of that 2.5 lakh, 1 lakh units will be made by Bajaj Auto's factory in Chakan. With plans of locally manufacturing Husqvarna brand, the opportunity almost doubles says the company.

Bajaj says, "This year Harley Davidson has forecasted a sale of 2.4-2.6 lakh units, with a bit of luck, KTM has a chance to overtake Harley Davidson as the number one premium motorcycle brand in the world."

There were some queries from the shareholders if Bajaj with the cash on its book looking at acquiring a further stake in KTM, Bajaj clarified that the company has no intention to increase its stake as the bulk of non-Bajaj stake lies with the promoter Stefan Pierer, who is not keen to sell.

"We have no desire to acquire more, even if we did, we possibly could not as almost all of that 52% is owned by Stefan Pierer himself. And we don't want him to sell, as he runs the company, he does a very good job at that, he is a very good friend of us and we have a wonderful partnership with them."

Ducati sold 55,451 units in 2016 registering a growth of just 1.2% generating a turnover of Euro 731 million. The brand which is known for its sporty bikes has made a conscious attempt to enter the cruiser segment and smaller displacement bikes too are discussed often to build volumes.

The brand which is owned by Volkswagen Group’s premium car brand Audi was put on the block after the diesel gate crises, compelling the Group to rethink on its future investment priorities.

While the volumes are low, but people in the know say when Bajaj Auto came together with KTM, the brand sold merely 65000 units, today it has grown four times, with Husqvarna in the tow, KTM-Husqvarna can potentially do half a million units, and if Ducati talks fructify, it may follow the same path as KTM and Husqvarna brand progression, from premium big bikes for western world, to lower displacement bikes for emerging markets.

In an interview earlier in the year the global sales and marketing director Andrea Buzzoni told ET, it is hard to imagine starting production in India, if the brand is not entering the smaller cc bike. And infact the company was reportedly open to the idea of partnering an Indian company for lower displacement bikes.

"There is a huge potential in terms of volumes in smaller cc bikes, in western countries, the motorcycle riders are getting older and older, Ducati will have to offer a bike for the younger population at the entry level. And in case, Ducati will decide to enter the small displacement engine bike, Indian will be part of the plan," Buzzoni had said.

Buzzoni had stressed that apart from developing traditional products, super bikes like Monster, Hypermotard, Scrambler, but also get into sports cruiser segment.