NEW DELHI: After helping to secure funding to clear KTM’s dues, Bajaj Auto has shifted focus to cost cutting and tighter governance at the Austrian premium motorcycle maker, its largest acquisition, a top executive told Mint.
The cost-reduction initiatives include a review of sourcing strategies and identification of synergies, while Bajaj steps up its role on KTM’s supervisory board, Bajaj Auto executive director Rakesh Sharma said.
“Our support to them started with the first phase, where we had to get the liquidity organized. The second was putting in the top management. The third phase is now the execution of the turnaround plan, one important constituent of which is reduction in costs, and capturing of synergies, which has got several work streams,” Sharma said in an interview. “We believe that the team has to be run as an independent company.”
In the current structure, Bajaj Auto is closely involved with KTM through the supervisory board, which oversees the execution of strategy and governance practices, while the management board runs independently and is responsible for adhering to best governance practices.
“It’s a very premier European and prestigious sports bike manufacturer with a very deep positioning, and very niche strong positioning, and we wanted to retain that and run independently,” Sharma added.
Bajaj’s efforts to revive the premium European motorcycle brand coincides with TVS Motor Company’s efforts to kickstart revival of the , which will turn up its product offensive in the current financial year.
For Bajaj Auto, the turnaround of the Austrian motorcycle maker is crucial given that it is its largest acquisition and plays a major role in boosting profit. Although it constitutes about 5% of the company’s exports, it plays an oversized role in boosting margins – as noted by the company’s management in the past.
“Had it not been for the short-term setback on KTM exports, our revenue growth would have been nearing double digits and Ebitda growth even much higher in the teens, given the margin accretive business that it is,” Dinesh Thapar, chief financial officer at Bajaj Auto, said during the post-Q3 results analyst call on 28 January last year.
Increased shareholding
Pune-based Bajaj began its partnership with in 2007, when it picked up a 14.5% stake for ₹300 crore. The stake holding has now increased to 75%.
. This came after KTM filed for bankruptcy in November 2024 after various factors, including declining sales and rising pressure on profit due to increasing costs.
Bajaj infused €600 million into the company through a €450 million loan and €150 million in convertible bonds, while €200 million had been invested since FY2024. KTM secured a 550-million-euro loan from a consortium of banks including JPMorgan, HSBC, DBS Bank and MUFG Bank in February to refinance debt taken from Bajaj Auto.
After the acquisition was completed in November, Bajaj has been working with the company’s team to script a turnaround in the fortunes of the premium motorcycle brand.
“It is a very substantial opportunity to improve the profitability of KTM,” Sharma said.
While Bajaj has not said when the turnaround efforts will show results, it has indicated to analysts that meaningful gains are expected towards the second half of this year. Analysts noted the acquisition can bring near-term volatility but implementing the plan will help in the long term.
“KTM represents medium-term optionality. While near-term volatility remains, Bajaj now controls strategic levers around cost rationalization and operational improvement. Over time, this can unlock meaningful value, particularly as full consolidation comes into play,” Venugopal Garre and Param Shah of Bernstein wrote in a 1 February note.
While Sharma did not specify the details of the cost reduction and synergy plans, Mint reported on 24 December that the company could look to exit bicycles, cars and other smaller brands to focus on KTM and Husqvarna motorcycles.