The KTM Conundrum For Bajaj Auto

Coincidence much?

“The Executive Board is currently working on securing financing of KTM AG, in particular on bridge financing in the three-digit million range,” Pierer Mobility said on its website.

“To this end, discussions are ongoing, both with core shareholder Pierer Bajaj AG and with existing financial creditors. The aim is to agree a standstill agreement with the financial creditors involved for the duration of these discussions as the basis for the financial restructuring.”

Pierer Bajaj AG is an equal joint venture of Bajaj Auto International Holdings BV and Pierer Industrie AG. It holds 74.9% in Pierer Mobility AG, which owns motorcycle brands like KTM, GasGas, Husqvarna and CFMoto in China.

Pierer Mobility went on to file for bankruptcy on Nov. 29, 2024. The debt restructuring proceedings end on Feb. 25, 2025.

But what went wrong exactly?

Things have gone south for KTM in a spectacular fashion. Austria-listed Pierer Mobility recorded its best ever annual performance in 2023—€2.26 billion in revenue, an Ebitda of €323.5 million and total sales of more than 372,511 units globally—at 7% operating margin.

In 2024, revenue was down 29% year-on-year at €1.9 billion, Ebitda turned negative €300 million, and dispatches to dealerships fell 21% to 292,497 units.

The trouble lies in the debt that the company has accumulated, and inflated inventory. 

Essentially, the company bit off more than it could chew—the acquisition of MV Agusta, MotoGP dreams and electric aspirations—while handing out a record dividend in 2023. In 2024, motorcycle sales slumped in Europe. That left thousands of motorcycles unsold.

Coincidence much?

“The Executive Board is currently working on securing financing of KTM AG, in particular on bridge financing in the three-digit million range,” Pierer Mobility said on its website.

“To this end, discussions are ongoing, both with core shareholder Pierer Bajaj AG and with existing financial creditors. The aim is to agree a standstill agreement with the financial creditors involved for the duration of these discussions as the basis for the financial restructuring.”

Pierer Bajaj AG is an equal joint venture of Bajaj Auto International Holdings BV and Pierer Industrie AG. It holds 74.9% in Pierer Mobility AG, which owns motorcycle brands like KTM, GasGas, Husqvarna and CFMoto in China.

Pierer Mobility went on to file for bankruptcy on Nov. 29, 2024. The debt restructuring proceedings end on Feb. 25, 2025.

But what went wrong exactly?

Things have gone south for KTM in a spectacular fashion. Austria-listed Pierer Mobility recorded its best ever annual performance in 2023—€2.26 billion in revenue, an Ebitda of €323.5 million and total sales of more than 372,511 units globally—at 7% operating margin.

In 2024, revenue was down 29% year-on-year at €1.9 billion, Ebitda turned negative €300 million, and dispatches to dealerships fell 21% to 292,497 units.

The trouble lies in the debt that the company has accumulated, and inflated inventory. 

Essentially, the company bit off more than it could chew—the acquisition of MV Agusta, MotoGP dreams and electric aspirations—while handing out a record dividend in 2023. In 2024, motorcycle sales slumped in Europe. That left thousands of motorcycles unsold.

KTM has come up with a debt restructuring plan that’s the bare minimum. Creditors have pushed back against it and proposed their own plans.

The group of Schuldschein creditors, led by US hedge fund Whitebox Advisors, is looking to offer lenders more than the 30% recovery envisaged under the company’s own proposal, according to a lender presentation seen by Bloomberg News. The threshold is the legal minimum under Austrian insolvency rules for KTM’s self-administration proceedings.

Under the lenders’ alternative plan, the existing equity in the company would be written down to zero. All creditors would be offered the option to provide new financing, although the creditor group is prepared to backstop the required funding.

Providers of the new financing would receive 30% of the equity in the business, with 70% going to reinstated creditors, the document stated. Existing shareholders would then have the option to buy out as much as 70% of the equity from the reinstated creditors.

For all intents and purposes, Bajaj Auto is in wait-and-watch mode. At least that’s what the management told us previously and in its latest earnings call.

“I think it's a bit premature for us to comment on this because it’s treated in the nature of an M&A transaction. There’s a process which is being run at the moment,” Bajaj Auto’s Chief Financial Officer Dinesh Thapar said, when asked if the company is considering a cash infusion into KTM. “And since Pierer Mobility is a listed company, I don't think it'd be right for us to make any comments.”

Sure, the Pulsar maker has the wherewithal (read: cash reserves of more than Rs 25,000 crore or $3 billion) to take over Pierer Mobility that may go on sale for a steal, but there’s nothing beyond bragging rights in owning an European brand. But again, Tata Motors Ltd. did so with Jaguar Land Rover, and the outcome is for everyone to see.