KTM turns a cash cow for Bajaj Auto: Earns dividend of Rs 3.65 bn in 8 yrs

 

Bajaj Auto

During 2017-18, Bajaj Auto manufactured 98,132 units of KTM branded bikes at its Chakan (Maharashtra) plant

 

  Japanese auto major Suzuki earns several billions of rupees every year from its prized India subsidiary, Maruti Suzuki, where it owns 56 per cent stake. That is a story of cash going out of the country. But we have a successful example of an Indian auto company driving home billions of rupees every year from its investment in a foreign firm. 

 

Pune-headquartered Bajaj Auto has over the last eight years cumulatively earned Rs 13.11 billion in profit share and Rs 3.65 billion in dividends from its investments in the Austrian bike maker KTM.
 

The Vienna Stock Exchange-listed KTM has been on a bull run in recent years and is now valued at $1.483 billion. Accordingly, Bajaj’s near-48 per cent stake translates into a value of $711 million or about Rs 49 billion. This is more than four times its investment of Rs 12.19 billion over the years. When Bajaj had first picked up a 14.5 per cent stake in KTM in 2007, the Austrian firm was making losses. It made losses for another couple of years, but then the tide turned. Bajaj, which subsequently raised its stake to 48 per cent, started getting its corresponding profit share from 2010. The company started paying dividend too from 2012 onward. In the 2017 calendar year, Bajaj reported a record Rs 2.88 billion from KTM in the form of profit share and earned dividend of Rs 940 million (based on the exchange rate about Rs 76 against the euro when the amount was finalised). The amount of Rs 2.88 billion accounts for 7 per cent of Bajaj Auto’s consolidated profit of Rs 42 billion during 2017-18. The profit share is accounted by Bajaj in its consolidated results. 

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Between 2010 and 2017, Bajaj has gained over Rs 13 billion by means of profit alone and has now more than recovered the Rs 12.19 billion it invested in purchasing the stake.

KTM turns a cash cow for Bajaj Auto: Earns dividend of Rs 3.65 bn in 8 yrs

 

 

The company did not respond to queries on the gains from KTM investment.

“The pattern between Suzuki’s earning from Maruti Suzuki and Bajaj’s earning from KTM is similar; one is an outflow for the country, the other an inflow. Both Maruti Suzuki and KTM have done well year after year in volumes as well as profitability,” said Ashim Sharma, partner and group head at Nomura Research Institute Consulting.

The scale and size of Suzuki’s earning is obviously bigger and it earned a record Rs 55.75 billion in royalty and dividend income from Maruti during 2017-18. Again, Bajaj’s earning from KTM has seen a consistent rise year after year, identical to Suzuki’s earning growth in the last several years.  

The calendar year 2017 has been another record year for KTM, with the highest volume sales and the highest turnover in the history of the company. It sold 238,408 motorcycles, growing 17 per cent year-on-year and clocked a turnover of €1.33 billion (Rs 101 billion approximately), a growth of 17 per cent. Its profit grew by 10 per cent to €78.9 million (Rs 6 billion).

Over the years, India has become a hub for production of KTM bikes. During 2017-18, Bajaj Auto manufactured 98,132 units of KTM branded bikes at its Chakan (Maharashtra) plant. Of these, 46,321 units were sold in the domestic market and 53,211 units were exported worldwide.