New Delhi: The co-owner of KTM AG motorcycle, Bajaj Auto Ltd, has managed to secure Rs 5,250 crore for a one-year loan with just days remaining to the deadline to fund an insolvency plan at the troubled Austrian company. The European unit of Bajaj Auto Ltd accepted to unsecured loan with DBS Bank Ltd., JP Morgan Chase and Co. and Citigroup Inc., according to a regulatory filing to the BSE.

The filing, which omits KTM’s name, states that the money will be utilised for Bajaj Auto’s investments. KTM’s creditors in February agreed to a 70% haircut as part of the restructuring agreement. The corporation has until May 23 to pay out a 30% quota to creditors and deposit the loaned amount with its insolvency administrator.

Bajaj and Austrian entrepreneur Stefna Pierer currently co-own Swiss-listed Pierer Mobility, which is KTM’s parent company. Citi has advised the company to secure new funds, which include additional cash that will be required to resume production.

What led to KTM’s financial troubles?

Last year, KTM had filed for insolvency, having struggled to navigate the volatile demand for its motorbikes during the Covid-19 which led to excessive inventories. Post the global shutdown, KTM had expected a huge surge in demand, which never came to be.

Rising labour and energy expenses have put thousands of jobs at risk, making the corporation one of the hardest impacted in Austria’s manufacturing sector’s financial troubles. At present, Bajaj’s Chakan facility in Pune produces KTM’s small and mid-capacity motorcycles, which are then shipped all over the world. KTM still has to contend with a market that is moving toward EVs and becoming more cost-conscious.

To finance the 548 million euro cash requirement and boost production, KTM requires 800 million euros in total. It remains unknown whether Bajaj Auto will take up a majority stake in KTM in lieu of the fund injection or bring out an outside investor to buy out the share Pierre has in the company.