Bajaj Auto mulls bike JV with Kawasaki - Views on News from Equitymaster

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Bajaj Auto mulls bike JV with Kawasaki

Jan 12, 2000

India's leading two-wheeler manufacturer, Bajaj Auto, is planning to hive off its motorcycle plant into a separate venture with Kawasaki. Bajaj Auto is India's largest manufacturer of two/three-wheelers with a presence in all three segments of the two-wheeler market - scooters (64% market share in September 1999), motorcycles (26% market share) and mopeds (6% market share).

The company is now mulling a spin off of its motorcycle operations into a joint venture with Kawasaki, its lead technical partner. The latter will hold only 20% stake in the venture.

Bajaj Auto vice-president, products, revealed that the motorcycle plant at Waluj would be transferred to this venture. Bajaj Auto plans to invest Rs 2.3 bn over the next four years in the motorcycle plant. A major roadblock towards the hive-off is the state government's refusal to extend sales tax benefits to the new venture. Bajaj Auto gets benefits ranging from Rs 1,000-2,000 per motorcycle.

The new venture, if it goes through, will unlock value of Bajaj Auto's Indo-Japanese motorcycle potential. However, the government's refusal to extend tax benefits to the venture may prove to be a major damper.

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