Bajaj Auto mulls equity stake in Piaggio - Views on News from Equitymaster

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Bajaj Auto mulls equity stake in Piaggio

Oct 29, 1999

According to newspaper reports, Bajaj Auto is eyeing a 10-20% equity stake in Piaggio. This was reported by a leading financial newspaper. 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 August 1999), motorcycles (26% market share) and mopeds (6% market share).

Sources reveal that the company envisages the role of a passive investor in Piaggio, with a nominee on the company's board. Deutsche Morgan Grenfell (DMG) holds equity 80% stake in Piaggio. A 10% stake is held in the company by Umberto Agnelli (a promoter), and the balance 10% stake is held by Texas Pacific group. Whether Bajaj Auto will be able to buy an equity stake in Piaggio will depend on whether Piaggio is interested in having an equity partner in the venture.

A stake in Piaggio will benefit Bajaj Auto in many ways. It will be give the company a firm foothold in European markets. It can be used as a sourcing base for exporting completely knocked down kits (CKDs) to Piaggio to meet demand in Europe. The company will enjoy access to Piaggio's technology in scooters and three-wheelers and combined with its cost efficiency it will make the compan a force to reckon with in the domestic and international markets.

Bajaj's 2QFY2000 results have failed to enthuse analysts, who feel that the going will get tougher for the company over the next two quarters. They have flagged a 'HOLD' on the stock.

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