Bajaj Auto, the country?s second-largest bike maker, is in preliminary talks to get a controlling stake of 55-56% in Austrian sports bike company KTM within this fiscal, sources in the know told FE. With joint product development on the anvil, the move will give Bajaj a larger global reach, especially in the higher margin premium bike markets of Europe.

Bajaj, which has 47% stake in KTM, will have to buy 956,529 shares for at least 51 million euros (R360 crore) for the additional 8-9% stake, according to the current share price of KTM at the Vienna stock exchange (53.99 euros/share on Wednesday).

?Bajaj is in talks to increase its stake in KTM to 55-56%. This follows the plans to expand manufacturing of more premium KTM models at Bajaj?s facilities, while also doing joint development work,? a source said.

A KTM spokesperson declined to comment over the matter, while Bajaj Auto did not respond to emailed queries.

The development follows recently announced plans by Stefan Pierer, promoter and CEO of KTM, to add manufacturing of several new KTM bike models at Bajaj?s plant in Chakan, Maharashtra, by 2014. KTM will also launch the Swedish-Italian Husqvarna brand in India, which it acquired from Germany?s BMW Motorrad in February this year.

Bajaj is likely to make the fresh stake purchase through Bajaj Auto International Holdings, a Netherlands-based wholly-owned subsidiary. The Pune-based company had started picking up equity in KTM in 2007 by buying a 14.5% stake for about R300 crore and has since been picking up shares from the open market. At present, Bajaj?s around 47% stake makes it the second-largest shareholder after promoters, Stefan Pierer and Rudolf Knuenz.

?It is logical for Bajaj to take its stake in KTM to majority when they have already gone up to 47%. It was just a matter of time. Bajaj has always focussed on higher margins instead of just volumes, so this integration would make perfect sense. The question is if Bajaj will have to buy the shares from the promoter now,? an analyst said.

Formed at a time when Europe was in the midst of an economic slowdown and funds were not easily available, the Bajaj tie-up turned out to be a saviour for KTM, ultimately helping it emerge as the biggest European bike maker in 2012. KTM sold 107,142 units in the year, overtaking BMW Motorrad by a slim margin ? incidentally BMW had a record year as well.

At present, Bajaj locally manufactures the Duke 125, 200 and 390 models for KTM, with a new range of faired sports bikes ? RC 125, RC 200 and RC 390 ? expected to be added for local production by next year. A major part of the local manufacturing will be meant for exports to markets like Europe, Brazil and other South East Asian countries. Bajaj shares at the BSE closed up 2.40% at R1,804.15 on Tuesday.

Bajaj-ktm tie-up

* Bajaj started picking up stake in KTM in 2007

* KTM aims to produce half of global output in India by 2015

* KTM-Bajaj plans to launch Husqvarna in India

* KTM-Bajaj bought Husqvarna from BMW earlier this year

* The tie-up will counter the TVS-BMW partnership in India