Royal Enfield may acquire Ducati, say reports but co denies move

Ducati is expected to fetch around Rs 10,500 crore from the deal

Royal Enfield is planning to buy Italian motorcycle brand Ducati, owned by German auto conglomerate Volkswagen, according to reports. However, the company has denied any such move, which may call for huge investment.

It may be noted that Reuters had earlier reported that Hero Motor Corp is looking at buying Ducati. However, according to a Times of India report, Royal Enfield has reportedly approached to acquire Ducati.

Ducati is expected to fetch a value of up to 1.5 billion euros (around Rs 10,500 crore) from the deal, while Royal Enfield had a reserve at the end of the financial year 2016-17 of about Rs 3,500 crore, as per the TOI report.

In response to an email, Royal Enfield said they will not be able to comment on speculation. An email sent to Ducati remains unanswered.

The reports surface at a time when Royal Enfield is aggressively looking at expanding its presence outside India especially in North America and Latin America. It has already made inroads in parts of Europe and even Australia.

Royal Enfield opened 12 exclusive stores this year in nodal cities like Sao Paulo, Barcelona, Valencia, Melbourne, London, Manila and Milwaukee. Royal Enfield opened its second direct distribution subsidiary outside India in Brazil, the fourth biggest two-wheeler market in the world.

In 2016, Ducati sold over 55,000 motorcycles worldwide. Royal Enfield sold more than 660,000 units globally in 2016-17, and intends to ramp-up its production capacity to up to 900,000 motorcycles by end of 2018, to meet its increasingly rising global demands.

While Royal Enfield makes large volumes of small and lower-middle motorcycles with a modest price, Ducati does the eaxct opposite.

The Italian company boasts of bikes with engine capacity between 800cc and 1,200cc. Royal Enfield, however, focusses on the 350-500cc segment.

The company makes expensive products with high and sophisticated technology motorcycles. The only benefit could be market access, which Ducati can bring,  analysts say.

“Royal Enfield has been investing in building capacity and capabilities. We will be investing Rs 800 crore in FY 2017-18 towards our upcoming manufacturing facility at Vallam Vadagal near Chennai, product development, two technical centres in UK & India and towards market expansion. The plant is expected to be operational by August 2017," Siddhartha Lal, CEO and MD of Eicher Motors said. 

With the company's third plant, the combined capacity of Royal Enfield is expected to be 8,25,000 motorcycles in 2017-18. 

“Our immediate business outlook remains strong and Royal Enfield continues to grow consistently, competitively and profitably towards leading and expanding the mid-sized motorcycle segment globally”  Lal added.

Eicher Motors' stocks went up by 3.01 per cent on Monday afternoon to Rs 26,614.95 a share in BSE.