Is Royal Enfield Really Picking Up Ducati? Let’s Not Jump the Gun

Royal Enfield is seen as a potential buyer for Italian motorcycle maker Ducati. But is such a deal really possible?

It’s Royal Enfield to Ducati’s rescue, or so a news report suggests. According to The Times of India, Royal Enfield has been approached by an investment banker to check whether the Indian motorcycle maker is interested in buying the iconic Italian brand.

Royal Enfield, on its part, has refused comment saying this is just speculation.

A report last week from news agency Reuters said that another Indian company – Hero Motocorp – could be one of the potential buyers as well.

Now, there’s really no smoke without a fire. Well, there’s a fire alright – at Ducati ’s parent company Volkswagen.

Volkswagen Group AG is believed to be trying to raise the money to pay off 16.2 billion euros in fines related to its diesel emissions scandal.

For this, it has apparently thought of putting some of the brands it owns, such as MAN, Scania and Ducati, on the block. Reports say the Ducati brand could be valued at about 1.5 billion euros. That’s Rs 10,500 crore.

Now, why does the news of a potential takeover by Royal Enfield seem far-fetched? For one, the amount needed to buy Ducati is no small sum. Eicher Motors, which owns Royal Enfield, had a turnover of Rs 6,366 crore last year, with net profits of Rs 1,229 crore. Royal Enfield claims it is one of the most profitable motorcycle companies in the world, but even then it would really have to think this one through.

But then again, there’s a strong counter-argument. Let’s for a moment say it raises the capital required. The question then arises: What would Royal Enfield, a maker of touring cruisers and classic motorcycles priced under Rs 2.2 lakh, do with a brand that makes high-end motorcycles priced upwards of Rs 8 lakh in India? It’s not really about volumes, but about entering new segments of the market. After all, Tata Motors took over Jaguar-Land Rover a few years ago. So, there could be some synergy in such a deal for Royal Enfield after all.

Either way, though, it’s a bit early to write off a deal entirely or to say that one is actually afoot.