Royal Enfield plans capex of Rs 700 crore, says Tamil Nadu plant ready

Eicher Motors Ltd. Plans a capex of Rs 700 crore in FY 20 on buttressing its Royal Enfield motorbike brand, by expanding a factory and improving a technology centre in two place in Tamil Nadu and launching new products. 

The company reported a 13 per cent decline in sales in the March quarter at 1,97,567 units. Siddhartha Lal, Eicher Motors managing director, said the industry is down and the company, after almost a decade of growth, will use the time to look at things afresh and reinvent itself. 

Royal Enfield’s reported Rs 545 crore as Profit After Tax in the March quarter, compared to Rs 462 crore in the same period last year—an 18 per cent growth. Total revenue from operations stood at Rs 2,500 crore, down 1 per cent as compared to Rs 2,528 crore in the same period last year. EBITDA was Rs. 685 crores, down by 14% compared to Rs 797 crores

The company has almost building a plant in Vallam Vadagal near Chennai. Production will commence in the second half of the current financial year. The Phase II of the plant will add 25,000 motorcycles a month. The company's total two-wheeler capacity is around 90,000 units a month, at present and this would go up with the 650 Twins expected to see 5,000 units production by July.

The Chennai Technical Centre is near completion where part of the product development team has already moved in. 

Royal Enfield sold close to 822,724 motorcycles in the year, registering a marginal growth from 820,121 motorcycles sold last year. 

Commenting on the slowdown, Lal said, "We are taking the opportunity to improve our service, gaps in distribution etc. We are doing a bit of clean up also". The new motorcycles like 650 Twins are also working well and it will pursue those areas. Besides, it is also looking at expanding its presence in the geographies where it is already present in with a deeper penetration.

While its market share has grown to six per cent now, in bigger cities it has a share of around 15 per cent and the company will be looking at growing in these cities with new products. 

The company will come out with the BS VI products and it will have a higher price, he added.