LML's Kanpur unit to restart next month

LML, the Kanpur-based two-wheeler company, proposes to convert itself into an export-oriented unit and go out of the domestic tariff area (DTA).

Addressing the 31st annual general meeting of the company, Deepak Singhania, chairman and managing director of the company, said the company had received substantial orders for the export of scooters and intended to recommence operations by next month.

Further, he said the company was also in discussion with certain organisations for financial/strategic partnership so that a comprehensive revival package was formulated before the BIFR.

He blamed the failure of the previous financial restructuring. Due to the inability of the management to procure working capital of Rs 80 crore from banks, the company could not go ahead on its plans.

This led to a cascading effect and the company, which had planned a slew of launches, could only launch the CRD 100, which was widely acclaimed, though. But the downsizing could not be done, nor the outstandings to suppliers be reduced. The strike in the company was "illegal", he said.

Singhania told Business Standard: "We are the only one manufacturing two-stroke scooters in the world. Neither Bajaj nor Piaggio is making that anymore. There is worldwide demand for these scooters. Besides we will make three-wheelers, again only for export. We will move out of domestic marketing."

However, a perusal of the annual report shows a daunting task is ahead of the LML management.

It has shown a loss of Rs 168.89 crore for the 18-month period from March 2005 to September 30. In the earlier period, the company sold 190,561 two-wheelers and in the period March 2005 to September 2006 it sold 111,083 two-wheelers.

However, its exports were at 34,879 units as against 19,969 units in the previous financial year. Vehicles were exported to 36 countries, including the US and EU countries.

The company has become a sick industrial company due to the erosion of its net worth, and its current liabilities have also exceeded the net worth by about Rs 139.96 crore.

The auditors have given details of the irregularity in the depositing statutory dues. Till date it has not deposited Rs 18.59 crore due on account of provident fund, sales tax, ESI, etc. The company's share capital has increased from Rs.167 .36 crore to Rs.198.77 crore.Its reserves & surplus have shown an increase from Rs.65.64 cr to 148.34 cr, all due to conversion of FCCB's.

The annual report failes to give adequate reasons for the seizure of production in January last.It does not explain why a model like FREEDOM which had done well initially did not stay long as market favourite. If CRD100 had done well, why it was not able to rescue the company. Besides no adequate explanation was given of the why banks did not give money for working capital?

As this was part of the total financial restructuring, how is it that it got left out.Some how this section does not give a feeling of satisfaction.

The closure is soughrt to be attributed to the alleged subversive activities of the workers in feb last last yer, and strike by them in the first week of March.

But people in the city know that the strike alibi came much later, production stoppage was much earlier.