He wants to leverage assets here for global operations, not the other way around, unlike many other domestic business chiefs
His cheeks have hollowed a bit but the jeans, cotton shirt and strapless sandals suggest that 40-year-old Siddhartha Lal hasn't shrugged off his youth. The last time he had had Lunch with BS, more than a decade ago, it was at a Chinese rooftop restaurant at 1, MG Road, the designer mall that fell victim to the municipal corporation's sealing drive. As heir apparent to the low-key Delhi-headquartered group promoted by the Lal family and chief of the Chennai-based Royal Enfield division (Eicher had acquired the maker of the iconic Bullet in 1994) he was raring to go then and it eventually showed in the turnaround of that fading brand. Now, seven years into his bigger role as MD and CEO of Eicher Motors Ltd, the Rs 6,390-crore flagship listed company, his zest for the business remains as unbounded, write Sharmistha Mukherjee and Kanika Datta.
If that makes him a rarity in a generally grim business environment, that's also because Royal Enfield saw motorcycle sales grow 54 per cent last financial year, outperforming rivals such as Bajaj, whose sales declined four per cent. Its commercial vehicle business, VE Commercial Vehicles (VECV), a 50: 50 joint venture with the Volvo Group, has not done as well but not that badly either. Last fiscal, when sales of medium and heavy commercial vehicles (MHCV) dipped over 23 per cent, VECV's volumes fell just 6.3 per cent.
This time, Lal has chosen the Gurgaon branch of Sakura, the peerless Japanese food restaurant. We're in a private room the better to record the conversation and going through a bewilderingly detailed menu before Lal, a regular, solves the problem by suggesting we opt for a "set meal": basically an elegant thali of chicken teriyaki with sticky rice, vegetable tempura, a small bowl of miso soup, and small portions of delicately cut vegetables and fruit. We precede this with an assorted sushi platter, Sakura's piece de resistance and this one didn't let us down.
We're chatting about the new Royal Enfield factory that's come up at Oragadam, 65 km from the original storied factory at Chennai, and he's explaining why he hasn't moved to the north, closer to the market. "There was no emotionality attached to it," he says, but the mathematics and business planning wouldn't have panned out because that would mean duplicating processes and, more importantly, suppliers. "We are not so big that we can duplicate our suppliers and not have quality issues. Second, Mr Osamu Suzuki's theory was also to concentrate on one location. This is as close to one location as we can get," he concludes stirring the green ginger into the soy sauce before dunking in a piece of sashimi.
About motorcycles, which powered Eicher's bottom line, had they done anything special or has the industry just evolved that way? "Lots of specials," he answers promptly, "but nothing happens overnight in our business. It is a result of all the action we have been doing for the last 13 years - yes, it takes that long," he says, detailing the steps. "And then in 2010, we came up with a new model, the Classic - it's really a modern take on the original Bullet - that now accounts for half our sales. For the last three years we have been on an absolute rampage on the road - 50 per cent year-on-year growth in revenue and much more in profitability."
The meals arrive in elegant lacquered crockery as Lal talks about where he sees this market going. "Motorcycles are the core of personal transportation in India and it will grow as people grow more affluent and move up from cycles. Our belief is that a much higher number of motorcycle commuters are becoming enthusiasts so they will turn to our type of motorcycles which we call mid-size, more evocative and brand-led, that can be enjoyed in different ways rather than only commuting. This will happen over the next five to 15 years."
Meanwhile, in developing countries where motorcycling is more of a leisure activity, people are not as rich as they used to be. "So they are moving from very big and fast bikes, and there is a space for interesting, brand-led, evocative mid-size bikes. That's what we want to build." Right now, he says, Royal Enfield's exports are small and it is largely a "quirky" vintage replacement market.
The chicken teriyaki is succulent but combined with large portions of sticky rice proves unexpectedly heavy and we struggle to finish it as the talk turns to commercial vehicles. Was the scene there more frightening than in cars? "Frightening? Nothing is frightening!" he retorts. The cyclical nature of the business is a given but "it will pop back after some time and we will be ready for it."
Being ready meant investing fully through the cycle. "Sure, short-term issues, we deal with on a short-term basis - you have to cut back inventory, for instance. But all our long-term investments in product, distribution, after-market, quality those we don't stop for a second." In trucks, for instance, they're looking at an "absolute renewal of the entire range, particularly heavy-duty. By the end of this year and through to 2014, there'll be 15 new products," he tells us.
We point out that after the Tata Ace there have been few breakthroughs, which is odd given the increasing share of road transport in freight movement. He says it's the heavy-duty segment that's stagnated. That market has been a duopoly for 60 years, he explains, an oblique reference to Tata and Ashok Leyland. "And it's in their interest to keep the market where it is. Because, if you push the market in terms of technology and on price points, other people can slot in very easily at a higher price. But because they keep the prices very low, everything is low - technology, sophistication, power-to-weight ratio, service levels are terrible...."
Therefore, "it falls on players like us who have stronger balance sheets than our competitors, better technological capability, and are more hungry" to innovate. "We have crossed curves with our biggest competitors in the last five to seven years. We launched our heavy-duty truck in 2010 and have been gaining one per cent market share every year since then." The larger plan is to refresh the entire range in 2014. "We have heavy-duty in our crosshairs."
Naturally, we must ask about the secretive project Eicher is developing with Polaris and due for a 2015 launch. Tell us about this car-like product, we ask provocatively, but Lal, who is picking at his food until then, suddenly starts eating with concentration. "Who told you it's car-like?" he demands. "It's in absolute stealth mode but we believe we are creating a new category. It's different, unique, very exciting."
Isn't it risky to launch given the way the car market has shrunk? He's not falling into that trap. "Wisdom wasn't a key guide for this. It either works really well or falls flat," he says enigmatically.
The tenor of the conversation has been so upbeat that we probe for the bad news that is good news for all journalists. Everybody complains of a skills shortage. Does he? "If you ask me to rate it on my list of top five issues, it's not there," he replies laconically.
"I don't know if it's a fashionable thing to say, but it's not any worse than earlier," he continues philosophically. "In a western country you get access to skills very quickly but at a price. In India, typically, if you know you have to hire you start working with the ITIs but you have to support them with your curriculum too. This is true even at the engineer level - there are three, six or even 12 months of training and support that a company has to put in."
And he's not fed up with India like other businessmen? He's genuinely nonplussed at the question. "We are delighted to be in India," he replies unequivocally. "Our people, our plants, our engineering and distribution, we have core knowledge and capability and understanding and expertise in India. We can leverage that for global operations."
Our plates are removed. The tempura on his is uneaten but he turns it down. We don't blame him because it lacks the delicate flakiness of the classic deep fry batter, the only flaw in a generally delicious spread. Our two-and-a-half hour discussion has been somewhat heavy-duty, so we end with a facetious question on the assumption that he's certain to have some personal folly embedded in his business plans. As an automotive company would he consider buying a Formula One team? "Absolutely not!" he shoots back. It's MotoGP that gets his mojo going, it appears, but no plans there either. Yet?