'We Love And Respect Competition

Q. You have declared spectacular half year results in a slow growth year for scooters with a 15 per cent increase in volumes and a 25 per cent increase in value terms...

A. We saw a growth of 15 per cent which could have been higher but for capacity constraints. Motorcycle sales have grown 21 per cent because Indian motor cycles are of a world class quality. The demand for superior quality, performing scooters is increasing. We don't produce clones of other products but set standards in terms of features and definitions.

Q. How long is the capacity constraint going to last ?

 

A. For another ten months. We may become efficient and reduce transit time but production cannot go beyond 25,000 units a month. But we are adding blocks of capacity between September to June. At the end we will have a capacity of 6 lakh per annum.

Q. What are the sale figures for the first two months of this year?

A. April was a blip because of the transporter's strike. We sold only 21,000 scooters, which was a 5 per cent growth over last year and in May we have sold 27,000.

Q. What are your regional market shares?

A. We have about a 14 to 15 per cent share in south and 12 per cent in west. While in the north, central and east it would range between 30 to 40 and some places even 50. Traditionally, the rural market is a motorcycle market. But now positive signals are emerging from the semi-urban markets too.

Q. What will happen when the TVS scooters, specifically targeted at north, and those from the new Bajaj plant hit the market?

A. The more the merrier! We love and respect competition. It is in the best interests of the consumer. But where are the new products and what technology are they based on? Where is the market activity indicating their arrival? But we have definite plans and definite products.

Q. What is LML's product definition?

A. It will be four stroke motor cycles in the 125 to 200 cc range. There are going to be four products in the rural, family and sporty segments. It will use high fuel efficiency, high power, contemporary technology from Piaggio.

The engine is the Gilera model which Piaggio does not produce in Europe because motorcycles sold there are all above 200 cc. They will hit the market in early 1999. We will also manufacture four stroke scooters with Piaggio technology to meet the year 2000 emission norms. So, if they are coming here, we go there.

Q. How are the motorcycle and sco-oter projects going to be funded ?

A. The estimated cost of Rs 160 to 200 crore will be met through ECBs, rupee loans and internal accruals. There may be a nominal issue or the two promoters may bring in additional equity.

Q. Your D/E equity ratio is already high...

A. There is an interest free loan of Rs 18 crore from the promoters which will be converted to capital. Another Rs 20 crore addition to the capital will make the D/E ratio comfortable.

Q. How are the liabilities of Rs 31.39 crore and Rs 17.72 crore from Esslon

Polyester and Vespa car respectively going to affect performance?

A. One third of the Esslon Polyester amount has been written off as losses last year and we have a cash security injuncted in our favour for another one-third. For the remaining we have to see what happens in the liquidation proceedings. In Vespa Car Company, the capacity was lying unused due to infrastructural problems. A lot has changed since then and we may either use the assets or recommission the facility.

Q. Isn't your ROCE employed at 20 per cent low for a growth industry?

A. Yes. We are just reviving from the poor showing till a few years ago. In a few years we will have the best returns in the industry. The LML team is its biggest asset and will ensure that its shareholders get good value.