Business Today Web Exclusive

Revival Hope

Whatever happened to the LML vs Bajaj saga? It’s not quite history, if LML’s Deepak Singhania has his way. He has a strategy worth Rs 210 crore in place to lift the sagging fortunes of his company. By October 2003, he plans to match his portfolio with that of Bajaj—and sell around 58,000 units a month. Can he do it?

LML's Deepak Singhania

Deepak Singhania, Managing Director, LML Ltd, is looking relieved, these days. The Rs 90-crore loss that the company posted in 2001-02 and slumping two-wheeler sales are not giving him sleepless nights anymore.

Reason: he finally has the broad contours of a strategy that could take sales up from around 10,000-odd units a month today to around 58,000 units per month by October 2003.

The money at stake? Rs 210 crore.

That the action has shifted from scooters to trendier motorcycles is obvious (the Indian mobike market is growing at over 30 per cent annually, while scooters decline at an annual 8 per cent). Whether LML can get a piece of this action has been the worry. Well, the company has recently launched a new 110-cc motorcycle, Freedom, to go against Hero Honda Passion and TVS Victor. And that, too, at an attractive price tag of around Rs 41,000 (ex-showroom, Lucknow).

Can this finally do it? The other two bikes that LML had launched, back in 2000, Adreno and Energy, failed in the marketplace. This, despite what LML saw as aggressive pricing.

That was then, says Singhania, shrugging off the fiasco with the argument that both those bikes were ‘niche’ products. "Adreno and Energy compete with motorcycles like TVS Fiero, Bajaj Eliminator and Hero Honda CBZ. The market for all of these motorcycles put together is only around 20,000 units a month," he says.

A broader portfolio of bikes, LML reckons, will do the trick. So the strategy now is to match TVS and Bajaj (if not Hero Honda), product to product. By October 2003, it plans to be selling gearless scooters (both plastic and metal body), motorcycles (niche and deluxe) and new kinds of geared scooters.

The company hopes to start posting profits by the second half of the current financial year. “We started with niche products because we had a very small production capacity for motorcycles,” he adds. Now, LML is investing Rs 140 crore in adding capacity. LML soon expects to be equipped to crank out 50,000 mobikes per month, even as gearless-scooter capacity rises to 100,000 per month.

“By 2004,” says Singhania, optimistically, “we should be able to sell around 800,000 two-wheelers per annum.”

LML has already spent Rs 75 crore in rejigging its production capacity and would be spending another Rs 70 crore in 2002-03. This money has largely been spent in modifying the assembly line and installing new machinery. Once the rejig is complete, LML would have a production capacity of 250,000 motorcycles and 250,000 scooters per annum. At present, it produces around 400,000 scooters and around 100,000 motorcycles. A large chunk of the scooter capacity has been lying unutilised, ever since it started losing the battle to a revitalized Bajaj, Kinetic and the new-entrant Honda (which has done exceedingly well with its debut effort, Activa).

Other than that, LML intends setting up shop in places as far as Columbia and Egypt, where it is striking partnerships with local players. Now this is interesting, though it’s not clear how it will have any bearing on LML’s market performance - which has been very poor over the past few years. What LML needs is to re-enter consumer mindspace with a bang. That requires more than money and machinery.

Issue Contents Write to us Subscription Syndication