The Telegraph
Since 1st March, 1999
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Kinetic rules out merger plans

New Delhi, Sept. 7: Kinetic Motor, the country’s second largest scooter maker will not merge with group company Kinetic Engineering, joint managing director Sulajja Firodia Motwani said.

In response to a question when the group would undertake an equity restructuring, which includes a merger of the two auto companies, to drive shareholder value, Motwani said: “There is no plan as of now and neither we intend to do it.”

Kinetic Engineering, the sixth-largest motorcycle maker, is the flagship company of the Firodia family-controlled Kinetic group, and makes motorcycles and mopeds while Kinetic Motor makes scooters and automatic scooters.

Last week, the country’s second largest motorcycle maker, Bajaj Auto Limited said it would spin off an investment firm to improve its price-earnings ratio.

Bajaj Auto would remain the manufacturing company, while the investment company, to be formed, would be the holding company.

“Any restructuring of equity raises the issue of management control as equity base of the two companies are different,” she said. Kinetic Engineering had a low equity base of Rs 4 crore, while Kinetic Motor had a base of Rs 15 crore, she added.

Kinetic Motor holds 50 per cent of the gearless scooter market in the country, which is the world's second largest market for scooters and motorcycles. Its competitors include Bajaj Auto, LML Ltd and TVS Motor.

Motwani also said the company would import around another 1,000 units of Aquila bikes from the Korean firm Hyosung Motors. Kinetic Motor had earlier introduced around 500 units of these bikes, which are powered by a 250-cc engine, and cost more than Rs 1 lakh.

Asked if the firm planned to make these bikes, Motwani replied in the negative. “These are limited edition bikes and will defeat the very purpose of introducing,” she said. “In fact, the demand for these bikes has forced us to import again.”

Motwani also said she expected unit sales to nearly double in 2003-04 to 1,00,000 units from 57,246, helped by the launch of four new, attractively priced models between Rs 30,000 and Rs 50,000.

“We expect sales to rise to 2,00,000 units in 2004-05,” she added.

The company, a three-decade-old moped maker, began making motorcycles in 2001. It positioned one model each in the entry-level and mid-price segments, which sold around 4 million units a year. Two models will compete in the high-end performance segment.

The country’s motorcycle sales jumped 30.16 per cent in 2002-03 and by 36.83 per cent in 2001-02 helped by launches, lower prices, low interest rates and a shift in buyer preference to motorcycles from scooters.

Eight firms, including market leader Hero Honda Motors Ltd and second-ranked Bajaj Auto Ltd, make over 40 models in India, that jostle for buyer attention in the price-sensitive market.

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