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CHAPTER-II
PROFILE OF LML LTD.
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COMPANY PROFILE
Introduction to LML Limited
This chapter being an introduction to the company presents the various aspects of
the company on which study has been carried out like general background of the
company, its basic information, core values, commitment, corporate mission, various
policies and strategies, its history and important events, products of the company,
SWOT analysis of LML Ltd., LML Board, LML organization chart, market
segmentation, system model for planning and information about the customer base.
It covers the introduction aspects related to the role of communication in human
resource in LML Ltd. It also highlights the importance of communication in an
organization in the light of various barriers to communication.
The Background of LML Limited
Established on 1st May 1972 at Kanpur, LML introduced models namely LML Vespa,
NV3, Alfa, T5 & 4w. The company’s joint venture agreement with Piaggio V.E.,SPA,
Italy for participation in the company’s equity and the management reached its final
stage of settlement during the year 1989 and thereafter the company introduced
during September 1992, a new range of highly fuel efficient scooters. In 1995 two
models of scooters- SUPREMO and STAR were introduced in the upper and middle
price segments and well accepted in the Market. The company has entered into a
new joint venture arrangement and executed several agreements, along with Piaggio
and Indian Promoters. Thereafter it churned out “Sensation”, a 125cc scooter in
1996, while raising its production capacity from 200000 units to 300000 per annum.
It also entered into several agreements with Piaggio of Italy for Import of technology
and know-how to manufacture new models of scooters and other two wheelers in
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different segments during the same year. 1997 witnessed the launch of its latest
model- Star, the fuel efficient, 150 cc two stroke engine which boasted of several
unique features for the first time in the Indian scooter industry. In 1997 it also entered
into a buy-back agreement with Piaggio to manufacture two-wheeler engines of
various capacities for the Italian firm.
LML- A Responsible Corporate
Over the years the ecology has remained unaltered. The effective pollution control
measures taken have ensured that the industrial township is unscarred by the
ravages of industrialization and the birds continue to tread their usual sky path.
Basic Information o Location
LML is located at C-10 Panki industrial Estate, Kanpur and is spread over 72 acres of Land.
o Business LML is the business of manufacturing 2-stoke and 4-stoke
scooters, scooterettes and motorcycles. o Capacity
The installed capacity of the plant at present is 4, 00,000 vehicles which is being increased.
o Manpower The manpower of the company as on December, 2005 is 3660
including workmen, supervisors and executives. Commitment
LML is one of the premier companies in the country and justifiably claims a
leadership role in two wheeler automobile industry. In keeping with the above status,
the company adopted a pragmatic business approach as enshrined in “The Mission
Statement” and “Core Values” of the corporation.
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Corporate Mission
The corporate mission of the company is “to become a very significant player in the
two- wheeler industry, and to increase the net worth of shareholders’ equity”.
Core Values
• Customer Satisfaction
• Concern for people
• Commitment to Quality and Excellence
• Innovation
In line with corporate mission and values, LML has taken up many initiatives
in the areas of environment, health, safety and quality that are related in following
policies which are widely understood at grass root level of the company:
Environment Policy
LML Ltd. Commits itself to:
• Conserve natural resources and minimize or eradicate adverse impacts on its surroundings.
• Prevention of all types of pollution (i.e.) air, water, solid waste and noise.
• To adopt environment friendly processes and technology and to produce eco-friendly products.
Communication of policies and strategies
The strategies, goals and action plans are communicated through:
• Daily management meetings with directors
• Daily department meetings chaired by HODs
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• Daily shop floor meetings chaired by Dy. Mgrs, Sr. Mgrs and line
supervisors
• Circulation of mission statement, core values and quality policy through
in house publications
• Training program on “profit centre concept” and “goal setting exercise”
for strategies
• Regular press meeting by MD and marketing professionals
• Press release from time to time about various activities of the company
a) The HRD circulates “LML World News Letter” every quarter to
share management’s perception of continuous development. Videos
are developed and are used for effective communication of
company’s policies and strategies and for quality awareness. Posters,
banners etc. are also displayed.
b) The top management evaluates and communicates its
expectations to meet the planned targets. Accordingly, the production
planning, financial planning, HRD planning takes place and are
prioritized.
c) Policies are framed on the basis of thrust areas by considering
customers’ feedback, market feasibility, portfolio analysis, plant
capacity etc. The focus areas are converted into action plan,
prioritized and deployed at the departmental level by involving
employees. Then they are formally communicated at department and
section levels.
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Evaluation of awareness of employees about company’s policy
The employees’ participation in the areas of Kaizen, 5 S, JITs, Quality circles,
Quality and productivity improvement etc. are periodically monitored and evaluated.
Reviews and Improvement of Policy and Strategy
In addition to these evaluations, there are various forums available for evaluation of
strategies, plans and goals at defined frequencies in a structured manner as per the
details given below. Directions are given to working groups during these meetings to
update and improve corporate image, action plans and strategies in order to remain
close to goals.
The policies and strategy are reviewed in the following meeting
• Daily meeting at shop floor.
Forum Frequency Headed by
Sharing of corporate objectives Monthly HOD’s
Sharing of Organizational policies Monthly Directors
Co-ordination meeting Weekly HOD’s
Cost control measures meeting Monthly Directors
Process improvement Daily Directors
Marketing and Sales Strategies Monthly Directors
Process of quality Management Daily Directors
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• Daily/weekly meeting of top management with HOD’s
• Monthly progress review
• Monthly meeting with vendors.
• Weekly meeting of line personnel with marketing department.
• Monthly 5S audit.
• Quality meeting conducted by quality Department.
Public Responsibility in Quality Policy and its Strategy
Business Ethics: Transparent transaction with internal and external customers.
Health and safety: Intensive follow-up on health counseling reduced the
absenteeism rates and improved healthcare of workers. Safety norms are met with
strict safety measures.
Environment Protection: Intensive follow-up on health counseling reduced the
absenteeism rates and improved healthcare of workers. Safety norms are met with
strict safety measures. The company ensures pollution free environment for the
society and employees through pollution control, effluent treatment plant, gardening
etc.
Waste Management: Daily meetings, 5 S audit norms, housekeeping cleanliness,
energy conservation, quality audit, JIT management, continuous maintenance and
employees’ total Involvement ensures waste elimination. LML has always believed in
community development and contributes very liberally for the development of
socioeconomic activities by providing medical and health facilities, supporting
education, sports, etc. LML has created a PF Trust for officers and sanctions loans
to employees without any difficulty. Grants are also given for education and medical
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treatment. Generous help is also provided to the society during natural calamities
like floods, wars like Kargil war etc. The Environment Management Cell with qualified
competent managers and officers are responsible for pollution control measures.
The cell monitors the system in line with ISO norms.
Year wise History of the Company
1972- The company was incorporated on 1st May, at Kanpur. The Company deals in
finishing leather and processes synthetic yarn.
1975- The Company undertook the manufacturing of highly sophisticated machinery
required for man-made fiber industry like crimping machines, draw texturising
machines, assembly twisting machines, up twisting machines, tow to top conversion
equipment, screen printing carriages, etc.
1977-All shares allotted to promoters, directors etc.
1979- Allotted 54,000 No. of equity shares to directors and 47,450 no. of equity to
SIT on 30.7.1979, 49,750 No. of equity shares allotted otherwise. 48,800 no. of
equity shares allotted to Gold Rock Investments. Ltd. 4, 60,000 Bonus Equity shares
then issued in prop. 4:5 on 3.10.1979.
1981- Suryodaya Investment & Trading Co. Ltd., offered out of its holding certain
number of equity shares as rights at par with the existing shareholders, who were
holding up to 50 no. of equity shares in the following manner: (i) 8 no. of equity
shares for every 25 no. of equity shares held and (ii) 5 no. of equity shares for
shareholders holding 26 to 50 no. of equity shares.
1982- (15 months) The Company installed one magnetic crimping machine, which
increased the production capacity of the yarn-processing unit to 3 tonnes per day. A
rapid dyeing plant was also installed to increase the production of texture dyed
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yearn. The twister machines division was started for manufacture of twisting
machines such as two-for-one up twister, assembly twister, etc, in collaboration
with Verdol S.A. France, Lezzeni Mario, Italy, etc. The Company issued 2, 82,500-
13.5% secured convertible debentures of Rs.200 each during September. Rs. 70/-
out of each debenture was converted into 7 no. of equity shares of Rs.70/- each at
par in November 1983. The balance Rs. 130 per debenture was to be redeemed as
follows: (i) Rs. 50 at the expiry of 7th year; (ii) Rs 40 at the expiry of 8th year and (iii)
Rs 40 at the expiry of 9th year.The company issued 8,00,000 – 13.5 % partially
convertible debentures of Rs 125/- each, to meet part of the cost of VESPA XE
scooter project. A portion of Rs 10 of each debenture was converted into one equity
share of Rs 10 each at par on the expiry of 6months from the date of allotment. The
residual amount of Rs 115 each was to be redeemed in three installments of Rs. 40,
Rs. 40 and Rs. 35 on 4th august of 1991, 1992 and 1993.
1983 - The engineering division fabricated and supplied a part of plant and
machinery required for Nylon-6 chips project. The company received industrial
license to manufacture 10 nos. draw winders and 400 nos. spinning frames per
annum. DGTD registration was received to manufacture 30 nos. metals cutting
including grinding machines and special purpose machines per annum. Spinning and
take-up equipment was also added in the license to manufacture tow to top
conversion equipments. The company initiated effective steps for the implementation
of these projects.The company received letters of intent to manufacture additional
2,00,000 scooters as well as 50,000 three-wheelers per annum. Government’s
approval was received for technical collaboration with Piaggio & C.S.P.A; Italy for the
manufacture of three-wheelers. 19,77,500 No. of Equity shares allotted in conversion
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of debentures. 19,95,000 No. of equity shares allotted as Rights (Proportion. 21:12;
premium. Rs. 2.50 per share).
1984 - To implement the license, a new company was incorporated under the name
and style of Vespa Car Company Limited during the year. This new company is a
sub-licensee, for the scooters and a large number of components were to be
supplied to the new company by the company. 20,91,018 No. of Equity shares
issued in conversion of debentures of I and II series.
1985 - The company offered 9,09,090 - 13.5% partly convertible debentures of Rs
110 each to the equity shareholders of the company on a right basis in the proportion
of 2 debentures: 25 equity. A portion of Rs 10 of each debenture was convertible into
one equity share Of Rs 10 each at par on the expiry of 6 months from the date of
allotment. 2,27,272 additional debentures were allotted to retain over-subscription.
The Residual amount of Rs 100 was to be redeemed in three installments of Rs 35,
Rs 35 and Rs 30 on 31st October of 1992, 1993 and 1994. Preference shares
redeemed, 73,020 shares allotted on extinguishments of debentures. Of series I.
11, 72,578 shares issued at par in conversion of II and III series debentures. Another
37,000 shares issued. 40, 00,000 rights shares issued (premium. Rs 80/- per share;
proportion. 7:16).
1986 - The Company introduced LML models namely LML Vespa, NV3, Alfa, T5 &
4W. To restructure the Company activities of scooter and synthetic yarn
manufacturing the undertaking of the fibre division was transferred to one of the
wholly owned subsidiary’ companies vis. LML Fibers, Ltd. with effect from close of
business on 31st July, 1987. Preference shares redeemed. 73,020 shares allotted
on extinguishments of debentures of series I, 11, 72,578 shares issued at par in
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conversion of II & III series debentures. Another 37,000 shares issued. 40, 00,000
rights shares issued (premium, Rs 80/- per share; proportion. 7:16).
1987- The name of the company was changed from Lohia Machines, Ltd to LML Ltd.
with effect from 6th may.
1988- The company proposed to implement the scheme of indigenization to bring
about cost reduction. 75,00,000 rights shares issued at par in proportion. 5:9. only
30, 08,740 shares taken up.
1989- The company’s joint venture agreement with Piaggio V.E. SPA, Italy for
participation in the company’s equity and in the management reached its final stage
of settlement during the year. LML Fibers, Ltd. Prakti Synthetics, Ltd, and Anurag
Synthetics Ltd, is subsidiaries of the company. A detailed proposal for revival and
organizational/financial restructuring of the company, its subsidiaries and its concern
Vespa Car Co. Ltd was submitted to financial institutions/banks.
1990 - The Company’s operations were affected by the political instability, foreign
exchange crisis and severe credit squeeze. Unsubscribed portion of the Rights
issued allotted in 1989/90 and 1990/91 (9, 17,121 shares to foreign collaborators
and 35, 74,139 Shares to promoters etc.). Another 74, 11,700 shares allotted at par
to collaborators. LML Fibers Ltd. and Prakti Synthetics Ltd. ceased to be subsidiaries
of the company.
1991 - The working results were adversely affected mainly due to the recession that
prevailed in the automobile industry. 76,600 shares allotted at par to foreign
collaborators. In march 10080,000 shares offered at par as follows: 96,00,000
shares as rights in proportion,1:3 (all taken up) and 4,80,000 shares to the
employees of the company (only 46,153 shares taken up). 3, 33,847 shares not
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taken up by employees allowed to lapse. 31, 62,000 shares allotted at par to
financial institutions upon conversion of loans on 23.3.1992. (6, 50,300 shares to
IFCI; 15, 04,700 Shares to IDBI; 6, 50,000 shares to ICICI and 3, 56,700 shares to
RBI).
1992 - The company introduced a new range of highly fuel-efficient scooter during
September.
1994 - The company undertook an expansion project to increase the capacity to 6,
00,000 vehicles per annum as well as diversification of the product range. The name
of the subsidiary has been changed from Anurang Synthetics Ltd. to ASL Ltd. ASL
Ltd. ceased to be a subsidiary of the company with effect from 27,09.1997. 3, 30,847
no. of equity shares were cancelled by the board. The company has lunched the
diversification-cum-expansion project involving a capital expenditure of Rs. 204
cores as appraised by IFCI. The company research and development wing is also
adopted and absorbing the technology under transfer from its collaborators.
1995 – Two new models of scooters- SUPREMO and STAR were introduced in the
upper and middle price segments and well accepted in the market. The company
enters into a new joint venture arrangement and executes several agreements, along
with Piaggio and Indian Promoters. The company proposes to make a
rights/warrants issue, term loans from financial institutions and banks, internal
accruals, leasing etc.
1996 - The company launched 125 cc scooters ‘Sensation’ during the year. During
the year under review, with the completion of the first phase of expansion, the
company achieved increase in its production capacity from 200000 units to 300000
per annum. The company entered into several License Agreements with Piaggio of
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Italy for import of technology and know-how to manufacture new models of scooters
and other two wheelers in different segments.
1997- LML manufactures only scooters but has access to collaborator Piaggio’s
technology. LML Limited launched its latest model- Star, the fuel efficient, 150 cc two
stoke engine which boasts of several unique features for the first time in the Indian
scooter industry. LML and Asian Paints are set to enter into a joint venture to
introduce a pay-by-scooter concept. LML was formed in joint venture between the
Kanpur-based Singhanias and the Italian scooter giant Piaggio. LML gas entered
into a busy-back agreement with Piaggio to manufacture two-wheeler engines of
various capacities for the Italian firm. LML Ltd, the second largest scooter
manufacturer in the country with more than 30 per cent market share, decided to
advance the lunch of its motorcycles from 1999 to the last quarter of 1998.
1998 - LML Ltd sets up the first of its six planned service-training centers outside
Kanpur at Noida near Delhi. LML launched a unique facility, toll free help line, for
customers in Delhi offering assistance and information for its top of the line scooter
Supremo 98. The company sets up additional line for enhancing capacity and
introducing new models. The company is set to double its capacity to 8,00,000
numbers by 2000 AD. The company had set up a new electric starter plant in Kanpur
as the company intends to make electric start a standard feature of all new vehicles,
including the four motor cycles. The Kanpur-based LML Ltd sews up a
comprehensive agreement with its Italian joint venture partner, Piaggio, to ensure
that the latter buys back a specified amount of components, CKD kits or complete
two-wheelers manufactured in India. LML Ltd launched scooterette ‘Trendy’, the first
from the stable of the Singhanias without support from their Italian joint venture
partner Piaggio. Piaggio established its presence in the Indian two-wheeler market,
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in its collaboration with LML, by bringing in a number of models of its famous and
of scooters.
1999 - Leading two-wheeler manufacturer LML will launch its first 60 cc scooterette
Trendy in New Delhi. LML LTD., Carrier Aircon and Vesuvius India Ltd—have failed
to sign up with the depository on time to enable their institutional shareholders to
dematerialize the share of the companies. Italian scooter-marker Piaggio decided to
exit from its joint venture LML Ltd. Italian auto manufacture Piaggio & CSPA
contemplates setting up a fully-owned subsidiary in India to manufacture the entire
range of two-wheelers, ranging from mopeds to motorbikes, in addition to its recently
launched big scooter Z-9. The 100- cc model proposed to be lunched by LML is akin
to Kinetic Honda scooter. LML entered into collaboration with Daelim of Korea for
motorcycle. The company launched new two wheelers, and recently introduced
“Xpress 5” engine (which is based on reed value induction technology), on its 150 cc
scooters. The company undertook implementation of ‘JUST IN TIME’ (JIT) system of
inventory management. Piaggio also issued a letter to the company purporting to
terminate the joint venture agreement and various other agreements, to which
company is a party.
2000 - Castrol India, subsidiary of the lubricant major Burmah Castrol Plc., entered
into strategic alliances with leading Indian automobile companies like Telco and LML
Ltd. to introduce its customized Products. ICRA assigned ‘A1’ rating to the
company’s commercial paper of Rs. 10 crores. The company to hire off its IT
department including Computer Aided Design activities to its subsidiary/corporate
body. The company proposed a preferential issue to the Indian promoters and their
nominees at Rs 40 per share. 22, 17 lakhs shares shall be issued to the Indian
promoters, which will increase their stake in the company from 47, 21 per cent to
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49,89 per cent. Two wheeler major LML chalked out a major organizational revamp
entailing the “transfer” of its information technology division in order to “emerge as a
flatter organization” through manpower rationalization. The company moves towards
launching motorbikes. To test market the new products, Adreno 100 cc and Energy
100 cc, LML places a dozen of them in the Kanpur market. LML Ltd ties up with a
Chinese two-wheeler manufacturer to make scooterretes and Step-thrus. The
Company besides its existing tie-up with Daelim of South Korea for two-wheelers is
looking at forging technical alliances with two other companies. The Board of
Directors allotted 22, 16,067 equity shares of Rs. 10 each at a premium of Rs. 30 per
share to the Indian promoters and their nominees on preferential basis. The paid up
equity share capital of the company increased from Rs. 4143.95 lakhs to Rs.
4365.56 lakhs. The company’s 132-KV main power station re-commissioned. The
power station had tripped off and suffered damage on August 30.
2001 - The company’s 4-stoke motorbikes ‘Adreno’ and ‘Energy’ launched all over
during January 2001.
2002- Appointed Mr. Siromani Sharma as the additional director on the board of the
company. Release a new version of 110 cc mobike price tagged at Rs. 30,000/-
named ‘Freedom’. Board decides to voluntarily de-list the equity shares from Delhi
Stock Exchange. Appoints Mr. Dasu Govind Parsad as the nominee director of
export- import bank of India. Purchases 50000 equity shares of Rs. 10 each at par
with its subsidiary company Perfect Polycons Ltd.
2003- Board approves the cessation of Perfect Polycons as its subsidiary.
2004- Equity shares of the company de-listed from Ahmedabad Stock Exchange
(ASE) with effect from January 16, 2004. LML Ltd. informed that pursuant to the
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application of the company for voluntary de-listing of its equity shares form Delhi
Stock Exchange Association Ltd. (DSE), DSE vide letter dated January 20, 2004
confirmed, the de-listing of equity shares of the Company from its exchange with
effect from January 23, 2004. LML launched two motorcycles and one variant in
three different segments to boost sales and diversify product portfolio.
26th March, 2006, Kanpur: Lock out declared at LML Ltd. and the company
handed over to the Government of India.
14th July, 2007, Kanpur: Lock out lifted at LML Ltd. and the company handed over
to the board of directors. With a staff of around 750 people the company re-starts
manufacturing around 300 scooters per month and exporting scooters to a number
of African, South Asian and European countries.
Date wise Important Events in LML Ltd.
17th January, 2004, New Delhi: Suzuki motor Corporation, the Japanese auto
major, is planning to launch a range of scooters in India after the company
introduces its motorcycle in the country in the middle of next year. The company,
which earlier had a joint venture, with the TVS group before parting ways in 2001, is
now independently setting up a manufacturing facility at Gurgoan near here. The
work on the plant will commence shortly, company sources said. Suzuki is investing
about Rs.400 crores in setting up the plant, which will have an annual production
capacity of two lakh two-wheelers. The first bike will roll out in mid-2005.
20th January, 2004, New Delhi: The four million units a year motorcycle market in
India is all set to witness the invasion of two new players. Nexus Design Projects, the
Indian firm, is in the process of identifying land for setting up a manufacturing unit in
Gurgaon, near Delhi. The firm will out-source the basic chassis for the bike from
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Yamaha and develop the swing arms and entire bike. The first bike would be an off-
road vehicle that would be sold to amusement parks and racing tracks abroad.
13th February, 2004: Motorcycle sales rose by 14.9 per cent to 354,640 units from
308,667 earlier. Sales in April-January were up to 3,437,495 units from 3,057,817. A
total of 44.26 lakhs two-wheelers were sold during April-January 2003- 04 over 40.62
lakhs units a year ago, data complied by the Society of Indian Automobile
Manufactures (SIAM) showed. Sale of motorcycles went up by 12.4 percent to 34.3
lakhs units (30.5 lakhs units a year earlier), helped by rising demand for 100-150cc
motorcycles. Scooters and scooterttees posted a modest 2.5 per cent rise to 7.34
lakh units (7.16 lakh units) but that of mopeds fell by 11.5 percent to 2.55 lakh units
(2.88 lakhs units). The scooter and scooterettes segment has been witnessing a
revival from the early part of these fiscal, thanks largely to surging sale of automatic
scooters made by Honda.
4th March 2004, New Delhi: Pakistan-made bikes like the Star CT 125-7 and DS-70
may soon be seen on Indian roads. The made in Pakistan exhibition, organized by
the federation of Indian Chambers of Commerce and Industry (FICCI), hopes to
open the floodgates for Pakistani businessmen to access Indian markets. The
Pakistan-based General Tyres is looking for ventures with Indian companies to
market their products. Similarly, Pakistani automobile components firm Agriauto,
which supplies to automobile giants like Toyota and Daihatsu, is scouting for
business deals with Maruti and Tata Motors.
9th March 2004, New Delhi: As a move over Chinese bikes, there is competition
coming from another neighbour. Pakistan’s leading bike maker, Dewan Motorcycles
is contemplating upon setting up a joint venture in India to produce and market its
range of 125cc cruiser bikes.
49
12th April, 2004, New Delhi : Indian two-wheeler exports, which have had a fourth-
gear year in 03-04, are scorching the tarmac in countries like Sri Lanka, Bangladesh,
Columbia, Peru, Dominican Republic, Costa Rica and Guatemala. Also on the anvil
is a foray into more developed market like Indonesia, Brazil, Thailand and
Philippines and possible locking of horns with Japanese and Chinese, rivals. With all
the export sales coming on the back of completely-built unit and local budging, it is a
home run indeed for Indian bikes. The state’s top exporter Bajaj Auto clocked a total
1.56 lakhs units (worth Rs 550 Crores) in fiscal 03-04 of which scooters and bikes
comprised 90,210 units. Domestic motorcycles market leader Hero Honda notched
up 39,255 units in exports comprising of 2% of its business in value terms. Japanese
bike major Yamaha and local two-wheeler maker TVS exported 32,906 and 28,043
units respectively helping total overseas sales growth of two-wheelers to stay over
50% this fiscal.
4th June, 2004, Colombo: Indian-made motorcycles have overtaken Japanese
models and are zooming ahead in Sri Lanka with impressive sales figures, but
cheaper Chinese makes are slowly catching up. Indian manufactures sold 63,583
motorcycles in Sri Lanka last year, up from 32,738 in 2002 and 8,243 in 2001,
according to official figures. On the other hand, cheaper Chinese models are
catching up with the Indian version and have sold 19,379 motorcycles in 2003, up
form 14,269 in 2002 and 9,245 in 2001.In comparison sales of Japanese models
once a popular choice in this island nation dropped drastically to 8,747, from 23,098
in 2002 and 19,469 in 2001. The Indian models were available for half the price,
while the Chinese makes were even cheaper.
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26th March, 2006, Kanpur: Lock out declared at LML Ltd. and the company
declared itself a sick unit and checked into the Board for Industrial and Financial
Reconstruction and company officially handed over to Government of India.
14th July, 2007, Kanpur: Lock out lifted at LML Ltd. and the company handed
over to the board of directors with a staff of around 750 people and the company re-
starts manufacturing around 300 scooters per month and exporting scooters to a
number of African, South Asian and European countries.
LML in the Motorcycle Segment
It was, however, only in 1997 that LML Ltd., the second largest scooter manufacturer
in the country with more that 30 per cent market share, decided to advance the
launch of its motorcycles from 1999. In 1999 LML launched scooterette ‘Trendy’, the
first from the stable of the Singhanias without support from the Italian joint venture
partner Piaggio. In 1999 Italian auto manufacturer Piaggio & CSPA were
contemplating setting up a fully-owned subsidiary in India to manufacture the entire
range of two-wheelers, ranging from mopeds to motorbikes, in addition to its recently
launched big scooter X-9 and on those lines Piaggio issued a letter to the company
purporting to terminate the joint venture agreement and various other agreements, to
which company was a party.
LML, meanwhile, had already entered into collaboration with Daelim of Korea for
motorcycles. It made its entry into the motorcycle segment apparent with launching
of motorcycles. To test market the new products, Adreno 110 cc and Energy 110 cc,
LML placed a dozen of them in Kanpur market planning to introduce two other
models the same fiscal. The final entry came with the nation-wide launch of its 4-
stroke motorbikes ‘Adreno’ and ‘Energy’ during January, 2001. Very soon 2002
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witnessed the release of a new version of 110 cc motorcycle price tagged at RS.
30,000 named ‘Freedom”.
Thereafter there was no looking back. LML Ltd lunched three motorcycles in three
different segments of motorcycle market in one day. The Graptor 150 cc, unveiled at
the Auto Expo 2004, the Freedom Prima 125 cc and Freedom Prima 110 cc, a totally
new model of the Freedom hit the market on the same day in Delhi, UP, Haryana ,
Himachal Pradesh, J & K and Rajasthan. In the words of Deepak Kumar Singhania,
Managing Director LML Ltd., “LML had begun to be called a one product wonder
(Freedom). With these three products, we shall dispel all such notions. In spite of
severe limitations we have been working very hard on getting the product mix
together and now we have it.” On introducing 3 motorcycles in the market at the
same time, he said, “The motorcycle market is continuously involving and LML has
always kept itself abreast with the changing needs and expectations of consumers.
These insightful learning have resulted in LML, strategically placing two motorcycles
in the smart commuter segment for two different categories- 110 and 125 cc whilst
Graptor 150 cc serves the needs of the fast growing lifestyle segment. He further
stated “In today’s market environment new product arrivals/up-gradation are a
constant requirement and LML has been facing severe limitations in capacity and
range of motorcycles which it is working to overcome”.
Indian Two Wheeler Industry
The birth of the Indian two-wheeler industry can be traced to the small beginnings
that it made in the early 1950s when Automobile Products of India (API) started
manufacturing scooters in the country. Although API initially dominated the scooter
market with its Lamberattas, Bajaj Auto Ltd., a company that later became a legend
52
in the global scooter industry, overtook it fairly quickly. Although a number of
government and private enterprises also entered the scooter segment, almost all of
them had disappeared from the market by the turn of the century.
The license raj that existed prior to economic liberalization (1940s-1980s) in India did
not allow foreign companies to enter the market, making it an ideal breeding ground
for local players. Local players were subject to a very stringent capacity licensing
process, and imports were tightly controlled. This regulatory maze created a seller’s
market, with customers often forced to wait for 12 years just to buy a scooter from
companies such as Bajaj. In 1980 Bajaj had waiting list that was equal to about
thirteen times its annual output, and by 1990 this list had doubled. Clearly, there was
no incentive to implement proactive strategies to woo the customers. In a 1980
interview with a local magazine, Mr. Rahul Bajaj, the CEO of Bajaj Auto, observed,″
my marketing department? I don’t require it. I have a dispatch department. I don’t
have to go from house to house to sell.”
The motorcycle segment was no different; with only three manufactures-Royal
Enfield, Ideal Jawa, and Escorts. There was hardly any significant competition for the
customer. While this segment was dominated by Enfield’s 350cc Bullet, the only
motorcycle with a four-stroke engine at the time, Jawa and Escorts also had a fair
share of the middle and lower end of the market. The winds of change began to take
hold in the mid 80’s when the Indian government stated permitting foreign
companies to enter the Indian market through minority joint ventures. Under these
relaxed regulations, the two-wheeler market witnessed a veritable boom with four
Indo-Japanese joint ventures; namely Hero Honda, TVS Suzuki, Kawaski Bajaj and
Kinetic Honda all lining up to target the Indian consumer market for motorcycles. The
simultaneous entry of four players into this underserved market helped boost
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motorcycle revenues to stratospheric heights. For the first time, the market dynamics
changed in favour of the Japanese players in both two-stroke and four-stroke
vehicles, and the Indian manufacturers who had held sway for such an extended
period of time were suddenly cornered.
The entry of these new foreign companies transformed the very essence of
competition from the supply side to the demand side. Confronted with a larger array
of choices, the consumers were regaining their influence over the products that they
bought. In keeping up with these higher customer expectations, the industry
accelerated the launch of new models, and every company was trying to outdo the
other in terms of styling, price, and fuel efficiency. The technological expertise that
the foreign companies brought to the marketplace helped increase the overall quality
and reliability of the products quite significantly. The old-guard companies soon
found themselves under pressure to improve their offerings and bring their products
at par with their global counterparts.
Economic Reforms and Automotive Sector
The impact of India’s initiatives in economic liberalization and globalization (post
1991) was most apparent in the automotive sector. Automotive industry was a key
driver of economic growth contributing around four to five percent to the Indian GDP.
Introduction of reforms and entry of international companies intensified competition
in the Indian automotive sector. This resulted in the transformation of a seller’s
market (created mainly due to the Indian government’s protectionist policies) into a
buyers market. The changing structure of this industry posed many challenges and
opportunities to the market participants.
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The automobile industry in the country is one of the key sectors of the economy in
terms of the employment opportunities that it offers. The industry directly employs
close to around 0.2 million people and indirectly employs around 10 million people.
The prospects of the industry also has a bearing on the auto-component industry
which is also a major sector in the Indian economy directly employing 0.25 million
people. India had the largest population of two-wheelers (around 41.6m vehicles) in
the world. It accounts for almost 70% of the world’s automobile market in volume
terms. India is the second largest manufacturer of two-wheelers in the World.
The Indian two-wheeler contributes the largest volumes amongst all the segments in
automobile industry. Though the segment can be broadly categorized into 3 sub-
segments viz. scooters, motorcycles and mopeds; some categories introduced in the
market are a combination of two or more segments e.g. scooterettes and step-thru.
The market primarily comprises of five players in the two-wheeler segment with most
of the companies having foreign collaborations with well-known Japanese firms
earlier. But most of the companies are now planning 100% subsidiaries in India.
Motorcycles were once considered the property of gung-ho youngsters, more suited
to giving rides to PYTs (pretty young things, for the uninitiated) rather than a family
vehicle. However, motorcycles are now seeing a major upswing in their fortunes with
much larger sales. This has also been aided by the Government decision that over a
planned phase all small engines would have to move over to 4-stoke for cleaner
exhaust emissions. It is a costly experience to develop 4-stoke scooters as many of
the domestic manufacturers have found out and it is easier to make 4-stoke
motorcycles, which are already in existence in all parts of the world. In the last four to
five years, the two-wheeler market has witnessed a market shift towards motorcycles
at the expense of scooters. In the rural areas, consumers have come to prefer
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sturdier bikes to withstand the bad road conditions. In the process, the share of
motorcycle segment has grown from 48% to 58%, the share of scooters declined
drastically from 33% to 25%, while that of mopeds declined by 2% from 19% to 17%
during the year 2000-01. The Euro emission norms effective from April 2000 led to
the existing players in the two-stoke segment to install catalytic converters. All the
new models were replaced by 4-stoke motorcycles. Excise duty on motorcycles was
reduced form 32% to 24%, resulting in price reduction, which aided in propelling the
demand for motorcycles. Fierce competition forced players to cut prices of certain
models.
The Indian Consumer
Two-wheelers had become the standard mode of transportation in many of India’s
large urban centers. Increasing urbanization, saturation of cities, and the lack of
adequate roads helped to propel demand for two-wheelers. The two-wheeler was
typically a prized possession in the average Indian household. It was normally used
to transport both people and goods, substituting for a car that was prohibitively
expensive. While a two-wheeler normally cost around Rs. 40,000, an entry-level car
was priced around Rs. 300,000. Two-wheelers had long road lives, and were often
used for even 15 years, passed down from one generation to the next. Industry
watchers reported that India had penetration rate of 10% as of the late 1990s (107
two-wheelers for every 1000 adults), far below the penetration rate of other
developing countries. While the production and sale of motorcycles grew
substantially between 1996 and 2001, the performance of the other two segments of
two-wheelers was poor.
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Importance of Motorcycle segment
Not only has the continuously rising sale prompted all automobile companies to pay
serious consideration to the Indian motorcycle market, but also the rising export
opportunities has triggered the same. There has also been an indication towards it,
as there are a large number of new entrants in the Indian motorcycle market. The
following data collected from Asian CERC would be sufficient to highlight that the
motorcycle segment couldn’t be ignored by any two-wheeler manufacturer any more.
Various Commuter Segments in the Motorcycle Market
In Indian market, cost is an important factor in framing the customer’s mindset. The
customers at any motorcycle outlet can primarily be classified on the basis of the
amount that they are willing to spend on the purchase of the machine. Thus it is very
important to come up with a classification based on the preferred cost range. The
motorcycles available in the market are often classified into the following segments
based on the cost of the bikes.
• Common Segment: As suggested by the name, this segment aims at the
masses, (i.e.) the lower income group. The price range is often from Rs.
30.000/- to Rs. 35,000/- or even up to Rs 40,000/-. It includes bikes like Hero
Honda CD 100, Suzuki Max 100 and Bajaj Kawasaki Boxer.
• Smart Segment: This segment generally caters to the taste of the middle
class with bikes ranging from Rs. 40,000/- to Rs.45,000/- and up to Rs.
50,000/- at times. This segment includes LML’s Freedom and Freedom Prima
125. This segment caters to customers who tend to make choices based on
several factors and cost and mileage play an invariably strong role for this
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segment of customers. This invariably is also the segment that claims
maximum sales.
• Life-style segment: As the name suggests, it caters to Life-Style conscious
people (i.e.) the upper middle class or the upper class. The cost is in the
range starting from Rs. 50,000/-. It includes bikes that can be easily
distinguished from the others by their high powered engines. They might not
always be mileage conscious but generally tend to have sporty looks. This
segment includes the likes of Bajaj Pulsar; Kinetic Laser; Hero Honda CBZ
and Karizma; Royal Enfield, Eliminator and Enticer, and LML’s Graptor.
SWOT ANALYSIS OF LML LTD.
STRENGTHS • Goodwill • Low cost • Fuel efficient • Economical spare parts • Stylish • Sturdy engine & frame • Technology from Daelim,
Korea
WEAKNESSES • Not present in every
segment • Lack of aggressive
marketing by dealers • Less promotional schemes • Ineffective CRM
OPPOUTUNITIES • Buoyant economy • Boom in automobile
industry • Increasing consumerism • Growth in rural economy • Improved roads • Easy availability of vehicle
loans • Reduction of excise duty
THREATS • Cut throat competition • Entry of foreign bikes • Poaching of motorbike
segment by Maruti • High cost of steel • Demanding customers • Shortening product life
cycle
Future plan of action
Re-engineering, design and development of various motorcycles and 4-stoke
gearless (CVT Type) scooters of different displacements.
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Technology Absorption, Adaptation and innovation
Efforts, in brief, made towards technology absorption, adaptation and innovation.
• Application of Computer Aided Industrial Design (CAID) for
development of vehicle concepts for up-gradation etc.
• Computer Simulation of Vehicle Structural Components, Linkage
Analysis and Stress Analysis.
• Testing of Vehicle components on test rigs and durability validation.
• Development and manufacture of prototypes using Rapid Prototyping
technology.
Benefit derived as a result of the above efforts e.g. product improvement, cost
reduction, product development, import substitution, and substantive improvement in
the product reliability.
Scooters to Motorcycles
Soon after its acrimonious break-up with its Italian technical collaborator Piaggio in
November 1999, LML faced another crisis with consumer reference shifting from
scooters which it produced, to motorcycles, which it didn’t. In 2001, motorcycle sales
outstripped scooter sales by a factor of 1.5. Adding to these troubles was the fact
that LML was losing momentum in its core area of scooters with market share
decelerating from 28.7 per cent in 2001 to 20 percent in 2002. Clearly, motorcycles
were the way to go, and LML responded to the market changes by wheeling out two
offerings, the Energy and the Adreno with technology support from Daelim( Korean
motorcycle manufacturer).
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Launching of Freedom
With less power and acceleration, neither Aderno nor Energy could compete with the
likes of Victor or Caliber. Nothing they offered was worth a sticker price of Rs.
44,000/- against the norm of Rs 40,000/- for competitors in the segment. LML did
attempt to reinvigorate sale by boosting engine capacity to 110 cc, giving a little
more power and lunching the Energy FX and Adreno Fx, a move that didn’t work
either. With scooter sales sinking and the two motorcycles languishing, losses piled
up. For fiscal 2003, losses stood at Rs. 44.24 core on sales of 574 crores. LML
opted for the most natural way out- cost cutting. Inventory was cut, the workforce
rationalized and some value engineering introduced. Operating cost dropped by 8 to
10 per cent. But the big push was to come from a dream motorcycle that was to be
wheeled out of LML’s Rs 10-crores R & D facility. In 2001, the research kick-started
with a survey of nearly 6,000 bike riders. The company knew that the consumer
wanted motorcycles, not scooter. What it didn’t know was precisely what kind of
bikes consumers wanted.
Among the demands for a perfect motorcycle were more stability and control, more
power and a choice in colour. Consumers complained of being tired of the functional
black, grey and red. Accordingly, the company churned out its new offering. The
Freedom’s engine was a variation of the energy FX’s engine, but LML tuned it to
rider preferences and came out with a frugal engine that would support both clam
and sporty riding.
LML Restructured its Product Portfolio
“Increasing product coverage is the only feasible route to return to profitability”, said
LML in its annual report for 2001-02. After an indifferent start, LML is finally being
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taken seriously in the motorcycles bazaar, thanks to its eye-catching offering.LML
tasted initial success in the motorcycle segment with Freedom but consequently
suffered due to:
• A single brand fatigue.
• Capacity constrained when sales of freedom peaked.
Deepak Singhania, managing director of LML limited, thinks that innovation is like
breathing “you just stop after the first breath thinking you don’t need to breathe
anymore,” he says. “You have to keep satisfying the package”. The Singhania
promoted LML Ltd. has restructured its model portfolio after the recent launch of
three new models- Freedom Prima (110 cc and 125 cc) and Graptor. The company
brought four of its existing models- Adreno Energy and three Freedom variants – SP,
UCF and DX under one model, Freedom DX.
Fierce Competition
LML PRODUCTS COMPETITORS PRODUCTS
GRAPTOR BAJAJ PULSUR
FREEDOM PRIMA 125 TVS VICTOR, BAJAJ WIND, HERO HONDA AMBITION FREEDOM PRIMA 110 HERO HONDA PASSION,SPLENDOR
The LML board comprises of the members of the Singhania family. The LML board
of directors includes two whole time directors, Lalit Kumar Singhania and Sanjeev
Shreya and managing director Deepak Kumar Singhania. Anurag Singhania is the
head of operations as well as the executive director. Then follow the three executive
directors of technical, marketing and corporate planning divisions.
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Fig: 1 LML Board members
Under the executive director of technical is the joint executive director manufacturing
followed by senior vice president, vice president, general manager, assistant general
manager, deputy general manager and a few managers manufacturing. Under the
executive director marketing is the senior vice president commercial followed by,
vice president, general manager, assistant general manager, deputy general
manager and a few managers commercial. Under the executive director corporate
planning is the senior vice president corporate affairs followed by, vice president,
general manager, assistant general manager, deputy general manager and a few
managers corporate affairs. HR is headed by a senior vice president HR followed by,
vice president, general manager, assistant general manager, deputy general
manager and manager HR. Pay and accounts is headed by a senior vice president
P&A followed by, vice president, general manager, assistant general manager,
deputy general manager and manager P&A.
OPERATIONS Anurag Shinghania
LML BOARD
WHOLE TIME DIRECTOR
L.K. SINGHANIA
MANAGING DIRECTOR
DEEPAK SINGHANIA
OPERATIONS ANURAG
SHINGHANIA
Whole Time Director Sanjeev Shreya
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Projects are headed by a senior vice president projects followed by, vice president,
general manager, assistant general manager, deputy general manager and a few
managers project. Legal division is headed by a senior vice president legal followed
by, vice president, general manager, assistant general manager, deputy general
manager and a manager legal. The company also has a company secretary of the
rank of a senior vice president.
Modernization and Technological Up gradation
• State- of- the- art- technology adopted not only by the departments like
production, instrumentation, electrical and mechanical but also by other
supporting departments like finance, accounts and stores etc.
• Regular Training Programmes on a continuous basis organized by the HRD
department helping in the development of requisite skills and up gradation of
knowledge, making use of internal and external faculty.
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Corporate Affairs Executive Director E.D. (Tech) E.D. (Marketing) E.D. (Corporate Planning) J. E.D. (mfg) Sr. V.P. (Corporate Affair) Sr. V.P. (Projects) Sr. V.P. (Commercial) V.P. (Projects) Sr. V.P & Co. Secretary Sr. V.P. (Mfg) V.P. (Commercial) Sr. V.P. (P & A)
Sr. V.P. (HR) V.P. (Corporate Affair) G.M. (Projects) Sr. V.P. (Legal) G.M. (Commercial) V.P. (HR) V.P. (P & A) V.P. (Mfg) V.P. (Legal) G.M. (Corporate Affair) A.G.M. (Projects) G.M. (Mfg) G.M. (HR) G.M. (P & A) G.M. (Legal) A.G.M. (Commercial) A.G.M. (Corporate Affair) A.G.M. (P & A) A.G.M. (Mfg) A.G.M. (HR) A.G.M. (Legal) D.G.M. (Corporate Affair) D.G.M. (Projects) D.G.M. (Commercial) D.G.M. (Mfg) D.G.M. (HR) D.G.M. (P & A) D.G.M. (Legal) Mgr. (Commercial) Mgr. (Mfg) Mgr. (Corporate Affair) Mgr. (HR) Mgr. (P & A) Mgr. (Projects) Mgr. (Legal) Fig: 2 Organization Structure of LML
LML BOARD
Whole Time Director L.K. Singhania
Whole Time Director Sanjeev Shreya
Managing Director Deepak Singhania
OPERATIONS Anurag Shinghania
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SYSTEM MODEL FOR PLANNING Fig: 4 System model for planning.
Fig: 3 System Model for Planning, LML Ltd.
TOP MANAGEMENT’S OBJECTIVES AND GOALS
EXTERNAL FACTORS -Political -Economic -Competition
INTERNAL FACTORS -Areas for improvement -Financial and technology Innovation - Human resources
POLICY DEPLOYMENT OF OBJECTIVES & GOALS -Quantified and time bound - Process improvement areas
STRATEGIES - Continuous monitoring of goals - Revised action plans in case of variations - Cost saving analysis - Expansion and diversification
ORGANISATIONAL DEVELOPMENT - Lean organizational structure - Cultural integration - Employee development
SYSTEM - Continuous focus on Customer, Cost
and Delivery - Profit center concept - Planning and control - Information sharing
IMPLEMENTATION AND MONITORING
