LML, Act II

The attempts to revive the company show the pugnacious side of Deepak Kumar Singhania
Bhupesh Bhandari / New Delhi January 14, 2011, 0:42 IST

There is a current affairs magazine that comes to me every week. I haven’t subscribed to it; I guess the publisher has forgotten to remove me from the initial mailing list. What caught my attention in a recent issue was a full-page advertisement for LML NV four- and two-stroke scooters. The backdrop was yellow, the scooter was painted a vibrant red and the girl on the pillion seat was in a short black dress. There were three bits of information on the page: LML was India’s largest exporter of scooters, the four-stroke variant can run up to 86 km on a litre of petrol and the company offers warranty for three years or 30,000 km.

LML had fallen off the radar screen some years ago. There was simply no news from the company. The Society of Indian Automobile Manufacturers for long didn’t publish LML’s production numbers. Its promoter, Deepak Kumar Singhania, has kept a low profile for several years now. Rivals haven’t bothered to track it. Some months ago, in June and July 2010, the LML share price had climbed over 40 per cent from less than Rs 9 to close to Rs 13 on the buzz that TVS was in talks to acquire its assets — a factory in Kanpur. Trading volumes too had risen sharply. TVS as well as LML had denied the buzz. The share price has since then fallen to Rs 11 now, and the trading volumes too have thinned. The advertisement, done by Brand Curry, clearly shows that the company is trying to claw its way back into reckoning.

Here’s what’s happened. LML, till the late 1990s, was the Indian partner of Piaggio. It was the first serious threat to the hegemony of Bajaj Auto at a time when scooters sold more than motorcycles. Tata Motors Director Ravi Kant was the spearhead of its marketing team in Delhi. Piaggio exited in 1999 after an ugly spat with Mr Singhania. LML was now on its own. It diversified into motorcycles with technology bought from Daelim of South Korea. It even developed some models on its own. But the going was rough and the company got mired in losses. It was sent to the operating table of the Board for Industrial and Financial Reconstruction (BIFR).

Following some labour unrest, LML declared a lockout in March 2006, which was lifted only in January 2007. That is when the company began to take stock of the situation. While its forte was geared scooters, the market had moved en masse to gearless scooters. LML realised that geared scooters were a niche it could fill. As selling in the domestic market entails large marketing budgets, LML decided to restart operations with exports. It appointed distributors who would take care of the marketing. Company executives say 4,000 scooters sell every month under the LML badge in Europe as well as the US.

Two years later, LML decided to re-enter the domestic market. By then it had developed the four-stroke LML NV which gives fuel efficiency not very different from motorcycles. This is not easy. Unlike a motorcycle, the engine in a scooter is covered by a steel plate, which can cause heating. To control the temperature, a fan needs to be added; but this eats up a lot of energy and consequently reduces the fuel efficiency.

The higher fuel efficiency removed one roadblock from the mind of the consumers. The next step was to identify people who would buy a geared scooter. Market research showed that in spite of the trend towards gearless scooters, there were hardcore loyalists who still yearned for a rugged geared scooter which could help them in their work. These were identified as men above 35 who lived in large cities but were not metrosexual. Traders and shopkeepers fitted the bill.

In April 2009, LML launched its scooters in Delhi. The company claims that against the 4,500 gearless scooters sold every month in the city, it sells almost 1,500 geared scooters. Though the two products are strictly not comparable, this would mean it sells more than several leading scooter brands. It has eight dealers in the city, who have together created 14 touch points for the brand. Appointing dealers remains a problem though, because LML has no future glory to sell, thanks to its recent inglorious past.

In 2010, LML expanded to Punjab and some cities of western Uttar Pradesh. All told, the company claims that sales have hit 3,500 per month. Combined with exports, this gives volumes of 7,500 a month which translates to an annual run rate of 90,000. This doesn’t mean the company is out of the woods. It is yet to come out of the clutches of BIFR. But the volumes have given LML the confidence to draw up plans for gearless scooters and motorcycles (once again) sometime this year. A national rollout could take a while, though.

The attempts to revive the company show the pugnacious side of Mr Singhania. He had started Lohia Machines Ltd in 1975 with his cousin R K Lohia. When Mr Lohia left in 1984, Mr Singhania’s two brothers, Sitaram and Lalit, joined the company. Sitaram walked out in 1990. By then the company had become LML, and its fortunes were on the upswing. Then the fight with with Piaggio erupted. Mr Singhania, in the days after the fight, would often say that one good thing that came out of the spat was that he learned English. The lessons of his second fight, this time for survival, will be no less important.