When Siddhartha Lal got married , he opted for something with more horsepower than the traditional mare - a Bullet. Lal's passion for biking in general and his motorcycle brand Royal Enfield in particular is well-known . Understandable, given that 38-year-old Lal cut his teeth in boardroom brain-storming with his gameplan for Royal Enfield.
Known as Motown's Mr Nice Guy, Lal has grown as a strategist since he asked his father for two years of 'grace period' to turn Royal Enfield around. The year was 2000. The company was making losses and the conventional wisdom was that Royal Enfield should be sold. It's a good thing Lal got his way. In the next 12 years, he has not only managed to turn Royal Enfield around but also helped restructure the group flagship Eicher Motors, often going against the grain of analyst and consultant wisdom.
Looking back, Lal credits his 'naivete' for what happened with Royal Enfield. "I was just 26 years old at that time," he says, "and the way I looked at it was simply that the brand had enormous potential . I could see that from a distance with my young and relatively naive eyes that the way we were running it at that time was not doing justice to the brand. I had absolutely no idea what the job entailed because I had no idea about the motorcycle business or any business as such. That naivete helped me take the plunge. Today , if you offer me a struggling business to recoup, I will think a little more before I take it up," he admits.
Lal's litmus test was when he decided to sell Eicher's tractors and engines business to Tafe. That was 2005 and the deal was valued at Rs 310 crore. Lal had by then decided that he wanted Eicher Motor to focus exclusively on commercial vehicles. While analysts lauded the move, auto industry insiders wondered whether the 'young man' was selling off his family silver. Lal's logic was simple — he wanted to have fewer businesses performing strongly. "The Eicher tractors sale was the visible part of the changes that we did at that time and they were many," he says. "We had scores of companies, including a garment business, a hand tool business, a pulp and merchant exports outfit, a consultancy firm and so on. None of them were doing fabulously well and any problem in any of them needed a lot of management attention. So as part of the strategy, every single one of them was either sold or shuttered. I'd rather we had one or two businesses performing extremely well than have a string of companies which were mediocre."
The change wasn't restricted to the strategy side alone. On the management side too, it coincided with the old guard moving out and the entire organization changing inside out. "We were an extremely top-heavy organization so we chopped it down and cleaned it up," says Lal. "When I moved from Royal Enfield to the corporate office I saw it as an opportunity to make big changes . We spent a year analyzing the scenario... it was a wellthought-out move."
Lal knew that there were skeptics even within the company but he was confident that the CV-focus would bear out. It took him another two years to put a rock solid partnership in place. "After the restructuring , we were left with two businesses — the major one was commercial vehicles and the niche one was motorcycles," he remembers. "I used to spend 80% of my time on the CV business - getting it off the ground, negotiating for a partner , getting everything in place." The search for a partner too took its time. After serious negotiations with Daimler - the team even flew down to India for a final pow-wow before signing on the dotted line but the discussions fizzled out — Eicher found the partner it was looking for. In December 2007, Swedish truck maker Volvo signed up with Eicher Motors, investing Rs 1,082 crore for a 50% stake in the joint venture company Volvo Eicher Commercial Vehicles (VECV). The JV stumbled on to the 2008 slowdown almost immediately and two years on, the cycle has turned once more. But with enough investments in place — Rs 1,000 crore in a new engine making plant to make India a global sourcing hub for Volvo, new product platforms, paint shops and lines and a new bus body plant — Lal is confident of riding out the slump. The good news is that both businesses are generating enough "positive cash flow" to keep the investors happy. VECV is using its internal accruals to fund its expansion programme. And as of September 2012, Royal Enfield has been enjoying "40-50 % growth for more than two years and that too constrained by production" , says Lal. RE's new Rs 150-crore plant in Chennai should be up and running by the first quarter of 2013 and the product pipeline is happily busy.
Not surprisingly, Lal isn't spooked by the slowdown. "CV is a cyclical industry and it faces a basic correction in cycle every 3-5 years," he says. "Sometimes it coincides with correction in the economy as well. It's a short-term issue dealt with short-term solutions , including improvements in production, cash flow and inventory . But we do not, for a second , ease off on our long-term investments and plans." By his own admission, Lal has had a frenetic decade ever since he offered to help turn around Royal Enfield. But the deal-making zeal hasn't come in the way of his passion for the brand that started his journey. That perhaps is one of the reasons why, despite some very lucrative offers, Lal has refused to part with his motorcycle company. Now with CEO Vinod Aggarwal running VECV, Lal has more time to focus on building up Royal Enfield as a classic brand. "I can now devote 50% of my time to RE," he says. "We are creating a market for that brand which is the practical leisure motorcycle market . It's a modern classic, a heritage brand that can be driven to work and also taken to mountain dirt tracks. Through all the tough times, we have stuck to our guns. It's only now that our focus is paying off," he says.
