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When Eicher bites the Bullet...
K R Sundaram Iyer (KRS) and his nephew K Eswaran from Kallidaikurichi started with the business of trading in bicycles and built an industrial empire.
ROYAL CYCLES and the English Cycles and Motorcycle Importing Co. were set up in Broadway by KRS and Eswaran to sell bicycles and motorcycles. They dealt with  branded bicycles of Raleigh, Rudge, Humber, BSA, Hercules, Phillips... and the Royal Enfield motorcycles. The 3.5 hp Enfield Bullet, with its rhythmic engine sound, was highly popular for its power and reliability. In line with such flourishing dealerships leading to progressive manufacture in the aftermath of independence, the two business leaders set up  Enfield India Ltd at Tiruvottiyur in North Madras.

The uncle-nephew duo also set up the Easun Engineering Co that focused on electrical transmission business. Later KRS and his sons took total charge of Enfield India and Eswaran and his family focused on electrical transmission business.

Enfield India flourished with the reliable workhorse, the Royal Enfield motorcycles. KRS also set up the K R Sundaram Industrial Estate in Tiruvottiyur, the first private industrial estate in the state, to produce components for Enfield India. But tagged to a single mother unit with  limited production, the estate did not flourish. KRS’s eldest son S Sankaran and later his younger son S Viswanathan took charge of managing the company. KRS’s second son S R Subramanian headed Madras Motors that distributed the company’s products at the national level. In the protected market conditions with limited competition, Enfield India flourished. Two other companies– Ideal Java Ltd and Escorts Ltd – focused on motorcycles in the 2.5 hp and 1.75 hp range and built up good custom.

Neither fantastic nor fabulous...

The attempts of Enfield India to produce motorcycles in the lower capacity did not succeed over much. The brand Prince did not take off. The Fantabulous scooter designed in-house was neither fantastic nor fabulous.

Diversification into agriculture engines proved to be a success. The company set up a plant at Thoraipakkam  to produce Villiers engines and it met with good demand. Viswanathan who took control in the 1970s embarked on expansion investing in a large facility in southern Tamil Nadu, created production facilities at Ranipet and also spent on a corporate headquarters at Saidapet. Post 1973, with the petrol prices shooting up and with the low fuel efficiency of the Bullet, the going became tough. With a low capital base, with heavy dependence for orders from the government (Defence & Police) and with stiff competition from Java and Escorts, the company accumulated losses and struggled for survival. By the mid 1970s, financial institutions, which had major stakes, took over.

A facile turn - around...

Under the advice of M K Raju Consultants, a turn around strategy was planned and successfully implemented. When the company was again on the growth path, Viswanathan took control, but did not adhere to the strategy suggested by the consultants that resulted again in losses.

When the government opened the LCV and two-wheeler industry for international investment in the 1980s, Enfield India did try to expand and attempted collaboration with the German Zundapp; but it did not take off.  The group missed the bus again when the economy opened up in 1991.

Viswanathan invited the Eicher Group to join hands. Vikram Lal and Subodh Bhargava took control in 1990. After three years, Eicher group  bought out the shares of Viswanathan. While the latter struggled to keep with the finance problems, Lal and Bhargava tackled it so easily: they settled the dues for IDBI, successfully negotiating funding and reduction of interest and sold the corporate office building to the bank. They sold off the flourishing agriculture engine plant to Greaves
Cotton for an attractive price. Presto! The heavy financial liabilities were cleared without much fresh infusion of funds.

Building synergy...

Enfield India became part of Eicher Group which itself was struggling to find its feet. Eicher, for long, was focusing on medium and heavy vehicles and on tractors. The motorcycle business was a small part of the group’s total business and did not receive much attention. The decision to look for synergy and to evolve as a leader in a limited segment led to the group vacating several businesses including the tractor business later sold to TAFE. This has enabled the group to focus on the huge potential offered by the two-wheeler industry where volumes have grown, from a few thousands to over 13 million in less than two decades.

For over two decades, Eicher was spreading its attention over a multitude of businesses and in a recent interview to The Hindu, managing director Siddhartha Lal frankly admitted to this: “in 2004, we had many big businesses. But we had a multitude of smaller businesses. We had got into garments business, tools, merchant trading, agriculture product trading - all sorts of stuff! We did a full portfolio rehash. We should focus only on a few. So, we wanted to move from being mediocre to being great.”

And so Enfield India that pioneered motor cycle production almost six decades ago is now gearing up to evolve as a significant supplier of mobikes in the higher power ranges. The plan to focus on expertise and develop markets  assumes interest.

I saw Lal launching improved versions at the AutoExpo 2012, New Delhi . It indeed was a spirited promotion. A sharper focus should win better custom. However, the field is now crowded with more sophisticated suppliers of world renown. Only recently TVS Motors announced plans to collaborate with BMW, Germany in the higher ranges.

The plans of Siddharth Lal to focus on export markets in developed and emerging markets and in rural urban and traditional youth segments hold promise ending years of low growth. 

Enfield bullets from Oragadam

FROM the crowded Tiruvotriyur where it set up the first unit five decades ago, Enfield India has opened a new factory at Oragadam spread over 50 acres.

With the inauguration of Phase 1, Royal Enfield plans to end this year with a production of 175,000 vehicles. Phase 2, which has already initiated, will ramp up the production capacity to 250,000 by 2014. With an eye to capture global markets, Siddhartha Lal, MD and CEO, Eicher Motors Ltd, said that this factory would be the nuclei for their company’s future.

Phase 1 of the plan involved an initial investment of Rs 150 crore. At the plant at Tiruvotriyur engines are hand crafted and the current capacity of the plant is 12,000 motor bikes per month, Lal pointed to plans of shifting the assembly and painting operations to Oragadam to focus on engine fabrication at Tiruvotriyur.

Lal pointed to the rise and fall of the Indian medium and heavy motorcycle market along with Royal Enfield. “We define the market and we do not have competition as such. Our demand is more than supply. Oragadam plant’s capacity is one vehicle per minute and over 800 per day and this will help us balance demand,” said Lal.

As Lal kick started the first bike produced from the Oragadam factory and zipped past the 1.4 km long test track within the factory, you understand better the Royal Enfield tag, ‘made like a gun.’  

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