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Wednesday, Oct 16, 2002

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Tata Engg plans big push into high-tonnage CV

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TATA Engineering and Locomotive Company Ltd (Telco) plans to power its future growth in the commercial vehicle segment through heavier trucks of over 40 tonnes. Currently, its product range traverses up to 40 tonnes and their variants.

Such an initiative was in line with efforts to bridge the gap between the existing and global product offerings in the commercial vehicles segment, Mr Praveen P. Kadle, Telco's Executive Director (finance and corporate affairs), said. "By 2007, India can boast of highways as good as in any European countries or the US... where heavy vehicles will be needed," he said, adding that reorienting exports from its traditional bases in the neighbouring countries would be one of the key strategies to achieve higher lifecycle earnings from the commercial vehicles sales.

"We would like to get into that 60-70 tonne offerings," he added. Moreover, Telco plans to sell fully constructed trucks in future. Earlier Telco used to sell only the chassis for trucks and several local builders constructed the bodies. It would leverage the existing capacities in the country for body frames by giving its own designs and quality standards to make this segment a lucrative business. Telco also expected its exports to improve "significantly" from the current level of seven to eight per cent, Mr Kadle said.

The company is trying to increase its dealer network in the rural and semi-urban areas to push its Indica sale and would scale up the petrol version of Indica to 20 per cent to increase the composition of diesel versus petrol from the present 90:10 of the total sales of Indica. Indica had become synonymous with diesel version until the new V2 version was launched.

The company had initiated broad restructuring exercise to get back into black in the current financial year. This exercise should result in the operating margins improving to 12 per cent by March 2003, up from 8.9 per cent from a year ago, Mr Kadle said, adding that it hoped to touch its previous high of 15-16 per cent by financial year 2005-06.

In its efforts to cut costs to improve its overall financial health and achieve better margins and profits, the company has already reduced Rs 68 crore in its operational expenses during the first quarter of this financial year. Telco had set an overall target of Rs 200 crore for the current fiscal (2002-03). It had earlier achieved a reduction in costs of Rs 300 crore in 2000-01 and Rs 330 crore last year to aggregate over Rs 620 crore in costs saved over the past two years. "Close to Rs 900 crore of cost which would be saved would be in the system," Mr. Kadle said.

Meanwhile, Telco's subsidiary, Tata Technologies, is in the process of setting up a design centre to cater to third-party vendors in Pune. "It will be an offshore centre," Mr Kadle said. Tata Technologies already caters to design needs of General Motors, Daimler Chrysler and Ford.

Telco, which has started reconditioning business, expects Rs 15-20 crore to flow to its top line from such efforts in the current year. The company also planned to set up a "full-fledged manufacturing facility in Lucknow" for reconditioning business, Mr Kadle said.

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