The Hindu Business Line : Kinetic group pins hopes on scooters for turnaround

AFTER a two-year slump in the business, Pune's Kinetic group is on a turnaround path, completely restructuring its business and charting out plans to come out of the red doing what it did best - making scooters.

Having just recapitalised the two group companies, Kinetic Engineering Ltd and Kinetic Motor Company Ltd to the tune of Rs 65 crore, the company is now also de-risking itself getting into the high-growth auto component manufacture business, which is expected to earn revenues of Rs 100 crore in the next 12 months.

New launches: Over the next few months the company will launch the first of the seven scooters the kitty of Italian partner Italjet. The first of these, the 165-cc Millennium, is expected to go into commercial production in a couple of weeks and roll into domestic markets and in Europe simultaneously.

While the product will be sold in India, Sri Lanka and Bangladesh under the Kinetic brand, the company plans to sell the vehicle under the Italjet brand in Europe. The Millennium will be followed in export markets by the Euro and later the 50cc and 100cc Dragster scooters.

"We are rebuilding our scooter portfolio and it will be marked by the launch of the Kinetic 4s," the Joint Managing Director, Ms Sulajja Firodia Motwani, said. The company is expecting the relaunched old favourite from its stable, now in a four-stroke, fuel efficient (55-60 km/litre) avatar to sell at least 50,000 units in the first year.

Auto component biz: The group, meanwhile, is also betting big on the auto component business in which group companies including ZF Steering have been very active. "The Kinetic group has always been making components and our operations are vertically integrated to take on the job," Ms Motwani said.

The restructuring plan envisages excess capacities at Kinetic Engineering being utilised to manufacture a range of small engines and parts in the range of 350-500 cc (eventually even 800 cc) for the two, three and four-wheeler industry and the company is now looking at transmissions and other engine parts to further grow the component business.

"We are already doing business with Carraro, Force Motors and Tata Motors and are in talks with companies in the US for components for the sports utility and recreational vehicles," she added pointing out the company's component business had revenues of Rs 55 crore last year. "This business will contribute significantly to our turnaround," Ms Motwani said.

Motorcycles a drag: Industry analysts, meanwhile, maintain the company's descent into the red was fuelled largely by its foray into the motorcycle business on which it spent an estimated Rs 250 crore but failed to get in the required volumes to justify the investments.

"We now plan to renew our focus on the scooter business and spend considerably lesser amounts promoting the motorcycle business. We also intend to start exploring export markets for the scooters and though they will only give us small volumes initially, it is a new opportunity for us," Ms Motwani said.

"Our losses have already come down in the last quarter and by March 2006 we will be making profits," she said.

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