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B. Krishnakumar

Ms Sulajja F. Motwani, Joint Managing Director, Kinetic Motor... A limited product profile and rising competition could cap growth.

THE scooter-maker Kinetic Motor Company is losing speed, as evident in its performance for the year ended March 2002. A subsidiary of Kinetic Engineering, Kinetic Motor Company is better known as the manufacturer of the Kinetic brand of automatic scooters.

Formerly Kinetic Honda, Kinetic Motor Company had a tie-up with the Japanese major, Honda.

This was discontinued a few years back. Consequently, the company's products no longer sport the `Honda' tag. After severing ties, Honda Motor Company of Japan has set up production base in India and come out with the Activa range of four-stroke scooters.

Kinetic Motor Company produces two-stroke automatic gear scooters, which are marketed under the brand of Kinetic AX, DX, ZX and Kinetic Marvel. The company has a presence in the scooterette segment through the model, Style.

With motorcycles racing ahead of scooters in popularity, it is not all that surprising that Kinetic Motor Company's turnover has dropped 11 per cent to Rs 376.92 crore. Its product portfolio is stacked with scooters.

Almost all scooter producers including the market leader, Bajaj Auto, have recorded a drop in scooter volumes. Kinetic Motor is no exception. It has been further affected by the growing popularity of Honda's Activa model.

Close to 54,000 Activas were sold last year, which appears to have created a dent in volume growth for Kinetic.

As a result, Kinetic Motor's total scooter sales (including exports) dropped to 1.12 lakh units from 1.27 lakh units the previous year, according to SIAM reports.

While the physical sales volume was down by about 12.4 per cent, the turnover recorded a relatively smaller quantum of decline of 11 per cent.

This reflects the improvement in product mix in favour of higher priced models. Moreover, the reduction in the excise duty on 100 CC two-wheelers could have helped the company arrest the drop in turnover.

The launch of models appears to have pushed the average product realisation for Kinetic Motor.

The reduced excise duty incidence, coupled with the implementation of cost-control measures, has pushed the operating profit margin to 9.44 per cent from 7.97 per cent. There was hardly any change in other elements of cost such as interest and depreciation.

The increase in the operating margin, coupled with cost-control measures, has helped the company mitigate the damage to the bottomline caused by the 11 per cent drop in turnover.

For the year ended March 2002, the post-tax earnings declined by about 10.75 per cent to Rs 14.2 crore.

The growing competition in the scooter market and the steadily increasing popularity of motorcycles would continue to have a major influence on the business prospects of Kinetic Motor.

The company recently launched a four-stroke scooter under the brand name of Nova. It also plans to introduce a new 65 cc scooterette — Zing — in June.

The success of these model introductions would play a key role in the company's earnings growth.

On the other hand, the competitive pressure would be upped by proposed new model launches by market leaders — Bajaj and Honda. Besides, TVS Motor Company also plans to launch a four-stroke scooterrete and a moped shortly.

All these factors would add to the already highly competitive business milieu in the scooter market.

Given this backdrop, Kinetic Motor's financial performance is unlikely to see any appreciable jump in the near term. From an investment perspective, shareholders can pare exposures in the company.

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