Not every promoter chief is a strong brand ambassador for
the company. But 43-year-old Siddhartha Lal is an unconventional CEO and
synonymous with the product that has made the company what it is. “Siddhartha
is Eicher’s biggest asset,” says R L Ravichandran, former CEO of Royal Enfield.
Lal, the managing director and chief executive officer of
Eicher Motors, was in his mid-twenties when he jumped into the family business
to look after Royal Enfield, a loss-making unit. That was in 2000, when the
Eicher board was about to decide on shutting down or selling the motorcycle
business. He believed in the product and wanted to give it a shot.
He spent time between Chennai (where Royal Enfield’s Bullet
plant is located) and the Eicher headquarters in New Delhi, taking stock of the
problems. He visited several dealerships to gain customer feedback on the vehicle.
The Bullet was revisited, a new engine was brought in and problems were
addressed. Lal also revamped dealerships and gave the motorcycle a new look. A
connect with the buyers was reinforced through company-organised rides for
owners. He sold the tractor business and raised money to invest in Royal
Enfield. Royal Enfield motorcycles now enjoy a waiting period of two-to-three
months and wide popularity across the nation, and account for more than
two-thirds of the company’s profit.
Within the span of a decade after Lal took charge, Royal
Enfield’s gears had reversed: The low capacity utilisation of early 2000 was
giving way to a capacity constraint. The pull of Royal Enfield motorcycles
created the need for capacity expansion and the company opened a second
manufacturing facility at the existing site in Tamil Nadu in 2013. Expanding
its portfolio, Eicher introduced a new category of vehicle in June 2015,
calling it the country’s first personal utility vehicle (PUV). Multix, the PUV,
is being manufactured through a joint venture with US-based Polaris Industries
and is targeted at independent businessmen.
While Eicher now has a wide portfolio that includes trucks,
buses, PUVs and motorcycles, it is Royal Enfield products that stand tall in
the country and within the company’s portfolio of products. The reason: In the
consolidated group profit for 2015-16, 82 per cent is accounted for by Royal
Enfield alone, while it accounts for just 40 per cent of the group’s revenue.
In 2015-16, the company posted a 43.6 per cent growth in consolidated revenue
to Rs 15,689 crore, while net profit surged 66 per cent to Rs 1,278 crore.
Profits in the first three quarters (April-December) of 2016-17 also soared 57
per cent to Rs 1,117 crore.
The market has saluted this performance. Eicher’s stock
price has multiplied several-fold, rewarding investors who have shown trust in
the growth commitment demonstrated by the management. Eicher remains debt-free
and is highly profitable. The listed company enjoys a market value of almost Rs
66,000 crore and is the second most-valued two-wheeler manufacturer in the
country after Bajaj Auto.
Royal Enfield virtually rules over the whole of the
country’s mid-size motorcycle market (bikes with an engine capacity ranging
between 250cc and 750cc). In this segment, it has a 95 per cent market share.
From a mere 52,000 motorcycles in 2012, production rocketed to over half a
million units in the year ended March 2016. This is directly correlated to the
widening product range under the Royal Enfield brand. The company is investing
in a new greenfield manufacturing unit that will almost double annual
motorcycle capacity to 900,000 units by 2018.
Royal Enfield has been investing in building strong
foundations across all areas of its business. It is investing Rs 600 crore
towards product development, setting up technical centres in Chennai and
Leicestershire, UK, and enhancing manufacturing capacity and market development
activities across geographies. Post-demonetisation, when all top selling two-wheeler
brands are posting sales declines, Royal Enfield motorcycles are reporting high
double-digit growth.
This success is not limited to Indian borders. These
motorcycles are exported to over 50 countries across the world, including the
United States, the UK, Japan and several countries in Europe, South America and
Asia. Lal’s international ambitions are the reason why he relocated to London
along with his family in August 2015. He is now working to make Royal Enfield a
global brand and is opening sales outlets in places like London, Paris and
Madrid. While India continues to be the mainstay for Eicher, Lal believes that
the next level of growth will also come from developing the international
business.
The success of Royal Enfield has attracted more companies
into the segment. Bajaj Auto forayed into the space in December 2016 with the
launch of Dominar, but Lal is not worried. “People who like us will come to us.
We will continue to work on the brand, retail and marketing. People who are
part of the Royal Enfield family continue to stick to the brand. They like what
we do after we sell them the motorcycle,” he said, referring to the rides and
activities around the brand.
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