News reports reveal that Singhanias of LML will buy out Piaggio's 23.6% stake in the company. This was revealed by a report in a leading financial daily.
LML is India's second largest scooter manufacturer with 27% market share (in September 1999). Its brands are recognised for styling and aesthetics.
Piaggio will pay the Singhanias Rs 135 m for the 23.6% in LML. Add to it Rs 236.5 m that Piaggio will pay the Singhanias for cessation of all non-competition obligations. As per the settlement LML shall retain non-exclusive rights to use all Piaggio technology received for all vehicles other than Piaggio motorcycle.
Piaggio shall also be free to set up any business in India including manufacturing of two-wheeler except motorised two-wheelers until December 31, 2007. Similarly, LML will be free to export all vehicles, except the four-stroke scooter (ET-4), until December 31, 2007.
Now that the imbroglio that has plagued the company is over, LML can finally focus on its scooter business and outline plans to sustain market share that has been heading southwards for quite some time now. After Piaggio's departure from the JV, technology will become constraint for future scooter launches. LML may need to tie up with technical partner if it wants to challenge Bajaj Auto's supremacy in scooters.
Sensing that scooter demand will continue to be weak with the advent of the Indo-Japanese motorcycle, LML has made a break in the motorcycle segment. It has tied up with Daelim of South Korea for technological inputs for its motorcycles. It is yet undecided on whether it wants to tie-up with Daelim for its proposed step-throughs.
Analysts have viewed the settlement in a positive manner. They opine that with a larger stake in the company, the management can now concentrate on future launches. However, lower scooter sales remain a concern. Until then, the stock is still a 'SELL'.
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