Royal Enfield Motors, the manufacturer of Bullet range of high-end motorcycles, is considering a proposal to lease out the production facility at its recently commissioned plant at Jaipur.
This is aimed to help the company return to profitability following the losses incurred in the previous fiscal -- primarily due to sub-optimal capacity utilisation.
The company will, however, continue normal production at its Chennai plant. Royal Enfield's Jaipur plant, which was commissioned in 1999, has an installed capacity of around 9,000-12,000 bikes per year.
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However, against the company's total capacity of around 39,000 bikes, sales during the previous fiscal were only around 22,000 units, inclusive of exports.
Royal Enfield is a division of Eicher, which also manufactures tractors and gears.
Sidharth Lal, chief executive of Royal Enfield, said: "We expect to close this fiscal with sales of around 25,000 units, which our Chennai facility alone can produce. Therefore, in order to cut losses and return to profitability, we have stopped production at Jaipur. Among other things, we are looking at the prospect of leasing out our capacity at Jaipur to outside companies."
"We are currently in talks with a few companies, but we will take a final decision only after we gauge the improvement in our motorcycle sales," Lal added.
Lal said the company was at present paying a huge amount towards interest and depreciation charges at the Jaipur plant, where one phase of construction has been completed. The proposal to lease out the capacity is aimed at raking in revenues from the idle capacity. Currently, the level of activity at Jaipur is "minimal", Lal said, adding that the company was maintaining some activity at the plant to keep it in working condition.
Between April-December 2001, Eicher had paid Rs 35.79 crore towards interest and depreciation alone, on a turnover of Rs 448.42 crore. Royal Enfield has sold around 19,644 motorcycles (including exports) till January this fiscal, against 17,868 units during the same period last fiscal.
After posting losses of Rs 51.47 crore during 2001-02, Eicher posted a marginal profit of 32 lakh at the end of the quarter ended December 2001. However, Eicher's cumulative losses till December this fiscal stood at Rs 11.78 crore.