LML to hive off IT business

Scooter major LML Limited has decided to delist its shares from the Ahmedabad Stock Exchange, besides demerging its information technology department and hiving it off into a separate subsidiary.

The company would be seeking the shareholders' nod for the same at its annual general meeting on August 22.

The promoters of the company will hike their holding in the venture to 49.89 per cent from the existing level of 47.12 per cent with the preferential allotment of 2,216,067 shares at Rs 40 per share. Following the preferential issue, resident individuals will hold 21.95 per cent stake in LML, while Indian companies will control 21.66 per cent, NRIs, FIIs, OCBs will have 6.38 per cent and the collective holding of financial institutions, banks and mutual funds will amount to 0.12 per cent.

Company officials stated that its shares are being delisted from the ASE in view of the negligible level of traded volume in its shares at the bourse.

Currently, LML shares are listed on the stock exchanges of Bombay, Delhi, Kanpur, and Ahmedabad, and on the National Stock Exchange.

''Following the rapid changes in the capital market, the volume of trading in LML's shares on the ASE has been reduced to negligible level. The board has since decided to get the shares of the company voluntarily delisted from the stock exchange,'' the officials said.

The IT department, company officials said, is being hived off to make better use of and to further develop the existing infrastructure of the department, including computer aided design activities of the company.

''All hardware, software and manpower resources of the IT department are being transferred to the subsidiary, which will be able to concentrate on its core areas of IT-related activities, including vendor-dealer networking requirements and the other needs of the company.''

LML is also seeking the shareholders' nod to remove all references to its erstwhile partner Piaggio of Italy from the 'articles of association' of the company.

In view of the continuing erosion in its market share and scooter sales, LML has embarked on a comprehensive corporate restructuring plan, aiming to enlarge and redefine product portfolio over a larger price band.

As part of its management restructuring exercise, the company has appointed a human resource consultancy firm to study its existing organisational set-up and suggest steps to revamp the same. The company is in the process of rationalising its manpower and has already effected a 13 per cent reduction in its workforce over the last year, from 7,357 to 6,413.

Under the business restructuring exercise, LML has decided to fortify its presence in the existing segment and introduce vehicles in new segments. The vehicles to be launched during the year include 4-stroke mobikes, 2-stroke plastic body gearless scooter and 4-stroke scooters.

In 2000-01, the company is working to place 4-stroke plastic body scooters, a 4-stroke step-thru and a 4-stroke chopper style mobike in the market. It is also working on development of two-wheelers based on alternative fuels like LPG and direct fuel injection system as per commitment towards a cleaner environment.

The company is also linking 120 dealers, its regional offices, warehouses and marketing offices through a virtual private network operating on V-Sat. The trial runs for the first batch of dealers has already commenced and the entire process is expected to be completed by June, 2001.

LML had recorded a net profit of Rs 61.9 million for the 1999-2000 fiscal as against Rs 394.7 million in the 18-month period of its previous fiscal. The company recorded a turnover of Rs 7.29 billion during the year as against Rs 12.46 billion in the previous fiscal. Operating profit stood at Rs 438 million as against Rs 1.21 billion a year ago, while profit before depreciation, interest and tax was Rs 547 million as against Rs 1.28 billion. It paid Rs 249 million as interest and Rs 228 million as depreciation.

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