VESPA CAR CO LTD
OBJECTS & ACTIVITIES
Manufacturing of all classes of automobiles including two-wheelers and three-
wheelers.
PROMOTION
The Company was jointly promoted by Lohia Machines
...
Ltd. (LML) and Piaggio of
Italy. Piaggio and LML agreed to participate in the equity capital of the
Company to the extent of 28% and 32% respectively.
TECHNICAL COLLABORATION
The Company entered into the following technical collaboration agreements:
(i) LML gave sub-license to the Company with the consent of Piaggio Italy
under which the Company have the same rights in regards to manufacture,
technical information assembly, sale and marketing of the two-wheelers (Vespa
Scooters) which LML has vis-a-vis Piaggio. Under this agreement, the Company
agreed to pay (a) to LML Rs. 7.5 lakhs in lump sum , in two equal instalments
and (b) to Piaggio royalty at the rate of 3% subject to taxes on the two-
wheelers manufactured by the Company upto 3rd November, 1990, (ii) Piaggio
agreed to transfer technical know-how to the Company for the manufacture of
Three-wheelers, on payment of royalty at the rate of 3% subject to taxes for
seven years during the period of agreement.
OPERATIONS
Commercial production commenced in September 1986. During 1986-87, the
overall sales turnover reached Rs. 11.47 crores mark. Two new models of
scooters named LML Vespa Alfa and T5 were introduced . The Company could not
achieve full production targets due to non availability of power, delay in
receiving the consignment of imported material, etc. The scooters were also
exported to Bangladesh, Combodia, Vietnam, Singapore and Macao. The project
report for setting up the three-wheeler plant was prepared and a proto-type
of the three-wheeler was being made. During 1987-89 (18 months) production
and sales improved to 24,295 nos. and Rs. 31.12 crores respectively. The
prototype vehicles were made and had been approved by Vehicle Research &
Development Establishment (VRDE) for road worthiness. The application was
made to IFCI for term loan for financing the above project. During 1989-90,
production and sales amounted to 8,806 nos. and Rs. 12.57 crores respectively
.Production was adversely affected due to strike by workers between April to
September 1989. The Company received order for export of three wheelers to
Bangladesh. During 1990-91, though production and sales had more than
doubled, the Company continued to incur losses due to political instability,
foreign exchange crisis, severe credit squeeze etc. During 1991-92, (18
months) owing to recession in demand. the company could sell only 8,226
scooters as against 19,659 scooters in the previous year.
SICK INDUSTRIAL COMPANIES (SP. PROVISIONS) ACT 1965
During 1991-92, the Company came under the provisions of the above mentioned
Act, and a reference was made to the BIFR.
The two promoters viz. LML Ltd. and Piaggio VE submitted a detailed proposal
to the financial institutions for financial and industrial restructuring of
the Company. Apart from increasing the capital base, it was also proposed to
take up production of light 2-wheelers and engines with a substantial buy
back of engines by Piaggio.
FINANCE
The following term loans were sanctioned: (i) Rs. 380 lakhs rupee term loan
by IFCI in participation with IDBI and ICICI (ii) foreign currency term loans
of US $ 157,500 and 22,794 collectively equivalent to Rs. 25.30 lakhs by
IFCI, (iii) Rs. 50 lakhs by GIC and its subsidiaries (iv) Rs. 50 lakhs by UTI
by way of subscription to 14% privately placed debentures and (v) Rs. 200
lakhs by commercial banks..
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