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Rs100 crore notional loss in turnover: TVS

Rs100 crore notional loss in turnover: TVS
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First Published: Mon, Mar 10 2008. 08 18 PM IST

Updated: Thu, Mar 13 2008. 11 36 AM IST
Chennai / New Delhi: India’s third largest bike maker TVS Motor Co. Ltd said a Madras high court order preventing the company from selling its bike “Flame”, with a twin-spark ignition, because of a spat over technology infringement has resulted in a potential turnover loss of Rs100 crore.
The Chennai-based company did not reveal the impact it would have on potential profit. TVS had planned to sell around 30,000 bikes in a month, but for the legal order that put the brakes on the sale. Before the court order, TVS had sold 614 Flame bikes between 13 December 2007 and 16 February in Tamil Nadu.
“It is like the floods. Can you do anything if there is a case of floods?” H.S. Goindi, senior vice-president, international business and three-wheelers at TVS, said. “It is part of life and we will move on commercially, and let the legal battle run on the parallel track.”
TVS had pinned its hopes on the bike to capture market share in the popular 125cc engine executive segment, which contributes to around one out of two bikes sold in India. At present, the company has a negligible presence in this segment with a price that range up to Rs50,000.
TVS is battling a case against its larger rival, Bajaj Auto Ltd, where the bone of contention is a technology called digital twin-spark ignition (DTSi) that uses two igniters instead of one for better fuel efficiency. Bajaj claims to have patented this technology and called it a violation when TVS unveiled the Flame with two igniters.
The court order seems to have added to the problems already faced by TVS and other manufacturers in the two-wheeler industry, mainly the reluctance of financial institutions to lend that has led to a dip in two-wheeler sales.
To compensate for the loss, Goindi said TVS is targeting higher sales numbers than before to make up “notional” losses, but he declined to comment on the revised targets.
The company officially on Monday launched a new version of the Flame, where the engine uses one igniter instead of two, to circumvent the technology dispute. Asked if the company would switch over to using two igniters if it won the court battle, Venu Srinivasan, chairman and managing director, said: “I would not like to speculate on that. We will decide at that point of time.”
The company plans to sell 15,000 units of the bike in March and move up to 25,000 units by October. The company plans to change the DTSi design of the bikes already produced and house only a single igniter.
“We have only 600 vehicles in inventory (of the old Flame). We just have to change the cylinder head and the costs are negligible,” said Srinivasan.
vidhya.s@livemint.com
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First Published: Mon, Mar 10 2008. 08 18 PM IST