A substantial part of Eicher Motors’ success story can be attributed to Siddhartha Lal’s conviction in Royal Enfield, a struggling business back in 2000. The year 2000 could have been decisive.
That was when the board of directors at Eicher Motors decided to either shut down or sell off Royal Enfield. For all its reputation, the sales of the bike was down to 2,000 units a month against the plant’s installed capacity of 6,000; losses had been mounting for years.
The group had a diverse spread of about 15 businesses including tractors, trucks, motorcycles, components, footwear and garments, but none was a market leader.
Just one person stood up to the board, insisting Royal Enfield should get another chance. He was Siddhartha Lal, a third generation member of the Delhi-based Lal family.
Lal undertook an intense portfolio analysis and took a hard call. He decided to divest 13 businesses and put all money and focus behind Royal Enfield and trucks, two businesses where he believed the group had a genuine shot at leadership.
A decade later, Eicher Motors earns over Rs 8,738 crore in revenues and makes a net profit of Rs 702 crore (FY14). Royal Enfield brings in about 80 percent of these profits.
If you had spent Rs 55,000 to buy a Royal Enfield motorcycle in 2001, you would now have an old, rugged bike.
But if you had invested the same Rs 55,000 in shares (at Rs 17.50 per share) of Eicher Motors, the company that makes Enfield bikes, your investment will be worth Rs 4.75 crore now.