"As per plans, the company proposes to sell 30,000 small cars in 1998-99. But for this sale of small cars, the company visualises a flat growth in 1998-99 vis-a-vis 1997-98. Since the company has created higher production capacity, it will be easier for it to adjust to higher demands as and when the same appears," said sources who added that Telco's vice-president (finance), Praveen P Kadle, intimated lenders that progress of the small car project was as per schedule, and commercial production of the same would begin at the end of the current calendar year.

It may be mentioned that Telco which recently declared its 1997-98 financial results, reported a big drop in net profitby 61 per cent to Rs 295 crore from Rs 762.32 crore in the previous year.

In its press release then, the company explained the reason stating that it had been affected by bad demand leading to lower freight rates, which coupled with higher input costs had severely affected the profitability of truck operators causing them to postpone vehicle purchases.

Lenders to Telco and automobile industry analysts point out that as no dramatic turnaround in the economy is expected in a year's time from now, "it would be safe to assume that the company's woes would stretch through 1998-99".

Sources close to Telco said that lender's concerns were sought to be allayed at a meeting convened by the company's lead bank, State Bank of India, last Saturday. The meeting, called to review the recent financial results of Telco, followed an earlier one of the consortium.