The rise in sales turnover is due to the increased demand for its latest offering, Kinetic K4-100. As this indegeniously developed four-stroke bike costs more than twice the price of the company's mopeds, any increase in its sales is bound to have a considerable impact on its topline, especially when compared to the periods when most of its revenue was from the sales of mopeds.

Moreover, the volume-wise growth KEL has managed is more or less in line with the growth of the two-wheeler industry i.e. it has not been able to cut into the market shares of any of itscompetitors. And the fact that operating margins have fallen to 11.03 per cent for this quarter from the 11.83 per cent for the corresponding period last year, suggests that KEL has had a hard time to even hold on to its own market share.

Capital additions made last year to facilitate higher production of K4-100 have caused interest cost to go up by 40 per cent to Rs 2.1 crore from Rs 1.50 crore. This has not only caused a steep fall in gross profit margins but has also resulted in a gross profit at Rs 4.46 crore to be only marginally higher than the Rs 4.35 crore made last year. Depreciation charges at Rs 2.34 crore, however, as it is being charged on a WDV basis, was almost the same level of Rs 2.45 crore provided the corresponding period of the previous fiscal. A slightly higher tax-outgo saw an almost stagnant bottomline at Rs 1.62 crore against Rs 1.5 crore earned during the corresponding period last year.

However KEL seems to have read the writing on the wall and are now concentrating more on thedistribution and marketing of its products. It is organising dealers training programmes, upgrading its showrooms and plans to make its advertising activities more focussed. It has also increased its stake in the finance companies it had promoted (TCKF etc.) as a means to cater to its customer's needs in a better way. Besides it has introduced a tougher version of its Kinetic Safari, called Safari DX, in the South keeping in mind the bumpy roads.

The KEL scrip though, having fallen below the Rs 100 mark for the first time this month on the day of the results, was doing comparatively better in relation to the Sensex. The scrip has been continuously underperforming the Sensex in the current calender year. During April the scrip had reached Rs 70, but has looked up since and is at a level of Rs 82, helped mainly by a rally which began last Tuesday.