According to agency reports, Telco's domestic vehicle sales during the quarter were 23,601 units compared to 39,798 in the previous year period while vehicles exported were 1,803 compared to 1,614. Exports in value terms during the quarter was Rs 78.88 crore compared to 69.71 crore in the corresponding period last year. Vehicle production was 25,803 units compared to 51,085 in the earlier period, it said.

Company chairman, Ratan Tata, told shareholders at the 53rd annual general meeting here on Tuesday that it had been a difficult year for the commercial vehicle industry. This was compounded by low freight rates and the fact that the railways had been doing well. Tata also indicated that the poorperformance was linked to the recent bout of political uncertainty which had seen demand for trucks taking a nosedive.

According to him, there seemed to be no immediate signs of a revival in industrial activity. "It seems much longer than I thought," he said. With basic infrastructure development yet to take off and freight rates under pressure, it was impossible to predict how long the slowdown would last, he added. "We don't know if we have hit the bottom but it is certainly a long way down," he quipped.

"The first quarter showing has been very disappointing but this may not be indicative of what the whole year will be," Tata said. What was worrying, he added, was that there was no agenda or policy announced by the government for economic revival. "It will require very firm policies to revive the economy. There ought to be a recognition that we are facing a slump in demand or, for that matter, a recession," the chairman said.

Tata said that at times like these, it was important to be globallycompetitive. "We should go beyond the shores of India and be an efficient manufacturer," he added.

However, in his replies to the queries of shareholders, Tata said that there was no reason why his company should lose market share saying it was a clear case of underperformance. "The company must be able to stand up and tell all why it could not perform," he said. This would have translated into a gain of Rs 90 crore to Telco's bottom line.

On the growing competition in the Indian automobile industry, Tata told shareholders with state-of-the-art products entering the market, Telco needed to upgrade its products constantly. While discussing the importance of investment in technology, he recollected the efforts of former chairman Suman Moolgaokar who always believed in upgrading vehicles though the market never demanded it. "The strength of Telco is a result of that vision. We should conserve our resources but that should not result in a tilt towards obsolence," Tata said.

The chairman added that timeswere changing. "Telco has been operating in a seller's market. Today, we need to give the market what it needs which means greater customer support through our dealers."

Tata admitted that there were no quick remedial measures to the current slowdown. "The practices adopted by companies abroad are different as they could always close their plants or retrench people," he said, adding that Indian companies could not afford to emulate such drastic moves. He told shareholders that while it was important to make up lost ground, "the ability to weather the storm is more vital than thinking of a short-term recovery."

On the small car project, Tata said that it would involve a capital expenditure of Rs 1,700 crore while the capacity at the plant would be 150,000 to 200,000 cars. The vehicle would be marginally more expensive than the Maruti 800 and would come in diesel and petrol versions apart from a high end model.In this direction, Telco has decided to create a new set of dealers for the small car along with afresh marketing team.

He maintained that there was no question of entering into a joint venture with a foreign partner for the project as they would first demand a 51 per cent stake. "This is the reason why we did not want a joint venture though there were many suitors," Tata said. He said that Tisco, along with a global consortium of steelmakers, was developing a high strength, low weight steel for the entire auto industry.

Telco would also have a look at it for use in the small car, he added. On recent reports that the company was exploring the option of taking a 51 per cent in HMT's tractor plant at Pinjore, Tata said there were no such plans and that his executives had merely made a business visit to the HMT facility. Tata reiterated that the promoters would continue to increase their stake in their group companies within the SEBI guidelines. The Tatas presently have a share of 14 per cent in Telco. "Our desire is to increase our stake in our core companies," he said.

INSIGHT
Scrip goesup

The Telco stock has reacted very well to the first quarter performance. Against an expected operating loss, the company reported Rs 103-crore operating profit. Consequently, the scrip, which saw buyers after the results, was frozen at the circuit breaker. The stock has underperformed both at the BSE Sensex and the BSE 200 since the beginning of the year and in the last two weeks has lost close to 40 per cent of its market capitalisation. Conditions were therefore ripe for a rebound.