The company was earlier in talks with Piaggio of Italy for the project but the same could not materialise due to several reasons, sources said but declined to give further details in this regard.

While the 150 cc model would be marketed in India, the 125 cc model would be manufactured exclusively for exports, sources said. The company has targeted to produce 70,000-80,000 units of 150 cc scooters and about 40,000 units of 125 cc scooters every year initially.

Hero Motors is looking for technical collaboration and vehicle designing of the scooters and discussing with these companies in this direction, sources said.

Hero Motors is still having discussions with the prospective companies and nothing has been finalised so far but the company hopes to complete agreement soonas its four-stroke engine facility would start production by 2001-02, sources said.

The company has formed a joint venture with Briggs and Stratton of the US for developing and manufacturing four-stroke engines for scooters and mopeds in India.

The 50:50 joint venture Hero Briggs Stratton was formed in August 1998 to manufacture two-stroke and four-stroke engines for two-wheelers. Though the company has started producing two-stroke engines in 1998, the four-stroke engine production would start in 2001-02 only, sources said.

The engine project has envisaged an investment of Rs 100 crore over three years period. The amount would be brought in partly by the way of equity and partly by borrowings.

The engines would be produced at Gaziabad (Uttar Pradesh) plant of Hero Motors where the company has separated its existing engine manufacturing facility into another unit to execute the project.

The engines would be used mainly by Hero Motors which produces scooters and mopeds in India but the company wouldalso explore possibilities of supplying the engines to Indian two-wheeler manufacturers, sources said.

All the four-stroke engines would conform to the emission standards applicable at the time of the commercial launch, they said.

The company would utilise these engines for its existing range of products including mopeds, scooteratte and scooter. Present engines requirement of the company is about 1.10 lakh units per annum which is expected to go up significantly in the next three years as it is planning to launch new models and varients.

Hero Motors had hired services of an agency to study the shortcomings of its existing two-wheelers and suggest the ways to improve their performance and looks.

Based on the survey report, the company has planned to introduce several varients of its Hero Puch moped and Hero Winner scooter in the near future.

Hero Motors has targeted to sell one lakh two-wheelers during the current financial year against 77,000 units sold in the last fiscal.

It has also aimed toexport 20,000 vehicles to European and South American market during the current financial year. During the first quarter of the fiscal 1999-2000, it has exported 3000 vehicles.