VCCL Ltd Company Summary

VCCL Ltd Summary

VESPA CAR CO LTDOBJECTS & ACTIVITIESManufacturing of all classes of automobiles including two-wheelers and three-wheelers.PROMOTIONThe Company was jointly promoted by Lohia Machines Ltd. (LML) and Piaggio of Italy. Piaggio and LML agreed to participate in the equity capital of the Company to the extent of 28% and 32% respectively.TECHNICAL COLLABORATIONThe Company entered into the following technical collaboration agreements: (i) LML gave sub-license to the Company with the consent of Piaggio Italy under which the Company have the same rights in regards to manufacture, technical information assembly, sale and marketing of the two-wheelers (Vespa Scooters) which LML has vis-a-vis Piaggio. Under this agreement, the Company agreed to pay (a) to LML Rs. 7.5 lakhs in lump sum , in two equal instalments and (b) to Piaggio royalty at the rate of 3% subject to taxes on the two-wheelers manufactured by the Company upto 3rd November, 1990, (ii) Piaggio agreed to transfer technical know-how to the Company for the manufacture of Three-wheelers, on payment of royalty at the rate of 3% subject to taxes for seven years during the period of agreement.OPERATIONSCommercial production commenced in September 1986. During 1986-87, the overall sales turnover reached Rs. 11.47 crores mark. Two new models of scooters named LML Vespa Alfa and T5 were introduced . The Company could not achieve full production targets due to non availability of power, delay in receiving the consignment of imported material, etc. The scooters were also exported to Bangladesh, Combodia, Vietnam, Singapore and Macao. The project report for setting up the three-wheeler plant was prepared and a proto-type of the three-wheeler was being made. During 1987-89 (18 months) production and sales improved to 24,295 nos. and Rs. 31.12 crores respectively. The prototype vehicles were made and had been approved by Vehicle Research & Development Establishment (VRDE) for road worthiness. The application was made to IFCI for term loan for financing the above project. During 1989-90, production and sales amounted to 8,806 nos. and Rs. 12.57 crores respectively .Production was adversely affected due to strike by workers between April to September 1989. The Company received order for export of three wheelers to Bangladesh. During 1990-91, though production and sales had more than doubled, the Company continued to incur losses due to political instability, foreign exchange crisis, severe credit squeeze etc. During 1991-92, (18 months) owing to recession in demand. the company could sell only 8,226 scooters as against 19,659 scooters in the previous year.SICK INDUSTRIAL COMPANIES (SP. PROVISIONS) ACT 1965During 1991-92, the Company came under the provisions of the above mentioned Act, and a reference was made to the BIFR.The two promoters viz. LML Ltd. and Piaggio VE submitted a detailed proposal to the financial institutions for financial and industrial restructuring of the Company. Apart from increasing the capital base, it was also proposed to take up production of light 2-wheelers and engines with a substantial buy back of engines by Piaggio.FINANCEThe following term loans were sanctioned: (i) Rs. 380 lakhs rupee term loan by IFCI in participation with IDBI and ICICI (ii) foreign currency term loans of US $ 157,500 and 22,794 collectively equivalent to Rs. 25.30 lakhs by IFCI, (iii) Rs. 50 lakhs by GIC and its subsidiaries (iv) Rs. 50 lakhs by UTI by way of subscription to 14% privately placed debentures and (v) Rs. 200 lakhs by commercial banks..