Strategic degrees of freedom

13 August 1999

In November 1998, when the Firodia family-controlled Kinetic group parted ways with the Honda Motor Company of Japan, its partner in Kinetic Honda Motor Ltd, it created a wave of speculation. People asked: what had led to the parting of ways? had the Kinetic group acted rashly? would the company go downhill, now that it did not have the Honda expertise?

"It was a sweet deal," says Sulajja Firodia Motwani, joint managing director, Kinetic Engineering Ltd, daughter of chairman Arun Firodia, who is obviously happy with the new arrangement. If the aggressive plans work, she will be vindicated in believing that this parting is sweet but no sorrow.

Kinetic Honda was formed in 1984 as a joint venture between the Kinetic group and Honda, each holding 28.56 per cent of the equity. In 1993 Honda Motor increased its stake to 50.92 per cent. Then, in November 1998, after protracted negotiations, in which Honda tried to take over completely, and the Firodias refused to surrender, Honda sold its shares to the Kinetic group for Rs 35 crore, at Rs 45 a share.

Strategic degrees of freedom
Why did Kinetic buy out Honda Motors' holding? "Kinetic is an established two-wheeler manufacturer. The two-wheeler market is set to grow 10 to 15 per cent in the next decade. We want to take a bigger slice of this market," says Ms Firodia Motwani. The parting of ways with Honda is part of this strategy.

"We had a lot of things going for us -- our name, as an established and trusted two-wheeler manufacturer, the name of the Firodias, which was built by my grandfather H K Firodia, the values we represent -- we had the technology, the capability, the brand," she says.

Kinetic Engineering has been a maker of mopeds for decades. Its Luna brand has become a generic term, synonymous with mopeds, the de-rated motorcycles that have served millions of middle class households in India who needed personal transport but couldn't afford a motorcycle or scooter.