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Piaggio, Singhanias part ways in scooter JV, trade charges

Italian bi-wheeler major Piaggio SPA has decided to pull out of LML Limited, its scooter manufacturing joint venture with the Kanpur-based Singhania family.

Piaggio -- through its subsidiaries Piaggio BV and Piaggio and CSPA -- has already terminated the joint venture agreement and all other related agreements with the company, LML Managing Director Deepak Singhania said.

''We have received a fax from Piaggio which stated that they have terminated the agreements and as per legal requirements, we have forwarded copies of this letter to all stock exchanges,'' Singhania said.

However, he said the legal implications of the move are being studied at present and it was not known whether Piaggio would withdraw its case from the ICC. ''We are actively pursuing the ICC case.''

Piaggio BV and Piaggio and CSPA together hold 23.6 per cent stake in the scooter manufacturing joint venture while the Singhania family also control 23.6 per cent stake in the venture. The remaining stake is in the hands of the public and financial institutions.

Piaggio has already filed a petition with the Company Law Board against the Singhanias under Sections 397, 398 and 402 of the Indian Company's Act, 1956. These sections relate to allegations of company mismanagement.

Piaggio officials, in Delhi, when contacted refused to comment. However, sources pointed out that Piaggio is now firm on its decision to exit from the joint venture and set up a wholly-owned subsidiary in India for producing its range of premium scooters.

The venture would also produce its Gilera range of custom bikes in India.

''Termination of the joint venture is the first step. We are now in the process of finalising the next move,'' Piaggio sources added.

The final price for offloading Piaggio shares in LML is also yet to be decided.

Piaggio is now preparing to approach the Foreign Investment Promotion Board for a formal approval to set up the subsidiary. ''We are in the process of finalising the details of the venture, selecting the site and are working out other modalities. Termination of the JV agreement was also necessitated by the fact that Piaggio will not have to seek a no-objection certificate now from LML for setting up a fresh venture in India,'' the sources said.

It may be recalled that the partners had crossed swords over controlling the joint venture company following the demise of Piaggio group head Giovanni Agnelli in 1998. The Singhanias had then sought to buy out Piaggio's stake in LML, citing Giovanni's death as an event that gave them the right to purchase the stake, as per the joint venture agreement.

The Italian scooter giant was earlier looking at introducing its Gilera range of bikes, including the top-end model 'Eaglet' through LML Limited. But due to the standoff between the partners, the project was called off.

LML has now joined hands with Daelim of South Korea to foray into the motorcycle segment.

The tiff and the resultant thumbing down of their motorcycle project in India has forced the company to take this extreme step of setting up a 100 per cent owned venture here. ''We have a whole range of two-wheelers, including scooters, scooterettes and custom bikes which would prove to be a success in India,'' the sources said.

''The entire project range in the company's stables is being studied to select the initial roll-outs for the Indian marketplace.''

On the equity base and investments planned for the new project, the sources said, the details of the project are presently being worked out.

Meantime, in New Delhi today, LML's counsels today rejected the charges made by Piaggio against its directors as ''frivolous and baseless''.

''The allegations made against our directors are completely baseless and LML Limited shall continue to take decisions which are in the interest of the company,'' company sources said.

The sources were reacting to the petition filed by Piaggio in the Company Law Board alleging gross mismanagement on part of the directors representing the Singhania family, the equal Indian partner in the venture.

They further stated that the allegations have been levelled against only the Indian directors and not the ones representing Piaggio on the board.

Piaggio alleged that it was ''forced'' to terminate the joint venture agreement with LML ''because of the breach of trust by the Singhania family''.

''We regret being forced to terminate the joint venture agreement because of the breach of trust by the Singhanias. We feel that the Singhanias have breached our trust and agreement, forcing us to take this step,'' senior Piaggio sources said.

The sources further pointed out that the immediate legal fall-out of the termination is being discussed with the Piaggio counsels in Italy and no decision has yet been taken regarding selling off its shareholding in LML Limited.

UNI

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