Bullet-bike maker Royal Enfield to blame as investors lose crores
The reason why investors are punishing Eicher Motors shares can be attributed to the company’s star brand Royal Enfield.
Everything seems to have come together in a perfect storm when it comes to trading in Eicher Motors share price. The company has once again touched a new low. On BSE, Eicher Motors cracked a low of Rs 23,100 per piece which has led the stock to drop by nearly 7% on the index. The quantum of loss today has been a massive Rs 1738 in Eicher share price. However, at around 1402 hours, the company was trading at Rs 23,478.15 down by Rs 1379.65 or 5.55%. The reason behind investors' fury can be attributed to the company’s star brand Royal Enfield, which is trapped in strikes, lockout and other disturbances.
On Tuesday, when markets were closed, Eicher Motors sent out a notification to stock exchanges providing details in regards to workers strike in Royal Enfield.
Eicher said, “Royal Enfield’s manufacturing facility at Oragadam has been operational since Saturday, September 29, 2018, after a part of the workforce had not reported for duty since September 24th. We expect to reach regular levels of production in a phased manner. Our manufacturing facility at Vallam Vadagal continues to operate and deliver to its full capacity.”
Eicher further added, “We would like to clarify that the company has not terminated anyone in the wake of recent developments at the plant. Salary revisions are done annually. The last annual salary revision was done in April 2018, and the next revision is due in April 2019.”
The Oragadam facility has been in operation for the last 6 years and has been a positive example of progressive human resource practices.
“We have internal mechanisms that facilitate collaborative working with leadership to address matters related to the well-being of our workforce,” said Eicher.
Lastly, the company clarified saying, “We are in dialogue with our plant based forums to amicably resolve all concerns. Royal Enfield has always been deeply committed to maintaining and furthering cordial relations with its staff and workforce to understand and fulfil their aspirations, and we will continue to do so.”
On Monday, Eicher Motors released the sales of Royal Enfield for September 2018 month, where the motorcycle recorded gradual growth.
Overall in September, a total 71,662 units of Royal Enfields were sold - recording a growth rate of 2%. While the models with engine capacity upto 350cc registered sales of 67,582 up by 2%, on the other hand, the models with engine capacity exceeding 350cc witnessed negative sales of 4,080 units down by 6%.
It was only export sales that boosted the growth of overall 2% in Royal Enfield. Eicher exported a total 1,597 of Royal Enfields rising by 54% from 1,038 unit a year ago same period.
In first half of FY19, the overall growth in Royal Enfield sales is up by 13% with 435,463 unit compared to 386,863 unit recorded between April - September 2017.
The domestic sales of Royal Enfield were impacted due to a section of the workforce at the Oragadam facility near Chennai, not reporting for work.
This has resulted in loss of production of 10,000 motorcycles in September 2018.
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