For nearly a decade and a half, the Firodias' Kinetic group felt constrained by its agreement with the Honda Motor Company of Japan, its partner in scooter maker Kinetic Honda Motor Ltd. After a by-now-familiar process in which the Indian and foreign partners jockeyed for dominant position, the Kinetic group acquired Honda's shares in the joint venture for a sum of rs 45 crore. This happened in end 1998.

The first task before the Kinetic group was to streamline its production units – mopeds from the Ahmednagar plant, scooters from the Pithampur plant near Indore, and motorcycles from the Koregaon Bhima plant near Pune. But much mor ehad to be done to derive the most from the synergies that existed between group and recent acquisition.

The buyout has helped combine synergies in the two companies, especially in marketing and finance.

Marketing and finance
Says Sulajja Firodia Motwani, joint managing director, Kinetic Engineering Ltd, "We had about 200 dealers for Kinetic Honda, and about 300 for Kinetic Engineering. The Kinetic Honda dealers were primarily in large cities, while Kinetic Engineering dealers had their presence mainly in smaller towns. These have been brought together, to sell the whole range of Kinetic two-wheelers, so we have a presence in both cities and smaller towns. And the customer has a wider choice."

The acquisition has helped with finance. "Finance is becoming very important for the sale of two-wheelers. Everybody is buying on instalments. Even in small towns people want to know what scheme is available. There are many big companies that provide finance, but only in the big cities. It was a critical part of our strategy to have a private label finance," Ms Firodia Motwani.

Kinetic had three joint venture finance companies, Twentieth Century Kinetic Finance (with Twentieth Century), operating in the west and south, Integrated Kinetic Finance Ltd. (with the Integrated group) in the south, and Kinetic Capital Trust in the north. "These companies had substantial expertise in systems and the business of financing. But they were partly financing our products, partly financing other consumer durables. So we were not getting the full benefit."

The Kinetic group increased its share in each of these companies. The share rose from 14.4 per cent to 45.76 per cent in Twentieth Century Kinetic Finance, from 5.39 per cent to 17.58 per cent in Integrated Kinetic Finance and from 5.49 per cent to 7.32 per cent in Kinetic Capital Finance Ltd. The names of the first two were changed to Kinetic Fincap Ltd. and Kinetic Lease and Finance Ltd. "Through this move we got another Rs 150 crore into the business, which will be a big support to us in our sales efforts."

Having gained controlling shares in these companies, Kinetic is now focussing on product diversification and brand building. It has lined up a slew of new vehicles to address each niche segment.

Support stays
"We still continue to have technological inputs from Honda," says Ms Firodia Motwani. "We felt that technology contracts are a better way of doing business. We get the benefit of Honda's technology, and we retain our freedom to grow as we want to."

Kinetic has a technical contract with Honda Motors, by which Honda will continue to provide technology inputs for the Kinetic DX, ZX and Marvel scooters for five years. Honda will also export scooters made by Kinetic Motors, under the Honda brand name.

For new activities too, Kinetic has found the technology acquisition route rather than financial collaboration a happier option. The group recently signed a technical contract with Hyosung Motors of Korea for engine technology for motorcycles, and with UEN of Taiwan for design.