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Royal Enfield likely to have fresh exits after CEO leaves

By Ruchi Upadhyay 
Updated Date

Mumbai: Close on the heels of Vinod Dasari’s resignation as chief executive of Royal Enfield, the maker of the Bullet motorcycles may potentially see a fresh round of exits at the top.

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Lalit Malik, the chief commercial officer at Royal Enfield, a longstanding confidante of Siddhartha Lal, has put in his papers, people in the know said. Shubranshu Singh, the global head of marketing who successfully launched the key models of the Interceptor, Thunderbird X, Meteor and the all-new Classic motorcycles, is also serving notice to take up a bigger role outside. Meanwhile, there are efforts at the company to retain the two executives, they said.

“We cannot comment on this, as we do not respond to speculative information as a policy,” a spokesperson of Royal Enfield said, responding to ET’s queries on the resignations of top executives.
For Eicher managing director Siddhartha Lal, the recent resignations at the Royal Enfield unit have come at a difficult period. The company is readying new launches of its premium bikes to breathe life back into flagging sales, and a person in the know said he would have preferred to have all hands on the deck.

A dozen new product offerings are on the anvil, but with critical sales and marketing executives on their way out, reviving and accelerating sales would be a tough challenge. Royal Enfield faces multiple headwinds of delay in product launches, falling volumes, rising cost and production disruption due to a shortage of microchips.

A few months before Dasari’s exit, the national business head, Pankaj Sharma, had left Royal Enfield to join Ola Electric. There were other exits in crucial positions in the sourcing and logistics department.
Another major event that the company must navigate is the extraordinary general meeting or recasting of ballot this week, where shareholders will reconsider the re-appointment of Siddhartha Lal as MD and his compensation. His reappointment failed to get the requisite majority from shareholders at the annual general meeting, forcing the company to return with a revised proposal before shareholders.

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And though shareholders have raised a red flag on promoter MD’s compensation, the employees have so far not been given any increments or promotions this year and last year, hikes were offered only for six months.
Despite the shakeup in the top management, the company is going ahead with its plans of “right-sizing” the workforce as part of its Project Restore initiative, which aims to attain a 25% operating margin and sales volume of 50,000 units per month.

The programme has led to the axing of close to 100 people. Its employee cost had almost doubled in the last few years.

The company had a headcount of 5,005 at the end of fiscal 2021, with an average pay-out of around Rs 16 lakh per employee, according the company’s annual report of FY21.

The ratio of the employee cost to total revenue was 9.2% in FY21, compared with 6.1% in FY18.
The growth of employee cost outperforming revenue growth by a wide margin has been a one of major reasons for the compression in operating margins, apart from lower operating leverage due to reduced utilisation. The operating margin of Royal Enfield was 20.4% in FY21 against 31.3% in FY18.

The rightsizing is across functions, from the global commercial organisation in the National Capital Region to manufacturing operations in Chennai.

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“Around 90-100 employees are being disengaged from the company as part of the normal annual performance evaluation process,” the spokesperson said. “This is part of the usual annual employee evaluation done every year. The company is extending all possible support to these employees.”

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