Top level exits in Royal Enfield hurts Eicher Motors shares

Top level exits in Royal Enfield hurts Eicher Motors shares

Last updated: 21 Sep, 2021 | 02:26 pm

Top level exits in Royal Enfield hurts Eicher Motors shares

Eicher Motors shares dropped by 5% on Monday after reports suggested that its subsidiary - Royal Enfield may potentially see a fresh round of exits in its top management. For Eicher the recent resignations have come at a difficult period as the company is readying new launches of its premium bikes to revive the flagging sales. 

Potential Exits

Lalit Malik, Chief Commercial Officer at Royal Enfield, and trusted ally of MD Siddhart Lal has reportedly submitted his resignation. While 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, as per media reports. This comes after the CEO stepped down from the post in August. 

A spokesperson of Royal Enfield said, “We cannot comment on this, as we do not respond to speculative information as a policy,” responding to queries on the resignations of top executives. Meanwhile, efforts are made at the company to retain the two executives according to media reports.

CEO’s Exit

Vinod K Dasari has stepped down as the Chief Executive Officer (CEO) of Royal Enfield and as executive director on the board of Eicher Motors with effect from August 13. Dasari said that he would like to dedicate time and energy to pursue his passion and ambition in affordable healthcare. He recently set up and inaugurated a not-for-profit hospital in Chennai and intends to commit his time towards the cause of building affordable and accessible healthcare facilities.

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.

Stakeholders vs Siddhart Lal

Eicher Motors on Monday said its board has re-appointed Siddhartha Lal as managing director (MD) of the company with effect from May 1, 2021.

However, the shareholders of Eicher Motors had rejected a proposal for re-appointment of Siddhartha Lal as the company's MD for a period of five years at its recent EGM. During the company's AGM, the members also rejected the proposal of increasing Lal's remuneration.

Now, the company must navigate the extraordinary general meeting (EGM) or recasting of the ballot this week, where shareholders will reconsider the re-appointment of Siddhartha Lal as MD and his compensation. One Eicher Motors executive said that the rejection of reappointment was over Lal’s increased compensation.

Employee Cut

The proposal to reject the hike in CEO’s remuneration comes even as the employees did not receive any hikes or promotions over the last 18 two years, except an appraisal 6 months ago. 

And despite the potential exits in the top management, the company is going ahead with its plans of optimizing 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 removal of close to 100 people as employee costs had almost doubled in the last few years.

Impact of the resignation

A dozen new product offerings are in line-up, but with critical sales and marketing executives on their way out, reviving and accelerating sales growth would be a tough challenge. Royal Enfield also faces multiple headwinds of delay in product launches, falling volumes, rising cost and production disruption due to a shortage of microchips. Analysts have pointed out that any sudden resignation by top management could create a negative sentiment on the stock.