INSUBCONTINENT EXCLUSIVE:
MUMBAI: Eicher Motors, the maker of Royal Enfield brand motorcycles, has suspended payments to a few of its suppliers, invoking what is
by the Covid-19 virus outbreak resulted in shuttering of manufacturing facilities and dealerships for automobile companies.
"While we are
said in a circular to select suppliers late last week.
Given the extraordinary circumstances that have disrupted its business operations
government instructions, protection of health and safety of employees and the pandemic-induced disruption of third parties.
The company
fulfilling its contractual obligation -- would continue beyond the 21-day lockdown.
The company is evaluating all forward-looking
contractual commitments given the unprecedented situation - that also with select business partners only - said people in the know.
In an
official response, Royal Enfield spokesperson said, the company has not postponed or suspended any payment for material and goods already
supplied, and/or services already rendered
The engagement with stakeholders is done in a manner that is contractually provisioned for
"We have prioritized salary payments to all our employees, and our temporary and permanent workforce
We have honoured all our current contracts and also taken steps to help those vendors / suppliers who might be vulnerable," added the
in mutual funds and fixed deposits grew annually by 47% to Rs 5,896 crore between financial years 2016 and 2019, according to its financial
year 2019 annual report.
The company also has trade receivables of just Rs 90 crore on sales of Rs 9,794 crore in the previous fiscal
year.
This also shows that pending receivables from debtors has been historically low.
Sales volumes at its most profitable two-wheeler unit
have not been encouraging in the current fiscal year, although it had not reached alarming levels to prompt it from holding back payments to
vendors.
Royal Enfield sold 14% fewer motorcycles in the first eleven months of the ongoing fiscal year.
The force majeure announcement came
as a surprise to some industry observers, as Royal Enfield had already cleared its BS-IV stock and the amount due to vendors was not a
With Hero MotoCorp taking the first step of Force Majeure, given the environment, Eicher Motors has joined the bandwagon," said an executive
at a vendor company.
Hero MotoCorp, which is sitting on sizable BS-IV stock, informed its vendors last week that it was invoking force
lockdown.
The company told vendors that bill discounting facilities have been withdrawn effective immediately.
It said it would release
as per standard payment terms.
Hero MotoCorp said it made payments up to March 22, adding it would not be able to maintain its track record