Speaking to shareholders at the company's 54th annual general meeting, Tata said the production of the Indica will stabilise at 5,000 units by September. "Telco has delivered 14,000 Indicas till July-end and has cornered a market share of over 6 per cent. Our share would have definitely been higher had we been in a position to deliver the vehicle on demand," Tata said.

According to Tata, the Indica has received a very positive response in the overseas markets and Telco is now planning to export its small car by the next fiscal.

The Indica project, Tata said, will "truly" break even only after the annual production touches 80,000-90,000 cars. The company, however, hopes to break even at the profit before tax (PBT) level once the output reaches around 65,000 cars annually.

The Telco chairman also added that the Maharashtra government was yet to clear the sales tax concession aggregating Rs 170 crore. "We have invested Rs 1,700 crore in the Indica project. It is unfortunate that the project is not being recognised (by the state government) as an important investment," Tata said.

The current year, according to Tata, is already showing signs of a revival and the automobile industry may benefit from the industrial upturn and robust agricultural growth. "We are confident about the future of the transportation industry. Freight rates are moving up and the demand for trucks is also rising," Tata said.

According to Tata, the passenger car segment will witness unprecedented competition in the coming years as most of the leading car manufacturers have set up base in the country. "Competition will intensify after global companies are allowed to import freely as per the WTO regulations. Telco will strive to manufacture a competitive range of vehicles in the low-end, which our competitors may not be able to match," Tata said.

To be competitive at the upper end, Telco will be open to forging alliances with global auto majors. "It might be difficult for us to match new model introductions or expansion of the product range in line with international manufacturers. Telco will thus explore greater co-operation including exchange of products to meet the needs of the customer without losing our own identity," Tata said.

The Telco chairman assured shareholders that the company's investment of around Rs 190 crore in associate companies has been made keeping a long-term view. "Most investments are in companies strategic to the company. I can assure you that over time Telco will reap rich dividends from investment in companies like Taco and Tata Cummins," Tata said.

During 1998-99, the Tata group has increased its stake in Telco to 20 per cent (from 15 per cent), and will continue to do so in the future through creeping acquisitions. "There are no plans to increase the group's stake through preferential allotment," Tata said.

Telcon ropes in Hitachi as equity partner

Telco Construction Equipment Company (Telcon), the newly floated subsidiary of the automobile company, has roped in Hitachi as an equity partner and may go public in future, Telco chairman Ratan Tata said.

SJ Ghandy, Telco's executive director in charge of the division, has resigned to join the new company as managing director.

According to Tata, the construction equipment business has been spun off so that it could grow in a more focussed manner. The business has been transferred to the new subsidiary for a consideration of Rs 400 crore. Telco has transferred 119 acres of land in Karnataka to Telcon that was earlier alloted to it for construction equipment.

Telco has, however, decided to put on hold the proposed investment for setting up business for automobiles at Dharwad. Tata said: "We have decided to hold back the investments due to the downturn in the automobile industry."