In a letter to the stock exchanges, LML stated that it "along with the Indian promoters-Suryodaya Investment and Goldrock Investments-and associate company Vespa Car Company Ltd and Piaggio & C SpA and Piaggio Vespa BV have negotiated in good faith and reached an out of court settlement to resolve all of their disputes and differences." The settlement brings down the curtain on the acrimonious dispute between Piaggio and LML.

The termination of the JV has brought a windfall of Rs 46 crore for LML as Piaggio will pay it Rs 23.65 crore in consideration of termination of all contracts including cessation of non-competition obligations assumed by the Italian company and of rights of LML and another Rs 13.55 crore as subvention payment in its capacity as a co-promoter of Vespa Car Company Ltd (VCCL). Piaggio will also not claim refund of the Rs 8.80 crore paid to LML as advance share application money.

Piaggio and LML will withdraw their respective claims and counter claims against each other currently pending before the International Court of Arbitration. Legal cases pending before the Company Law Board will also be withdrawn.

Piaggio will withdraw its nominees from the boards of LML and VCCL. LML is also acquiring Piaggio's stake in VCCL for Re 1.

In a letter to the stock exchanges, LML stated: "In terms of the settlement reached between the parties, the joint venture agreements of LML and VCCL with Piaggio as also all other agreements between either of them and any of Piaggio will be terminated. The exclusivity rights of LML will also terminate. LML shall, however, retain non-exclusive rights to use all Piaggio technology received for all vehicles other than Piaggio motorcycle."

Piaggio will also be free to set up any business in India including manufacture of two-wheeler except motorised two-wheelers powered with later engine till December 31, 2007. LML would be free to export all vehicles, except the 4-stroke scooter (ET-4) export of which would be permitted after December 31, 2007.

LML and Piaggio will not use trademarks, logos and brand names of each other. The rights to the `Vespa' trade mark will rest solely with Piaggio.The Indian promoters' equity stake in LML will increase to nearly 50 per cent from the current 26.10 per cent in the Rs 41.50 crore paid up capital.

INSIGHT:

Shareholders will benefit
The fact that Piaggio has finally decided to exit from LML gracefully has come as good news for the LML shareholders, with the stock hitting the upper circuit. While the Singhania's will definitely benefit from a higher shareholding, the other shareholders will also benefit; from the fact that it can now focus on its new product launches as well as on the export market. Though the market is enthusiastic about the deal, the future valuations will certainly depend on the ability of the company to turn around completely. For the first six months LML's scooters sales dropped by 14 per cent, while production was lower by 13.5 per cent. A lot will depend on its new launches.

-- Aaron Chaze