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We will continue to increase our R&D spending: Pawan Munjal

Hero MotoCorp, the country's largest two-wheeler maker does not see a pick-up in demand soon. The management is hopeful that the Union Budget focus on the rural economy will spur demand in the long run. Pawan Munjal, chairman, managing director and chief executive officer of the company speaks to Ajay Modi on the possibilities from the new R&D centre near Jaipur. Edited excerpts:

The initial capex for the centre was Rs 450 crore when announced in 2013. Why did it increase to Rs 850 crore?

In the course of setting up this facility, we decided to go whole hog and not leave any area of expertise. The test track got added. We went for the best possible standards of quality. Special equipment for construction was brought. It was not simple and easy. Since I wanted to create the best, I did not hold back on investments.

Once fully operational, what will this facility mean to the company?

We will be able to come up with new products on a regular basis. There was a lull for the past four years, after the separation (with Honda). We took the step (of separation) knowing that it is going to take us time. There are possibilities to do various kinds of products which we did not have earlier. Together with the infrastructure, the hardware, capex and the talent pool, we can do much more compared to what the small team at Dharuhera (R&D centre) could do.

Will the company now allocate more money towards R&D?

Clearly, the spends will go up as a percentage of profit earned. The whole intent of doing this is to spend money on R&D, do research and innovation and come up with new stuff, that we have possibly not done in the past. This centre has been set up with the intent of increasing expenditure.

February was a month of high sales growth for both Hero and the industry. We are about to end a year. Do you see the situation in the two-wheeler sector getting better?

Nothing has changed in the recent past to give us any reason to believe things will improve. We have been putting the best effort to sell more and more.

The recent focus on rural economy in the budget makes me hopeful that sentiments will change and bring more money for rural population and drive demand. At the same time, I am keeping fingers crossed for a good monsoon this year.

In scooters, you are now one-fifth of the monthly industry sales. What is the scope to grow your share further?

The two launches - Maestro Edge and Duet, are still recent. We have a lot to do with them in the market. The Duet has not even been launched nationally. We will keep increasing our numbers with them and also expand our scooter range going forward.

The automobile industry continues to face labour agitations and disturbances from time to time. What can be done to minimise them?

If one had an answer, things would really change for the good. At Hero, we have by and large had a smooth run and maintain healthy relations with the complete set up, including workers and union. It is all about relationships. These things are dealt by companies in their own individual manner. Since Hero Cycle days, we have tried to integrate every constituent, so that it's a win win situation for everyone.