Instead, the company has decided to channel its investments to restructure its two-wheeler subsidiary, Kinetic Honda Motor Ltd, chairman of Kinetic Engineering, Arun Firodia told The Indian Express. The company is dropping the `Honda' brand name from its domestic scooter sales.

Kinetic's small car, which was touted as the `smallest of the small cars' by analysts, was to be priced at Rs 1.25 lakh. Kinetic said as the cost of the car will shoot up beyond the Rs 1.5 lakh mark after paying 40 per cent duty, it will not meet the target customers of two-wheeler users who would like to upgrade to cars. Hence, as the new price would not be competitive, it has decided to drop thecar plans.

The company, however, hoped that the duty concession of 15 per cent duty (equivalent to the duty on auto-rickshaws) will come sooner or later. Interestingly, the micro-car's name `City' was in direct conflict with Honda's `City' brand name. Honda has a separate joint venture with Delhi-based SIEL Ltd to make Honda cars in India.

On open offer to KHML shareholders, Firodia said as per SEBI's takeover code, KEL need not have to make any offer to the small shareholders of KHML. The KHML scrip is, meanwhile, touching its 52-week low every day since Honda's exit.

``As per SEBI's takeover code, certain exemptions have been given to sell-offs between Indian promoters and foreign collaborators. SEBI's takeover code does not apply to us even if the company's management and undergoes a change,'' Kinetic chairman argued.

After Honda's exit from the loss-making joint venture, Firodia said the group has decided to launch a new four-stroke scooter model from KHML's stable. The company will alsoconcentrate on Kinetic increasing its market share in the northern scooter markets, he said.

After Honda's exit, Firodia's Kinetic Engineering's stake has gone up to over 70 per cent. ``We are planning to restructure KHML by increasing advertising and marketing budgets. Efforts would be to use the Pithampur plant to its maximum capacity.'' he said.