Telco found itself the subject of selling on Tuesday on rumours that the company was calling back its newly launched car Indigo due to technical problems.

The scrip of Tata group flagship and India's largest commercial vehicles maker slipped 1.12 per cent to Rs 159.20. It recovered from its early low of Rs 157. Over 3.2 lakh Telco shares were traded on BSE so far.

The company is rumoured to be calling back its Indigo car due to some technical problems believed to have been developed with the model. However, automobile analysts are now stating that the company has, in fact, denied these rumours.

The prompt denial saw Telco recover from a setback. The scrip lost 5.36 per cent from Rs 165.90 on 10 January 2002 to its Tuesday's low of Rs 157.

Telco had launched the Tata Indigo last month. Indigo is the company's second passenger car after the Indica that was launched almost four years ago.

The car, a sedan variant of the hatchback Indica, was priced aggressively between Rs 4.38 lakh and Rs 5.25 lakh (ex-showroom, Mumbai).

The price of the fully loaded petrol car was kept at Rs 4.99 lakh (ex-showroom, Mumbai). The company has invested Rs 400 crore in this project.

Last week, Telco said December 2002 sales were at 15,216 vehicles, a 25 per cent growth over the 12,178 vehicles sold in December 2001. Sales for the nine-month period ended 31 December 2002 were 1,42,024 units, 25.3 per cent higher than the 1,13,337 vehicles sold in the corresponding period last year.

However, month-on-month, sales declined marginally by 3 per cent following the lower sales of the car Indica.

Commercial vehicle sales, though, were impressive at 9,787 units, a 39.5 per cent growth over the 7,018 vehicles sold in December 2001 and a 20.6 per cent rise over the November 2002 sales figure (8,113 units).

For the nine-month period, Telco recorded sales of 73,481 units, 33 per cent higher than the sales in the corresponding period last year (55,265 units).

Sales of medium and heavy capacity vehicles at 50,561 units, grew 33.2 per cent, and light commercial vehicles at 22,920 units, rose 32.4 per cent.

In the passenger vehicles segment, the company recorded sales of 5,429 vehicles in the period under review. It ended the first nine months of the current fiscal with a cumulative sale of 68,547 units, a growth of 18 per cent over the same period last fiscal.

However month-on-month, sales dropped 5.7 per cent from 5,758 units in November 2002.

The fall in the passenger vehicles segment is mainly ascribed to the sluggish performance of the Indica (at 3,441 units, flat compared to December 2001).

The company said that cumulative sales for nine months stood at 51,469 units, a 24.2 per cent growth over the same period last fiscal. The Tata Indigo, launched towards the second half of December 2002, recorded sales of 466 cars for December 2002, Telco said.

Analysts say there are concerns, though, that Indica sales have turned out unimpressive in December 2002.

Even so, they insist that the commercial vehicles segment is doing well, so overall, there were no doubts about the company's future profitability, margins being higher in the commercial vehicles segment.

Telco is expected to record further growth in the coming months due to the government's thrust on infrastructure projects, the boom in the replacement market, the shift in consumer preference from one- and two-axle vehicles to multiple-axle vehicles (in which Telco holds No. 1 position), and the increase in demand in the northern region (where Telco has a strong presence).

A rise in road transport carrying food grains has also helped the company's growth. Besides, the company has resorted to aggressive cost-cutting and financial restructuring.

For Q2 ended 30 September 2002, Telco's total income (net of excise) went up by 24.6 per cent to Rs 2,165.23 crore (Rs 1,737.46 crore).

The company posted a net profit of Rs 58.80 crore, sharply reversing its net loss of Rs 61.83 crore in the corresponding quarter of last year.