Ashok Leyland sees demand pick-up in short term; eyes maintenance, repairs

With subdued demand for new vehicles in short term, higher demand is expected for repairs and maintenance of existing fleet

Ashok Leyland Ltd said that it is expecting the demand to pick up in the short term, with a higher demand for repairs and maintenance activities of existing fleet. The company has also formed a team which monitors costs and helps roll out initiatives for cost reduction.

In a regulatory filing related to Covid-19 impact, the company said that it expected the market to revive in the short term. With pent up demand due to the ongoing lockdown, the company's Aftermarket division expects the demand for parts and services to bounce back owing to a large population of Ashok Leyland vehicles coming back into operations.

With subdued demand for new vehicles in the short term, vehicle utilisation of existing fleets is set to be substantially higher than in the recent past, subsequently leading to a higher demand for repairs and maintenance of existing fleet, it said.
 

It expects the Covid-19 lockdown to be lifted gradually which will help in resumption of full operations. This should help in generation of cash from operations. With the current levels of debt and available lines of credit the company said that it is sufficiently funded to meet all its financial commitments during the year. As on March 31, 2020 the company had a net debt of Rs 2,028 crore. Since then the company has tied up both long term loans as well as short-term loans, and this has helped it improve the liquidity position.
 

"The company currently has enough liquidity and has been tying up both working capital lines and long-term credit lines with various banks. The management team is closely monitoring the liquidity position of the company to ensure that it is managed efficiently. The company has been  meeting its commitments and maintains enough liquidity to take care of necessary obligations. Cash flow forecasts are prepared on a regular basis, which helps in ensuring efficient management of liquidity," it said.
 

While the company expects the market conditions to remain volatile and challenging, it remains motivated to build a sustainable future over the long term. The company is prepared to focus its efforts on securing supplies, manufacturing and logistics for growth and invest in new opportunities amidst this crisis. To consolidate and further grow its market position, it is ready with its indigenous, cost-effective iGen6 mid-nox engine technology for BS-VI and Modular Business Programme platform, which will deliver significantly improved performance to its customers.
 

Since the pandemic has impacted its business operations, the company is taking several measures to mitigate substantial negative impact arising out of the above including manpower, investment plans and close collaboration with customers, banks /financial institutions, suppliers and employees. During the past few months the company has launched several initiatives to improve cost management. These efforts are expected to help reduce overall costs of the company.

Aftermarket operations were interrupted due to Covid-19 and the division is taking measures to mitigate negative impact in areas of inventory management and service level delivery by working in close collaboration with employees, channel partners and suppliers.
 

Digital application LeyKart is being used by customers to address the current gap in supplies on an expedited basis. Going forward the Aftermarket division of company expects higher adoption of online ordering platform and a shift in preference towards contact-less ordering and delivery process.
 

Ashok Leyland reported domestic sales of 1,277 units in May, 2020, almost 90 per cent lower than the 12,778 units sold in the same month last year. The company's light commercial vehicle (LCV) sold 1126 units in May, compared to 4143 units in May, last year. The LCV sales were zero in April, compared to 4223 units a year ago. In April, the company has reported zero sales of M&HCV as against 8,918 units, a year ago.