Less than a week after Hinduja Group flagship company and commercial vehicle maker Ashok Leyland announced a three-working day week to meet subdued demand, another group company Hinduja Foundries today made a similar announcement to restrict its production at its three plants in the country.
Hinduja Foundries will suspend production for five days a month. While the Ennore and Sriperembudur plants will follow this new production schedule till March 2009, the Hyderabad unit hopes to return to normal production by January 2009.
While Ashok Leyland’s cut in production was completely driven by poor off take of commercial vehicles in the country, Hinduja Foundries blamed shortage of power in its home state Tamil Nadu for its decision to cut production.
V Shankar, chief financial officer, Hinduja Foundries told Business Standard that poor offtake in the commercial vehicle market was only part of the reason for this decision. The company has made an offer to the Tamil Nadu Electricity Board that it is willing to keep its plants in the state closed for five days a month in a row, if the board can provide assured power for two consecutive days. Foundries, unlike many other industrial units takes time to get ready for production once it is shut down.
As part of the crisis management plan, TNEB, has imposed severe restrictions on manufacturing units with regard to the number of hours they can operate in a given day. This policy is not conducive for a unit like Hinduja Foundries, said Shankar. There is an estimated 1000-1500 MW of power shortage in the state, which forced the state to impose a new set of restriction on industrial units recently.
Hinduja Foundries proposes to implement its new production schedule by November last week at the Sriperembudur and Ennore units, while Hyderabad will adopt the new schedule with immediate effect.
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Shankar said that the new schedule will definitely have an impact on the company’s third quarter results, but was unable to quantify it.
Company's net profit during for second quarter ended September 30, 2008 dropped by 77 per cent to Rs 1.07 crore from Rs 4.68 crore in the corresponding month of last year. Net sales, however, increased by 8 per cent to Rs 119.85 crore during the quarter. The company’s stock price on BSE fell nearly by 3 per cent to close at Rs 83.50 today.