Ashok Leyland set to sell 2 non-core units abroad

Company appoints merchant banker to scout buyers for Albonair and Avia

Ashok Leyland has appointed a merchant banker to look for buyers for its two foreign subsidiaries — Albonair GmbH, the German arm which works on reducing vehicle emissions, and Czech Republic-based Avia. This is part of company's plans to sell its non-core assets. The company also said for the first time in the last six quarters it made an operating profit and targeting one-third of its revenue from exports in the next three years.

Gopal Mahadevan, chief financial officer, said the company has identified Albonair GmbH and Avia for divestment.

He refused to disclose how much the company is planning to mobilise from selling these assets. The deal is expected to close by the fourth quarter of this financial year.

Albonair has reported a loss of Rs 69.35 crore in the financial year 2014. "Certain companies were bought as a portfolio, so that they can add significant growth as we move forward," he said.

The Ashok Leyland management thought that a lot of developments from these companies will come back to India to provide services here. But it found that it would take much longer time.

Avia was bought for two reasons: First, it will serve the European market and second, its cab technology. Entire Boss platform the company launched was done through Avia's cab, otherwise Boss could not have been launched.

"We would have incurred huge money in developing this cab, if we didn't have Avia's strengths. We earned value of the acquisition by way of the new cabin," he added. The company had invested €46 million in Albonair. Albonair has been into addressing the future emission requirements, but the Indian timeline for implementation of BS IV and the timeline for the latest emission control standards in Europe were delayed. It was a question of whether the company needs to hold this investment back or leave it.

Results

Mahadevan said the company saw a good quarter compared to the same period last year.

Market share increased by 1.7 per cent to 27 per cent, volume grew by 10.5 per cent (compared to industry's growth of 8.5 per cent), revenue grew by 27 per cent and Ebitda (earnings before interest, tax, depreciation and amortisation) margin rose by 5 per cent.

The company could successfully do a QIP of $110 million, which was used to repay debt in July. It also got a few good orders, 4,000 from the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). This makes the company the largest player in JNNURM. Besides, the company got an order for 2,200 buses from Sri Lanka and another order of 600 buses. Exports grew 40 per cent and on year-to-day basis it was 24 per cent.

In the medium term, the company targets one-third of its revenue from exports. To support the target, the company is planning to expand its footprint to Africa, North America and even to Russia.

"The overall performance in relation to industry and competition is satisfactory," said Mahadevan.

He said market share has increased on the backdrop of growth in network, which was doubled in the last 3-4 years to around 550 sales and service points and frequent new launches. It has introduced new products consistently. Market penetration of the company was good. The company has 50 per cent plus market share and the revival helped achieve better growth, he said.

The company has been focusing on reducing working capital and lowering debt. Healthier sales realisations has helped strengthen its bottomline.

According to Mahadevan, profit before tax from operation was Rs 56.2 crore during the quarter, while in all other quarters, the company has been making losses in operating profit, as there were no major volumes sold in the industry during the period.

The company registered a net profit of Rs 120.69 crore for the second quarter, compared to a loss of Rs 25.05 crore for the corresponding period last year. This was due to exceptional item, which was Rs 108.9 crore, and which came due to the sale of land.

The current debt equity ratio of the company is at 1.1:1 and is on track to reach the target of 1:1.

The debt level was down to Rs 4,323 crore in September from Rs 4,700 crore in March 2014. Major portion of proceedings from the QIP was used to repay the debt and also the non-core assets proceeds were also used for the same purpose. The operating working capital was also controlled to bring down the debt. The company about two years ago had a debt level of Rs 6,200 crore.

IN A STATE OF CHASSIS

• Ashok Leyland said it had identified two assets outside India, Albonair GmbH and AVIA, for divestment
  

 

The deal is expected to close by the financial year end
 

Germany-based GmbH had reported a loss of Rs 69 crore in FY14