Don’t miss the latest developments in business and finance.

Ashok Leyland profit hits a speed bump

Exceptional loss of Rs 379 crore and higher tax cost despite lower finance cost impact numbers

Ashok Leyland set to change track after expansion spree
T E Narasimhan Chennai
Last Updated : May 26 2016 | 12:44 AM IST
Ashok Leyland’s net profit for the March quarter took a hit, falling 66.5 per cent year-on-year to Rs 77 crore because of exceptional loss of Rs 379.3 crore.  

A few years back, Ashok Leyland had diversified into a few areas including light commercial vehicles (with Nissan), construction equipment (with US-based John Deere) and other areas. Now, the company has decided to write off its investment of Rs 510 crore in the Nissan venture.

The joint venture was set up between 2007 and 2009 to beat the cyclical nature of the Ashok Leyland’s main business of selling trucks and buses, but the plan, after showing initial promise, fizzled out. The write off in Nissan includes last year’s Rs 224.19 crore write-off in the JV, which reported a loss of Rs 791.16 crore in 2014-15.

More From This Section

The company has also exited from the John Deere venture. Its operating profit stood at Rs 753 crore against Rs 457 crore the previous year. The debt to equity ratio at the end of the year was 0.24:1 as against 0.75:1 last year.

The board has recommended a dividend of 95 per cent per share, which will be 95 paise per share. The results for the year also included exceptional provisions (net) of Rs 389 crore.

These included provisions for impairment in investments in certain joint ventures as well as overseas subsidiaries. This move is in line with the company’s strategy of reviewing its portfolio of investments and rationalising the same to drive focus on the core business.

Ashok Leyland Managing Director Vinod K Dasari said the company has decided to focus on its core business and to come out from the areas of unrelated diversification. It will also liquidate its stake in Avia. It has, however, decided not to sell German-based Albonair considering the valuation of the company has increased. Dasari said the JV with Nissan for LCV is still on. The company is in discussion with the Japanese partner on how to take forward the business. The relation between Ashok Leyland and Nissan turned ugly after both the parties went to the court and started blaming each other as the JV was not doing well.

Also Read

First Published: May 26 2016 | 12:39 AM IST

Next Story