Switch Mobility dilution now will depend much on valuation: Dheeraj Hinduja

In a Q&A, the executive chairman of Ashok Leyland says the firm will be diluting 10-15% in Switch Mobility to raise $200-250 mn

Ashok Leyland, the flagship company of the Hinduja Group and commercial vehicle major, is looking to expand its presence in the electric vehicle segment. Dheeraj Hinduja, executive chairman of the company, talks to Shine Jacob about the firm’s EV roadmap, preparation for BS VI phase-2 norms and status of its de-risking plans. Edited Excerpts:

1.Your electric vehicle arm Switch Mobility was looking to raise $200-250 million. What is the status?  

Switch Mobility is mainly focussed now on developing new products for the UK, Europe and the Indian market. It has a good order book. The fund-raising plan was to help us introduce new products, and set up a new plant in Spain. This requirement of $200-250 million is for the next 2-3 years.

We are in talks with a few potential investors. Sometimes these discussions take longer than planned. Otherwise, there is good interest in the company. Much of the dilution will depend on the valuation that we get for the company. All I can say is that we won't be raising funds below the level we did in Dana's case, which came in with a small investment. If I were to take that parameter and look at the type of funding we're looking to raise, we might achieve about 10-15 per cent dilution. We want to be comfortable with all the terms and conditions. Discussions are on, and they aren't affecting the company's producy plans in any way.

2.Are you looking at any fresh launches in the EV segment?

We have got the double-decker vehicle that we had showcased in Mumbai during the middle of August. They should be running on Mumbai roads in the next 1-2 months. We have some new buses and we will have the LCV (light commercial vehicle) electric vehicles in the market by mid-2023. From a European perspective, we are looking to launch E1 bus by the middle of 2023 as well.

3.What is the status of your preparation for the BSVI phase-2 norms that kick in on April 1, 2023?

They are just coming out with these norms and we need to get the details. I think the only important thing is that we will always be compliant to the requirements and legislation, regardless of what they are. I think the most taxing thing faced by all OEMs was moving from BS IV to BS VI within three years. After meeting that challenge, we will be able to meet all other requirements. It shouldn’t be a key constraint. I do not see any immediate changes like vehicles getting liquidated.

4.A few years ago, you came up with a de-risking plan to reduce dependence on the cyclical domestic CV business and strengthen your presence in defence, exports and LCVs. Are you satisfied with the progress?

Our de-risking was also a result of moving into LCVs, whose cycle is always different from the MHCV (medium and heavy commercial vehicles). LCV has been very positive, the volumes have been growing. We're looking at launching new products in this segment as well.

International operations faced a slight slowdown for two years due to Covid. But this year, we have seen a growth of over 45 per cent during the first half and the second half should see good growth too. Several of our products are available for the international market. We have appointed many new distributors. So, that should go well.

On the defence side, though we have a number of products, a lot depends on the government’s own expenditure. The first half has been slow but we have won many tenders. We have been given indications that purchases will be happening in the third quarter and fourth quarter as well.

Over the longer term, these additional businesses – LCV, international operations, power solutions and defence – are all very supportive during times of this CV cycle. Hopefully, we have just seen this growth in the last one year and the cycle should continue on an upward trend. GDP growth in India is expected to be very strong. Hopefully, this this upward trend will continue and we may not need to be fully focussed on divestments or looking at how other businesses support us. We are pushing very strongly on all segments. We are also looking at exporting defence products as well. I think in the years ahead, these other businesses will contribute greatly to our revenues.

5.How do you view the improvement in commodity prices and the semiconductor crisis?

There has been improvement in commodity prices. Prices have gone down. Fuel prices have come down over the past few months. So, that will definitely help Ashok Leyland and other OEMs. It is always difficult to look ahead and see where these movements will be. It is not likely to have a big impact immediately. The current reductions that have happened will be favouring us.

We do not buy semiconductors directly, but through suppliers. However, over the past 6-8 months, we have seen significant improvement. I think at the current rate, we do not foresee any difficulty. The Indian market is moving very fast. We will have to ramp up our capacities. It is difficult to tell when the situation eases. The past 6-8 months have been very encouraging. Suppliers have been able to ramp up their capacities. I don't foresee much impact as we go forward into Q3 and Q4. We have given our indication of the type of ramp up we are seeing and hopefully we will get the adequate supplies.