Diversification will help company in long run: Ashok Leyland

The commercial vehicle major Ashok Leyland, which has been facing tough market conditions, has said that its diversification in adjacent businesses will help the company in the long run. The company has said that it has invested heavily in these businesses and expects leadership position, not only in the domestic market but also in overseas in some of those businesses.

 

V Sumantran, vice chairman, Ashok Leyland said that in the last few years the company has been investing heavily in areas, where it not only saw potential and relates to core business, but also high margins.

 

“While our focus will be on the core business, we added some bright adjacency businesses, then went to critical vertical integration with power trains and for future needs, entered into emission and other technologies related areas. It may look some pattern to the madness, but these are related to our business and if we master this, we will be the master and will be the best automobile company,” says Sumantran.

 

The diversifications include company's foray into Light Commercial Vehicle (LCV) business along with Japanese auto major Nissan, in which around Rs 2,500 crore has been committed.

 

“It has been a good start, on the first year itself we have sold 35,000 units of “Dost” and now 50,000 units of Dost are on the roads”.

 

On Tuesday, a new MPV named Stile was launched and four more products are in the pipeline, which will also be exported.

 

In 2011, Ashok Leyland launched the first product and now it claims it captured 19 per cent of Dost segment market across the country and 28 per cent market share in the states which it operates.

 

“We could not go pan-India, due to our capacity constrain,” said Sumantran.

 

Similarly, in the backhoe loader segment, which came from its construction equipment JV with John Deere, Ashok Leyland claims it got No,2 in some of the important markets and already the product getting a good conversion from competition products. The JV attracted investment to the tune of Rs 250 crore.

 

On technology and engineering, the footprint was through Albonair, a German subsidiary which works on reducing vehicle emissions and Defiance Technologies, which provide Engineering, Manufacturing and Enterprise (EME) Services and Solutions for Automotive clients.

 

It may be noted Defiance Technologies is working with Nissan to help develop a small car.

 

“Defiance is opening our eyes and that was evident from the recognition we got from Nissan,” said Sumantran, who set a mandate to the company that only 15 per cent of the business should come from the Group companies.

 

As far as Albonair goes, in which the company has invested Euro 40 million, Sumantran said the German subsidiary got around 160 people and working on affordable technologies to reduce emissions for both Indian and global markets.

 

In 2006, the company was started when Ashok Leyland saw emission regime coming in 2010 expecting significant volume of product require BS IV. “In 2006, we were worried how to develop an affordable technology, since the company cant go with expensive European cost and that is when this company was born to help to control the cost”.

 

The German arm claims it has become a single source supplier to a large European truck market and Sumantran expects the company will capture 24 per cent share in Europe in emission control systems by 2017.

 

“If you see our diversification, their will be a pattern and they are not only related to our core business and strength, but also high-margin businesses. For instance construction equipment got better margins compared to two-wheelers or passenger cars. Our approach is right and we are investing in right areas,” said Sumantran.