Laid path to make Ashok Leyland great company from average: MD Vinod Dasari

In a Q&A, the CV man of the South, as he is known, talks about his 14-year stint at the company, and the road map he laid to catapult it into big league

On the ninth floor of Ashok Leyland’s headquarters in Chennai, the conference room has a picture with a six-year-old goal encapsulated in these words: “Our vision to be in the Global Top 10 in M&HCV Trucks (>7.5 T GVW) and Global Top 5 in M&HCV Buses (8m and above) in volume terms”. At the bottom, there is a handwritten addition: “Mission Accomplished,” signed by Vinod K Dasari on January 10, 2019. This could be the best parting note the CV man of the South can leave behind when he steps down as managing director of the company on March 31, 2019 after a near 14-year stint, eight of which were spent as MD.

Dasari met T E Narasimhan & Gireesh Babu at his office, on the condition that no personal questions should be asked, and spoke about his journey at the Hinduja Group’s flagship company, which expanded nearly 7x during his tenure and grew other businesses to address risk during the downturn in domestic truck market. Edited Excerpts:

During the past few months, the industry and Ashok Leyland (ALL) have both seen a slowdown in commercial vehicle (CV) sales. Are you worried about the outlook?

It is a temporary problem. Year-to-date, the CV sector has grown 25 per cent, which is very good in any industry. In December, we had a 20 per cent decline but it is still 25 per cent higher than November. Sales were lower because in January 2018, new regulations on blowers and air-conditioners came, so there was a huge pre-buy last December.

During the past nine months, ALL is up 25 per cent. I continue to be very bullish. In the beginning of the year we said the market would grow by 10-15 per cent. I still feel the market will grow 15-20 per cent, even though Q4 is lower than last year.

Will pre-buy, ahead of Euro-VI, push the 2019-20 numbers? How is ALL gearing up?

I am more excited about next year, as it will be the year before Euro-VI comes in. The world over, pre-buy usually increases sales by 25-50 per cent. So let us take a conservative approach. You would still have 25-30 per cent growth in the next year.

ALL will invest around Rs 100 crore to increase capacity just to meet this demand. Knowing that the year after there could be a downturn, we are still investing into debottlenecking, with roughly 10-20 per cent increase in capacity.

You built new areas to address the risks (if the domestic truck business slows down). How are they contributing now?

Five years back, nearly 90 per cent of the profits used to be from trucks. Today it is 50 per cent. But it isn't as if the profit from trucks is coming down -- other businesses, including LCV, parts, power solution and defence have grown.

Any opportunity that you feel you have missed, such as international markets, for instance?

It is true international markets, except for Middle East and Bangladesh, did not do as we expected. The reason is the lack of offerings, especially Light Commercial Vehicles (LCVs), which account 80 per cent in the international markets.

In the international market, the entry point is LCV. After acquiring Nissan’s stake in the LCV JV, ALL will have LCV products for the international markets. Besides, from April 2020, ALL’s 100 per cent Left Hand Drive-compliant products range -– from 2 tonne to 55 tonne – will cater to any market with Euro-III through VI (today, less than 10 per cent of ALL vehicles are LHD-compliant). The LHD range will conform to European crash norms at half the cost of vehicles being manufactured in Europe, and will help penetrate major markets in that continent, ASEAN and other geographies.

Have you accomplished your mission at ALL?

When I took over, we said we would create a platform that will transform ALL from an average to a great company. Foundations have been laid for products, people and processes which will take ALL to the level f greatness.

Company revenue was Rs 4,000 crore a few years back and by end of this year, it will be around or over Rs 28,000 crore. A lot of that 7x growth has come from trucks. For 15 quarters in a row, the company reported consistent double-digit operating margin and will do everything, including not chasing market share, to continue the trend.

Today, 40 per cent of our production comes from the north. We have more than 30 per cent market share in Kolkata, over 20 per cent in the north-east. We target 30 per cent market share wherever we are competing. (The company that was largely known as a south-based firm, has clearly set footprints across the country).

We have created an entrepreneurship and start-up culture in the company, may be we need to be even more entrepreneurial to do start-ups. For example, the service mandi in the last 12 months does Rs 40 crore GTV a month and is valued at Rs 1,000 crore now. For a big company to do such things is difficult, but I was more interested in the DNA creation, and we were largely successful.