 "Dheeraj G Hinduja & Carlos Ghosn")
The commercial vehicle major Ashok Leyland has said that as part of its plan to conserve cash it is planning to control capex.
The company said it would invest around Rs 400 crore in 2013-14 as compared to Rs 1,500 crore, a year ago. The automajor also said it has cut salaries by 5% and reduced casual labour in view of poor demand.
Dheeraj G Hinduja chairman said that the company need to optmise the cash and decided to delay the capex till the market review. He noted the market is down by 25 per cent.
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“Fortunately critical investments were made in the last four years most of the investments have been done. If critical investment are needed, we will not shy away,” said Hinduja.
Company told Analysts that debt reduction is a major target in 2013-14 and is to be accomplished mainly by controlling capex and investments. The management has guided for Rs 200 crore of capex and Rs 250 crore of investments for this fiscal as compared to Rs 845 crore and 700 crore respectively in 2012-13.
They have also indicated at liquidation of non-core assets to improve the cash flow situation.
The company also said staff costs were lower as production rationalisation, reduction in working days and five per cent salary cuts taken in order to reduce costs. Going ahead, the management has guided for more cost rationalisation efforts.
A ICICI Direct report stated that weak macros have had a severe impact on ALL’s earnings as it remains the most levered in terms of operating performance. Volume growth expectations have been tempered and it feel no swift recovery is possible.
ALL’s financial recovery is also on an unsure footing. We feel margin recovery for ALL will take three quarters.
"This immediate year seems to have gone from bad to worse in the HCV space and ALL with a
high base through FY13 will cause a decline in overall volume for it. Going forward, even if volumes beat our expectation, operating performance rise to FY13 level seems a tall order. We maintain our downgraded stance on the company," said ICICI Direct in its research report.
To a query on about payback on the investments made by Ashok Leyland in acquisitions and joint ventures, Sumantran said “we expect to reap the rewards soon”.
Hinduja said in the last few years Ashok Leyland has really gone through a major investment cycle and capex cycle. It was estimated the company would have invested around Rs 4,000 crore in various joint ventures including with Japanese automajor Nissan to manufacture Light Commercial Vehicle, with John Deere to manufacture construction equipments, in other associate companies including Albonair, Germany and Defiance Technologies to make future ready solutions.
The company had also put in a new manufacturing facility at Pantnagar, which went on stream two years before.
The company said to address the future automobile industry's emission norms Albonair made an emission control systems and now it is the single source supplier for the second largest truck maker in Europe. By 2017 the company expects around 24 per cent market share and so far the company invested Euro 40 million.
He said Defiance Technologies, the information technology arm is catering to several clients other than Ashok Leyland.
Speaking about Nissan JV, Sumantran said Rs 2,500 crore were committed by the partners for the full spectrum of products, so far around 50-60% was spent. The company launched Dost, Stile and an engine and by 2015-16 a new manufacturing facility for rolling out vehicles may be set up.
On the strategy for buses Sumantran said there is huge room for global strategy for buses but has to be executed locally.
The Jawaharlal Nehru National Urban Renewal Mission-II (JNNURM) should provide the launch pad for the low-cost bus, Janbus.
He said Optare, UK has given good bus designs and the Solo model is being made in UAE.
