Ashok Leyland to dilute stake in subsidiaries

To raise around Rs 500 crore

The commercial vehicle major Ashok Leyland is planning to offload its stakes in few of its subsidiaries and also in IndusInd Bank Ltd (IBL). The proposed dis-investments of non-crore assets will help the company to reduce its debt, which currently stands at around Rs 3,500 crore. The proposed offloading of stakes would bring around Rs 500 crore over the next 12 months, said a senior official from the company.

Addressing analysts, K Sridharan, chief financial officer, Ashok Leyland said that either the company will partially exit or totally divest its stakes from the companies. The company hired investment bankers and consultants to find a strategic customers and buyers, he said.

It may be noted the company has already hired consulting firm McKinsey to advise the company on better working capital management.

Some of the company in which Ashok Leyland is planning to dilute its stake includes IndusInd Bank (in which the company holds shares worth around Rs 700 crore), Hinduja Leyland Finance (HFL), Albonair GmbH, Defiance Technologies and Defiance Testing.

The sale of investments in such companies should help Ashok Leyland raise around Rs 500 crore. The process is expected start once the merger of two of its associate companies Ashley Holdings and Ashley Investments with Ashok Leyland are completed.

In HFL, Ashok Leyland is the major shareholder with 60% holding, which the company is planning to bring down to below 50%, said Sridharan. It may be noted, the NBFC company is talking to private equity firms for stake sale.

Meanwhile, Ashok Leyland has partially diluted its stake in IBL and in ICICI and booked a profit of around Rs 75-76 crore during the current fiscal, said Sridharan.

Sridharan said, at present the company’s long term borrowing level is around Rs 3,500 crore and in the next 2-3 months it will be increased to Rs 4,100 crore. “If we succeed in offloading the stake it will reduce our loan book and asset base,” said Sridharan.

He noted, in the next fiscal the company has to repay around Rs 700 crore of debt and the company hopes the offloading will help the company to meet the target, said Sridharan.