Ashok Leyland to sell non-core investments to cut debt
Ashok Leyland plans to divest its stake in some companies like Albonair GmbH, which it considers as non-core investments, to reduce its high borrowing levels, K Sridharan, CFO said on Thursday.
January 25, 2013 / 18:09 IST
Nachiket Kelkar
Moneycontrol.com
Ashok Leyland plans to divest its stake in some companies like Albonair GmbH, which it considers as non-core investments, to reduce its high borrowing levels, K Sridharan, CFO said on Thursday.The India's second largest commercial vehicle maker has long-term borrowing of around Rs 3,500 crore and another Rs 1,500 crore in short-term cash-credit for working capital.Sridharan said, companies like Albonair GmbH, a solutions provider for reducing automotive emissions and Defiance Technologies and Defiance Testing, which provide services in design engineering, testing and validation, were non-core and sale of investments in such companies should help Ashok Leyland raise around Rs 500 crore."We are committed to finish it off (stake sale) in 12 months," he said in a post earnings conference call.The Hinduja Group company also hopes to shave off around Rs 1,000 crore from its working capital requirements by reducing inventories and getting pending receivables from various state transport bodies.Ashok Leyland also expects to cut its operating costs by around 10 percent sequentially in Q4. It has already cut manpower cost by almost 15 percent, by five-day working, against earlier six-days and various other measures like cut in travel expenses.Q3 Results disappointAshok Leyland like other CV makers has been impacted by the sluggish growth in the medium and heavy commercial market in India, even as its small truck Dost sees brisk sales.Its net profit in Oct-Dec quarter rose 11 percent year-on-year to Rs 74 crore, helped by Rs 156 crore profit on disposal of non-current investments. Excluding the one-time gain, it had a loss of Rs 84 crore (including other income and finance costs), compared with a profit of Rs 71 crore in the year ago quarter.Revenue last quarter was down 18 percent to Rs 2,381 crore. "Against the backdrop of a sluggish economy and weak macro-economic indicators, Q3 was bound to be an extremely challenging one for a GDP-driven industry as ours," Vinod Dasari, MD, said.The Sri Lankan market had also underperformed. But that was almost offset by its inroads in non-SAARC (South Asian Association for Regional Conference) markets like Africa, Ukraine and Russia.The company sold 22,661 units in the third quarter, down from 23,175 units it sold in the year ago quarter.It gained around 250 bps market share in the third quarter in the M&HCV space, helped by expansion of its dealer network, especially in North India. However, Sridharan acknowledged that the company had lost some market share (30 bps) in its dominant South India market due to heavng levels of discounting by companies in states like Andhra Pradesh and low demand for tractor trailers.GuidanceAshok Leyland hopes to sell around 24,000 units in the fourth quarter, and another 2,300-2,500 units are expected to be sold in the export market.Overall the sluggish growth in the M&HCV market is expected to continue in the fourth quarter, according to Sridharan. He expects overall in the current financial year, the M&HCV industry will see sales drop 22-23 percent. Sales are down around 20 percent year-to-date.Ashok Leyland's volumes are seen down 10 percent, Sridharan added.Operating margins, excluding any one-time share sale, are expected to be around 9 percent. Third quarter margins were at 4.3 percent. Sridharan said that Ashok Leyland's marketing team expects the CV industry to grow 10 percent in FY2014 and he hopes Ashok Leyland will improve market share by around 100-150 bps. Its SCV Dost, which now has 18 percent market share, is currently available in 9 states and is in ramp-up mode. Ashok Leyland will launch a CNG (compressed natural gas) and a passenger version of the Dost, going ahead. A 5 tonne small truck is also planned.Ashok Leyland said it is also growing in the LCV segment on the back of better acceptance of the Ecomet range of vehicles and initial feedback to the recently launched multi-axle vehicles with twin-speed rear axles has also been encouraging. The company raised prices in Jan, which should offset any discounting in the CV market, Sridharan said.The company has pegged cummulative investments this financial year at around Rs 900 crore, including capex spends and investments in other companies like Hinduja Foundries.Last quarter, it had a capex of around Rs 440 crore.Over FY14-15, it has pegged a capital expenditure of around Rs 550-600 crore. Ashok Leyland shares slipped over 9 percent to Rs 22.15 on NSE in morning trade. The stock, however, reversed losses and in afternoon trade was at Rs 24.50, up 0.4 percent.nachiket.kelkar@network18online.com
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