Nov 09, 2012, 03.05 PM IST | Source: CNBC-TV18

Tough, but will try to keep margins over 10%: Ashok Leyland

Managing director Vinod Dasari said, while it may be difficult, they will be able to maintain margins over 10%.

Hinduja Group flagship company Ashok Leyland registered 7.45 percent dip in net profit to Rs 142.59 crore for the Sepetember quarter. It had posted a net profit of Rs 154.08 crore in the same quarter last year.

Its total income rose to Rs 3,319.91 crore for the quarter under consideration from Rs 3,128.27 crore for the corresponding period previous fiscal.  The company’s better than expected margins boosted earnings.

Speaking to CNBC-TV18 about the financial performance managing director Vinod Dasari said, while it may be difficult, they will be able to maintain margins over 10% .

"Given the competitive environment there will be some challenges, but we will also have to focus on reducing our material cost, so that we bring back our margins up north of 10 percent," he elaborated.

The stock gained more than 5% today. Broking firm CLSA has upgraded the stock to a buy with a target of Rs 32.

Below is the edited script of his interview with CNBC-TV18’s Udayan Mukherjee and Sonia Shenoy

Q: What the street has like the most is the 10 percent plus operating margins for Ashok Leyland; do you think it’s sustainable?

A: It will be difficult but I think we will be able to sustain the 10 percent plus operating margins. I think given the competitive environment and low Total Industry Volume (TIV) there will be some challenges but equally we will have to focus on reducing our material cost so that we bring back our margins up north of 10 percent.

Q: Margins usually do much better the higher the contribution from the medium and heavy commercial vehicle segment, do you see any pickup over the next few quarters in the medium and heavy commercial vehicles (MHCV) segment?

A: I think we were all hoping that this quarter and next quarter there will be a significant improvement in demand but October to October, we saw 20 percent drop in the medium and heavy commercial vehicles. So I think there is a lot of pent up demand coming. I believe that some of the infrastructure projects are starting to happen; you can see that because the tipper market, which is usually a leading indication of where the medium and heavy commercial markets will go, the tipper market is actually doing exceptionally well. If that is the case that means the rest of the market is just about to follow.

So I am hoping that maybe even towards the late end of this quarter of early part of next quarter and all of next quarter will be a good quarter.

Q: How is the buses segment doing?

A: Buses are doing pretty good. I would say that everybody is waiting on the next round of the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) II as they call it. If you recall about a couple of years ago we had JNNURM funding for about 15,000 buses, which lasted about a year-year-and-a-half. The second round of this is coming up which is about 20,000 buses. We expect to be the market leader in this just like we were last time. We continue to maintain our leadership position and the JNNURM II, will give us the chance to launch our patented ‘Jan Bus’, which is the world’s first front engine full flat floor bus with only one step.

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