Ashok Leyland Limited (ALL), the country’s second-largest manufacturer of commercial vehicles, has lined up a capital expenditure of Rs 1,500 crore over two financial years ending FY24. While a capex of around Rs 750 crore per FY is expected, the actual spend may be lower as it aims to conserve cash, said the Chennai-based company.
Incidentally, Ashok Leyland will not invest in any new factory. Instead, it would focus on debottlenecking its plants to improve efficiencies in its manufacturing processes.
In an online interaction with reporters after announcing its first quarter results, Gopal Mahadevan, director and chief financial officer, Ashok Leyland, said, “Our capex should be in the range of Rs 500-750 crore per year. This is the estimate that we do at the beginning of every year. Invariably, we end up spending a lot less because we are very tight on project and capex management. But the Rs 750 crore is for the each two years because this industry requires capex at minimum level for it to grow the business and that is what we are doing.”
On July 29, Ashok Leyland reported a standalone profit of Rs 68 crore for the quarter ended June 2022, against a loss of Rs 282.3 crore in the corresponding period of the last fiscal when the second Covid wave weighed on earnings. Revenue from operations for the June FY23 quarter increased sharply to Rs 7,223 crore, registering a 145 percent growth compared to Rs 2,951 crore in the same period last year.
"With the expansion in revenues and efficient cost-management, we have seen our bottom line improving. The softening of commodity prices, in particular for steel, should impact our margins positively," said Mahadevan.
It was also revealed that an additional sum of $100-150 million will be deployed by Ashok Leyland’s EV subsidiary Switch Mobility in the next two years towards building plant capacity, developing new platforms and rolling out new products.
“For the EV subsidiary, we will be having a capex of $150 million to $200 million over a period of two years. That may be spent both in UK and India,” Dheeraj Hinduja, ALL's executive chairman, told reporters. He also revealed that the company is close to finalising strategic investors for Switch Mobility and an announcement in this regard is just a few weeks away.
When asked about export plans for EVs, Hinduja revealed, “From a sourcing perspective, Ashok Leyland, as parent company, has a very good sourcing base in India. But it doesn’t make sense to send buses from here to Europe, UK or Spain. India will definitely be a hub for neighbouring countries and obviously some of the Middle East nations as and when the timing is right. As far Europe is concerned, we have the facility in Leeds in UK and have recently announced our new assembly facility in Spain. Wherever there are possibilities of improving our economics, especially for sourcing within India, we will do that. “
Ashok Leyland is planning to invest more than Rs 2,000 crore in electric vehicles over the next five years under the PLI scheme for the automobile sector. “For the PLI, the minimum we have to do is cross the threshold of Rs 2,000 crore (in order) to benefit from this scheme. We have capex programmes in place on the electric vehicle front. We do not foresee any problems in meeting these timelines.” He also clarified, “At the moment, we are looking predominantly at vehicles and extension of the facilities that are needed as well. We will be doing our own battery management, sourcing ourselves.
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