Ashok Leyland, Nissan sign restructuring agreement for 3 JVs

Ashok Leyland has signed a restructuring agreement with Nissan Motor under which the company is looking to completely take over the 3 joint ventures it currently has with Nissan, said CFO Gopal Mahadevan. The agreement is subject to regulatory approvals, he noted.

Speaking with CNBC-TV18 Mahadevan clarified that the total investment in the joint ventures was roughly about Rs 500 crore and as a conservative measure Ashok Leyland had booked impairment over the last two financial years.

"I don't know about small cars but we would certainly continue to build on the LCV business," he said when asked if the company will continue to manufacture LCV and small cars that were key products under the JV.

On plans of merger between Ashok Leyland and Hinduja Foundaries, he said it is “a little too early to comment on that”, adding any development on the matter will be shared at an appropriate time.  Below is the verbatim transcript of Gopal Mahadevan’s interview to Farah Bookwala Vhora on CNBC-TV18.Q: I want to start by asking you the talks about the unravelling of the relationships between Ashok Leyland and Nissan. This has been the talk for some time now and finally we are talking about restructuring today. The annual report for this year mentioned that you were taking an impairment of Rs 558 crore and I believe that Ashok Leyland had invested about Rs 1,000 crore in these three JVs. So, now with this exit of this venture what do your losses stand at?A: I don't think these numbers are right. I don't think Ashok Leyland has invested Rs 1,000 crore, I don't know where you got these numbers from to be honest. But each partner had invested about, I am just giving some very approximate numbers of about Rs 500 crore each of equity and what we had done as a measure of conservatives and as of March 31 was actually to take an impairment in two years. It was not one year and that was in March 31, 2015 and March 31, 2016.So, that is all behind us now and what we have done is - I am happy to share is that - Nissan Motor company and Ashok Leyland Limited have now announced a restructuring agreement where subject to statutory approvals we are looking at taking over all the three joint ventures that we have determined owning them 100 percent.Q: So, does this mean that you would continue to manufacture light commercial vehicles (LCV) and small cars under your partnership with Nissan in any format either through a royalty agreement or otherwise?A: Yes, that is the idea. I don't know about small cars but we would certainly continue to build on the LCV business, though it is an excellent product that is doing very well in the market and we are looking at expanding the product base and continuing to build the business.Q: Also if you could just help us understand if there is any indication on what the product portfolio could look like because some of the products like Evalia and Style had not done well. In fact Style has been discontinued as well. So, when you are talking about restructuring the portfolio what can we expect now?A: I didn't talk about restructuring the portfolio. What I said was that though this is a very important vehicle and we also have a couple of other vehicles in the stable with this partner in Mitr, Mitr is a bus. So, we would continue to build on these products and grow the LCV business and that is the arrangement that we have.Q: Any plans to merge Ashok Leyland and Hinduja Foundries as well now that we are talking about this?A: No, it is a little too early to comment on that. I do not know why you are asking that question. If we have to make any announcements be rest assured that we will share that information with you at the appropriate time.