Ashok Leyland lines up Rs 750 crore capex for FY22, plans new LCV variants

Ashok Leyland, the country’s third-largest commercial vehicle maker, has lined up a capital expenditure of Rs 750 crore for FY22 but hopes to cut this down to conserve cash.

The Chennai-based truck and bus manufacturer announced a net profit of Rs 241 crore for the quarter ended March 31, 2021 compared with a net loss of Rs 57 crore posted a year ago in the same period.

Speaking to analysts after the declaring results, senior company officials did not provide a capex figure for FY21 but until the end of December it had incurred a capex of Rs 450 crore.

Gopal Mahadevan, director and chief financial officer, Ashok Leyland, said, “Capex should be in the range of Rs 750 crore. We share the capex number but we keep it very tight. It depends on the level of investment we want to do. But broadly we know that we need to invest in the capacity to debottleneck.”

Ashok Leyland will not invest in any new factory. Instead, it would focus on debottlenecking its plants to improve efficiency.

“We are not looking at any major brown field or green field expansion. The manufacturing people have taken it upon themselves as an insurmountable challenge to run the plants efficiently. We will need some debottlenecking for LCV (light commercial vehicles),” Mahadevan added.

He said fleet utilisation in the country had improved substantially compared to May with the easing of lockdowns across several states, but discounting levels on CVs continue to remain high.

Commercial vehicle retail sales for the industry crashed to 17,500 units in May, owing to the lockdown, from 51,500 units in April, data fro the Federation of Automobile Dealers Association showed.

During April and May this year, Ashok Leyland reported wholesale sales of 10,699 units in the domestic market. During the same two months of last year the company saw 1,277 units sales because of the strict nationwide lockdown. The company is strengthening its LCV portfolio with some launches planned in the coming months.

Last year in September Ashok Leyland launched the Bada Dost LCV, a 3.5 tonne light truck. Bada Dost was born out of the Phoenix platform.

“The Phoenix platform, within its range, will throw up more and more variants over the next quarter and therefore we will be expanding our presence but within the limits of the platform. We will be looking to participate more and more in the light commercial vehicle segment,” said Vipin Sondhi, managing director and CEO, Ashok Leyland.