Ashok Leyland is planning to raise anywhere between Rs 400 crore and Rs 500 crore of debt to support its around Rs 1,200-crore investment plan. A major chunk of the investments will be infused into its Pantnagar facility, primarily for research and development (R&D) and joint ventures (JVs). The company’s current debt level is around Rs 3,000 crore.
“Of the total capex, around Rs 650 crore would be for the Pantnagar facility and Rs 150 crore for R&D. A major outflow will be towards the Nissan JV, and some portion for Hinduja Foundries and in the John Deere JV, “said K Sridharan, chief financial officer of Ashok Leyland.
The company has started the year with around Rs 960 crore of working capital in March 2011. Then, it rose to Rs 1,800 crore in June and further increased to around Rs 2,000 crore in December. It has come down to Rs 1,070 crore in March 2012.
“March-to-March, it was around Rs 100 crore or so. While one can predict this part of our movement, there will be some amount of a drop happening in the fourth quarter because of the sales being more and the production in the last quarter. We have read the market wrongly in the last year in terms of building the vehicles or building our production inventory for that,” Sridharan said, while addressing the analysts.
The company, he said, was expected to knock off around Rs 300 crore out of these levels of working capital this year. The company believes that if this is achieved, its borrowing plan will also come down by that extent.
“We did not factored in this drop in the working capital for the borrowing plan for the Rs 1,200-crore investment plan. But if that possibility were to happen which we are working on, we should be able to reduce our overall debt,” Sridharan said.