Ashok Leyland to consolidate all group companies

Commercial vehicle major Ashok Leyland Ltd (ALL), a Hinduja Group company, is planning to consolidate its associate companies into one.

This includes its light commercial vehicles (LCV) joint venture with Nissan and construction equipment manufacturing venture with John Deere. The company also said it was scouting for partners for building vehicle bodies in India and potential acquisition abroad. ALL is also planning to redesign sales strategy to regain lost market share.

K Sridharan, chief financial officer, told Business Standard: “This (consolidation) will be one of the major steps we will take and it will be after the IFRS (International Financial Reporting Standards, which all companies have to adopt on a government-approved schedule) comes into effect. Six companies will be consolidated into one company and the financials of these companies will be taken into ALL's balance sheet.”

The companies include Ashok Leyland Nissan Vehicles Ltd to manufacture LCV; Nissan Ashok Leyland Powertrain Ltd, manufacturers of powertrain to LCV vehicles, and Nissan Ashok Leyland Technologies Ltd, partner with Nissan to develop related automotive technology.

An ALL-Nissan developed LCV model, Dost, was launched recently and the partners have set a target of 140,000 vehicle sales over the next three years. Sridharan said production capacity was ready, but the supply chain needed to be ramped up.

Another JV is Ashok Leyland John Deere Construction Equipment Company Pvt Ltd. Its first product is to be rolled out next week. Then, there are Ashley Alteams India Ltd, a JV between Finland-based Alteams and ALL to manufacture aluminum die-casting, and Automotive Infotronics Pvt Ltd, to design and develop digital electronics products for the transportation sector. In all these joint ventures, ALL holds 48-50 per cent and it's share of assets in these JVs were worth Rs 379.5 crore as on March 31, 2011, and earned income of around Rs 51.3 crore, according to ALL's annual report.

ALL-John Deere is set to roll-out its first excavators from the Gummidipoondi facility near this city during the current calendar year. Backhoe loaders would come first, followed by wheel loaders. “We will also supply engines to our partner,” said Sridharan.

ALL’s market share in the medium and heavy commercial vehicle segment was 22.2 per cent during the first quarter of the current financial year. It has said it is aiming for 25 per cent. The company has set a target of selling 100,000 vehicles in both the domestic and export markets.

“Non-availability of body building, for both buses and tippers, is one of the major growth constraints for the company and for the industry,” said Sridharan. He said ALL was open for strategic alliances for body building in India and for acquisitions outside India.

The other focus will be penetrating into the northern and eastern markets. “We lost market share since our focus has been more on the bulk segment, but not retail. We are re-designing our sales strategy and will address this issue,” said Sridharan, while addressing analysts.

He said financing cost, increasing input cost, fuel price increase and a sluggish freight rate were major challenges for the industry. The increase in interest cost alone for the company was Rs 20 crore during the second quarter, he said.