Ashok Leyland to cut debt by Rs 1,000 cr

Existing non-core areas is one option says company MD

Apart from lining up a slew of new launches over the next few months to stay ahead of the competition, the Hinduja group flagship commercial vehicle-maker Ashok Leyland is planning to bring down its debt by Rs 1,000 crore by the end of this fiscal.

The company would use a combination of efforts, including exiting non-core areas and rationalising the working capital requirements, to reduce the debt to Rs 5,000 crore from the present Rs 6,000 crore, said Vinod K Dasari, managing director of Ashok Leyland. “Industry slowdown is  an opportunity for undertaking such an exercise,” he said here on Friday.

Under the non-core area, most of the 32 subsidiaries could be on the radar except some core entities like the Nissan joint venture. He said this would also help divert resources from lower value-added areas to areas where the company gains more.

The debt on the company's books increased to Rs 5,500 crore as of June this year from Rs 4,300 as at the end of the March quarter. Now, it has increased by another Rs 500 crore, according to Dasari.

While most of this debt had gone into capital expansion, the ever-extending downcycle in the Indian automotive industry has only made the returns on this investment elusive.

However, the company has not lost hope of an early recovery as yet. “The demand growth should return in 3-4 months. Going by even some sceptical view, the upturn is just 12 months’ away,” Dasari said.

The commercial vehicle market witnessed a negative growth of  25 per cent in 2011-12 followed by similar negative growth last year. Now, it is down by another 20 per cent, according to him.

The company was able to withstand the negative growth — even though the commercial vehicle segment contributes 50 per cent to its sales revenues — only because other segments, including buses, engines and automotive parts business, had fared well to provide cushion to the financials of the company. The export market is also doing quite well, he said.

<b>New launches</b>
The company today launched a new truck engine Neptune claimed to be 10 per cent more fuel efficient and durable by an extra 300,000 km compared with the competition. It had spent five years and Rs 500 crore to develop this engine with Euro VI standards keeping with some future time line.

However, the company later brought it down to BS 3 standard-compliant level as it decided to go for an early launch in India. It will be available in 31-tonne truck and will be packaged subsequently with 25 tonne trucks and 40 tonne commercial tractors, according to Dasari. He said with economy down and fuel costs rising, they thought it was the right time to provide more value to the customer through Neptune.

A new mid-size truck named Boss is slated to be launched next week while a bigger version comes into the market in November this year. The all-new full flat floor Jan Bus will be launched in India coinciding with the Government of India’s new procurement tenders under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) later this year, according to him. The company is also planning to launch JanBus in Thailand.