Ashok Leyland to focus on commercial vehicles: Dheeraj G Hinduja

Said performance was remarkable, when industry sales volume was static, amidst demonetisation

Commercial vehicle major Ashok Leyland chairman Dheeraj G Hinduja said the company will continue to provide thrust to the core business of commercial vehicles and build a portfolio of profitable segments.

 

Hinduja said the company performance was "remarkable" last year and this was achieved in a year when the overall industry sales volume was static, and demonetisation and implementation of BS-IV emission norms had dampening effects on sales volume growth.

 

In the medium and heavy duty segment, a sales volume of 102,313 vehicles was realised in a flat market of 302,529 vehicles registering a growth of four per cent and a market share of 33.8 per cent. The truck segment posted an overall share of 33.1 per cent, which is a record.

 

In the bus segment, due to strategic shift to exit unprofitable segments, there is a decline seen in the market share which will be overcome shortly through appropriate countermeasures, he added.

 

He said, Ashok Leyland will sharpen the light commercial vehicle (LCV) strategy and a slew of products are already in the pipeline. LCV market grew 7.4 per cent and with a sale of 31,770 vehicles, Ashok Leyland retained the share in this segment despite fierce competition and only one product in the line-up, said Hinduja.

 

Hinduja said that due to adverse conditions in target markets, Ashok Leyland's performance in the international markets has been modest. He said international business will be a very important lever of growth for the company, with new bus plants planned in Africa in 2017-18.

 

Looking ahead, Ashok Leyland is well-positioned to capture the upsides owing to various developments in India and outside, said Hinduja.

 

"I am confident more than ever before that we are on track to consolidate our market gains in India sustainably and emerge as a beacon of market relevant technologies in the commercial vehicle field," said Hinduja.

 

Company also has plans to introduce new models in the LCV segment in the immediate future and it will focus on improving the network on cost effective basis particularly in North, Central and Eastern regions has started yielding results by way of improvement in market share in these regions.

 

Ashok Leyland has impaired Rs 647 crore in 2016-17 after studying its intrinsic value of investments in Joint Ventures (JV)/Associates/Subsidiaries. This include provision of Rs 121 crore towards Albonair GmbH and Albonair India, in addition, Rs 526 crores has been provided towards Optare Plc. for the loans and obligation.

 

Last year, consequent to the significant uncertainty in continuity of the joint venture operations and the accumulated losses of the joint venture entities, the company has provided for carrying value of the investment in Ashok Leyland Vehicles Limited, Ashley Powertrain Limited and Ashok Leyland Technologies Limited aggregating to Rs 296 crore.

 

Consequent to the purchase of the stake from the JV partner (Nissan) at a purchase consideration of Re 1 for all the three said entities and the subsequent finalisation of business strategy for LCV business, the impairment has been written back to the tune of Rs 296 crores in current financial year.

 

The CV major also said 7123 BS III vehicles were identified for conversion, after the Supreme Court order banning sales of the vehicles with this emission standards, have been classified under work in progress (impact Rs 815 crore). Out of 9572 BS III vehicles identified for disposal, 2449 vehicles has been earmarked for export markets and balance 7123 vehicles has been identified for conversion from BS III to BS IV.

 

"Hence out of total inventory of 12319 vehicles, only 7123 vehicles attracted conversion," said the company. It is expecting to reap the benefits of the emission technology intelligent Exhaust Gas Recirculation (iEGR) which it has developed for emerging markets like India, for next few years.

 

Pre-buying although lower than expected has moderated the demand for CVs in early part of 2018. With possible implementation of GST, fleet operators are likely to hold their decision to purchase, while the manufacturers will align their production and inventory to the GST requirement. Consequently, the near term outlook is moderated. However, there would be increased thrust on infrastructure and rural sector in the budget, resumption of mining activities in select states would continue to support tipper demand which has outperformed the industry in FY 2017 and higher demand for consumption-driven sectors and e-commerce logistic service providers, among others are positive signs.

 

Ashok Leyland Vehicles Limited (formerly Ashok Leyland Nissan Vehicles Limited) as reported loss of Rs 2.49 crore, while Ashok Leyland Technologies Limited (formerly Nissan Ashok Leyland Technologies Limited) has reported a profit of Rs 4.09 crore.

 

Rs 647-cr impairment

Ashok Leyland has taken an impairment hit of Rs 647 crore for 2016-17 after studying its intrinsic value of investments in associates, joint ventures, and subsidiaries. It has said 7,123 BS-III vehicles identified for conversion have been classified as work in progress (impact Rs 815 crore).