Ashok Leyland to set up assembling facility in African countries

Company scouts for technical partner for defence business

As part of its strategy to boost export business, India's second largest commercial vehicle company Ashok Leyland is planning to set up three or five assembling plants outside India. The first plant is expected to go on stream by end of the current fiscal and each of these plants would attract investment of around Rs 30-50 crore.

"We want to insulate ourselves from the cyclical nature of the commercial vehicles business by focussing on exports, defence supplies, sale of spares, diesel engines and bus," said Gopal Mahadevan, chief financial officer of Ashok Leyland.

One of the strategy is to increase exports. In 3-5 years one third of Ashok Leyland's revenue should come from export, which currently contributes around 15 per cent, he said.

To achieve this goal the company is expanding its foot print. At present the company has strong presence in SAARC and Middle East markets and the company see huge opportunity in Africa and South American markets.

To cater the African market the company is looking at Nigeria, Kenya, Senegal and other countries for setting up assembling facilities along with a local partner. Initially the company will assemble small commercial vehicles and once the distribution and service network are in place it will go for bigger vehicles.

This was the strategy the company followed at UAE, where currently it assembles around 2,500 buses and the company hopes to look at opportunities for trucks.

For the current fiscal Ashok Leyland lined up around Rs 500 crore capex and investment.

Mahadevan said in the next three-five years the share of medium and heavy commercial vehicles (M&HCV) revenue should be around 35-40 percent, which currently contributes around 55 per cent, and export should contribute one third of the total revenue.

"We are not going to de-grow the revenue from M&HCV segment but on the other hand would increase revenue from other avenues," he said.

Another major thrust area is defence, said Mahadevan adding that Ashok Leyland has pre-qualified to participate in 8-9 tenders. At present the company supply transportation solution, to move soldiers mainly, and going forward it is planning to offer services including Ambulance, vehicles which can carry weapons and others.

The company has said it is talking to few technology suppliers to partner and bid for defence projects.

"At present defence contribution is around 4-5 per cent of overall revenue, but we see this as a Billion Dollar opportunity in the next 5-7 years," said Mahadevan.