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40 years ago... And now: Ashok Leyland - The 66-year - 'young' company readies self for the future

The company shot into the limelight when it became the powerful and secretive Hinduja group's first acquisition in India

T E Narasimhan 

Ashok Leyland

At 66 years, Ashok Leyland, India's second-largest (CV) manufacturer, takes pride in being a "young company". This refers as much to the overhaul of its oldest facility in Ennore, Tamil Nadu, as to its branding strategy, roping in Indian cricket team captain Mahindra Singh Dhoni, and the average age of its executives - more than half are 35 years or less - making the 42-year old Dheeraj Hinduja, chairman and scion of the promoter group, and 48-year old Vinod K Dasari, managing director, near-veterans.

The drive for youth is not merely a cosmetic change but to gear up for a market that has expanded from a two-horse race to a field of nine-odd competitors. Yet, 40 years ago, competition was hardly a factor. The CV market was neatly divided between the south, dominated by Ashok Leyland, and the north, dominated by Tata Motors (then known as Telco).

So much so that the history of the company over the past four decades is, in a sense, a history of the CV market and, since this industry is traditionally considered a bellwether, of the Indian economy, too.

began life in Chennai (then known as Madras) the year after independence as Ashok Motors, founded by Raghunandan Saran, a freedom fighter from Punjab. Named for the promoter's son, it was set up in collaboration with Austin Motor Company, England and incorporated on September 7 for the assembly of Austin cars.

It acquired its current name in 1955 when British Leyland acquired a 40 per cent stake. This was the culmination of a 1950 agreement with Leyland UK, under which Ashok Motors had the sole rights to import, assemble and progressively manufacture Leyland trucks for seven years. In 1954, at a time when production was still licensed, the company was granted a licence to make 1,000 Comets a year.

This collaboration was to prove a little troublesome because British Leyland ran into financial difficulties. Eventually, after several developments at the UK end, the equity stake in came to be controlled by the Rover group.

By 1967, had diversified into bus manufacture, launching the Titan, the first Indian-made double-decker bus, and it also began to supply trucks to the Indian Army in 1970. Steady expansion and innovation followed - such as the Cheetah, India's first rear-engine bus that, amusingly, had drivers complain that they "could not hear the engine". In 1980, the company's second plant was started at Hosur, also in Tamil Nadu and by 1982, the company made its first foray into the west and north with facilities in Bhandara in Maharashtra and Alwar in Rajasthan.

But it was partial economic liberalisation under Rajiv Gandhi's one term as prime minister that really shook things up for the CV industry. Economic growth picked up and, on the back of forex relaxations, several Indo-Japanese entered with medium CV, pointing to a general uptick in the otherwise slow-moving CV industry.

It was in 1987 that the otherwise low-profile Ashok Leyland shot into the limelight with the entry of the Hinduja group. Hinduja's interest attracted attention partly because the non-resident Indian group was known to be secretive about its business dealings and, at the time, at the receiving end (never proven) of links in the Bofors arms scandal that eventually brought down the Rajiv Gandhi government.

Ashok Leyland marked the Hinduja group's first entry into a listed business in India and it came after it bought out the Rover group's stake and brought in Fiat Group's Iveco as a partner. That association lasted two decades until Iveco, which owned 15 per cent, started pressing for majority control. Unwilling to concede, the Hindujas bought out Iveco in 2007 and currently hold a majority stake.

Contrary to the commentary at the time, the Hindujas largely ran the company - it remains the group's largest venture in India - through professional managers (in a sense, Dheeraj Hinduja's chairmanship marks a departure from that tradition, since he is an active participant in the management).

The company continued its steady course, launching India's first CNG-powered bus (that was run by the Mumbai bus service company) in 1996, and its Stag became the first Indian vehicle to cross from the Indian side when the Srinagar-Muzzafarabad road route was opened in 2005.

By the mid-2000s, in synch with many Indian businesses, Ashok Leyland started stretching its wings abroad. In 2006, it acquired the truck business of Czech Republic-based Avia and, in the same year, signed an agreement with Ras Al Khaimah Investment Authority to set up a bus assembly facility in UAE, which was inaugurated in 2010. Joint venture agreements with John Deere (for construction equipment), Siemens (automotive infotronics), Albonaire (green technologies) and a stake in UK-based Optare (for buses) added to hectic activity in the global arena

But it was its collaboration with Nissan that has proved interesting, not least because this marks the second foray Japanese auto major into India after a less-than-successful collaboration with Hyderabad-based Allwyn. In 2007, Nissan signed an agreement with Ashok Leyland to make and market light commercial vehicles.

Today, Ashok Leyland is a Rs 9,943-crore company with a 27.1 per cent market share. But like other major manufacturers, the shrinking economy has meant a shrinking market. According to the Society for Indian Automobile Manufacturers, the CV market has shrunk by almost a fifth in the past 10 months. Like its competitors, Ashok Leyland, too, had to go through its bout of cost cutting with a personnel freeze and a 21 per cent cut in the chief executive officer's salary. It also had to hold plans to launch a facility for smaller trucks in collaboration with Nissan, and it started selling non-core assets to reduce a debt of Rs 4,323-crore accumulated from heavy but necessary investments in plant and technology in the past. Between 1987 and 2007, the company had been investing around Rs 100 crore a year; between 2007 and 2013 it invested around Rs 100 crore every month.

Going forward, the focus of the current 10-year transformation - called Phase IV within the company - is to make Ashok Leyland a self-reliant Indian company. "So far we were inside a cocoon somewhere, protected by some big brother who had technology and products so on," says Dasari. Triggers for the change, he explains, include the fact that nobody is going to provide technology any more, heightened competition and India's chronically cyclical market.

The company appears to have moved some way towards readying itself for the future. Today, Dasari proudly points out, 85 per cent of the value addition is carried out by machines that are five years old, 90 per cent of the products sold are less than three years old and 80 per cent of the network is less than five years old.

Still, for a company that recorded a turnover of Rs 100 crore 40 years ago, the target of $10 billion (Rs 62,000 crore) in 10 years from now is no small ambition. It certainly marks a long journey from Ashok Leyland's origins as a vehicle assembler of yesteryear.

First Published: Thu, December 11 2014. 00:47 IST