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Ashok Leyland's acyclical businesses help offset domestic M&HCV loss

"We will be extremely tight and vigilant on the capex," said CFO Gopal Mahadevan

What did it take Ashok Leyland to come up with a customised truck?
A truck being assembled can be seen in this representational photo

Ashok Leyland said that it had lined up around Rs 750 crore capex for 2020-21 and had spent Rs 270 crore till the second quarter. The company's management said it was extremely vigilant as far as capex was concerned. Meanwhile, the company's non-domestic M&HCV businesses or acyclical businesses contribution grew substantially in the second quarter compared to the last year.
 
Gopal Mahadevan, whole-time director & CFO of Ashok Leyland, said that for the whole fiscal, the proposed capex was Rs 750 crore, of which Rs 270 crore had been spent till the September quarter. The company has head room for another Rs 500 crore, which will be invested in product range, capabilities and debottlenecking.
 
Until the end of the second quarter, the money had been spent on modular platforms, to develop a new range of LCVs and electric vehicles.
 
"We will be extremely tight and vigilant on the capex," said Mahadevan.
 
Commenting on company's performance, Mahadevan said, "This year we cannot compare year on year, since almost the whole of the first quarter was washed out. Month on month, quarter on quarter we are seeing improvement."
 
Ashok Leyland Ltd posted a loss of Rs 147 crore during the September quarter as against a profit of Rs 39 crore in the correspondong period of the last year. Revenue from operations during the September quarter stood at Rs 2,837 crore, down 28% YoY. The company’s revenue in Q2FY20 was at Rs 3,930 crore.
 
Mahadevan said, "Positive EBITDA of 2.8 per cent during the second quarter was made possible by the revenue enhancement and operational efficiency initiatives of the company during challenging times. All the acyclical businesses, including LCV, aftermarket, defence and power solutions have performed really well during the quarter. Focus on operating cost and material cost optimisation will continue, even as we pursue growth.”
 
He noted that while the last year's domestic M&HCV business had contributed around 57 per cent of the revenue, this year it contributed 45 per cent. He further said that other businesses, including light commercial vehicles (LCV), aftermarket, power solutions, defence and international markets were nearly at the pre-covid levels.
 
"Mix was in favour of non-domestic M&HCV businesses. They are growing and contributed well to the revenue and profit. Sustainability of these businesses is crucial now," said Mahadevan.