Ashok Leyland earmarks 20 billion capex for key CV projects to be executed over the next two fiscal years.
Bhargav TS and Ashish Bhatia
Ashok Leyland has earmarked 20 billion (Rs.2000 crores) as the capex for key CV projects to be executed over the next two fiscal years. Having reported total revenue of Rs.29055 crores with a net profit of Rs.1983 crores for FY2019, the new capex investments will account for initiatives towards the rollout for BSVI emission norms in April 2020, and a new project related to Light Commercial Vehicles (LCVs). Averred Gopal Mahadevan, Chief Financial Officer, Ashok Leyland, “The investment will be directed towards creating a new LCV platform Phoenix, and a new modular platform for BSVI mainly.” Looking to address the void of the company’s LCV portfolio with Phoenix, Mahadevan drew attention to the Original Equipment Manufacturer’s LCV Dost. Explained Mahadevan that the Dost addressed the 2.5-3-tonne segment leaving a void in the 5-7.5-tonne segment which the company wishes to address going forward. “With the new LCV platform Phoenix, we will address the 5-7.5-tonne segment,” he stated. Ashok Leyland is expected to launch an upgraded Dost variant too with an upgraded powertrain and a refreshed cabin over the next three to four months as per sources in the company. Citing LCVs as an important business, both from the perspective of domestic consumption and exports, opined Mahadevan, that in the export markets, LCVs was a good strategy to build the brand. “In many of the new markets, the company will foray with LCVs and later expand in the M&HCVs segment,” he added.
Confident of growth
In its growth guidance, the OE expects overall industry growth at 10-12 per cent levels. Averred Dheeraj Hinduja, Chairman, Ashok Leyland, “Despite the challenges in 2018-19 we managed to increase our market share and reported growth. I am optimistic about 2019-20, mainly on account of the BSVI switchover, push for infrastructure growth, and the push for capital investments especially since the Government is back as the single largest majority in the recently concluded Lok Sabha elections. In the fourth quarter (Q4-FY2019), the OE’s profit dipped by 10 per cent to Rs.665 crores from Rs.741 crores. The dip was blamed on heavy discounting, price realisation besides higher input costs including the price of steel. In Q4-FY2019, the EBITDA was at 11.1 per cent as compared to 12.8 per cent in the same period of the previous year (Q4-2018). The OE according to Mahadevan is hopeful of reporting double-digit EBITDA levels in the quarters to come. As per the recent SIAM data, while the domestic M&HCV segment volumes in Q4-FY2019 de-grew by four per cent to 112469 units, Ashok Leylands’ volumes grew by one per cent to 41519 units. The company’s M&HCVs market share was up at 36.9 per cent as against 35.1 per cent the previous year (Q4-FY2018). Here LCV volumes increased by eight per cent to 15502 units. On partnerships with EV companies and the speculations’ rife of a Tesla partnership in the offing, Hinduja mentioned, that the company was not looking at collaborating with any car manufacturers at this stage. “The EV space is a very new sector with a fast-paced technology development cycle. We are in general very happy to have discussions with people who have been present in this sector and have better knowledge about the space,” he concluded.
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