The Hindu Business Line : Ashok Leyland to step up R&D spend

AT the beginning of the current financial year, Ashok Leyland had planned for an enhanced R&D expenditure of about Rs 75 crore. The step-up was need-driven. But now the `150 per cent weighted deduction on in-house R&D expenses' that the Budget proposes to allow from this year is, for Ashok Leyland, a windfall.

"Reckoned at a tax rate of 36 per cent, it (the Budget benefit) means that for every Rs 100 I spend on R&D, I get back Rs 18," Mr K. Sridharan, Executive Director (Finance), told Business Line. In addition, there are tax benefits on the Rs 100 actually spent too.

According to Ashok Leyland's annual report for 2003-04, the company last year spent Rs 48.83 crore on R&D. The need for technology upgradation has left the company with no option but to step-up R&D expenditure.

In the current year, the company proposes to buy a simulator (called six-poster rig), which alone will cost about Rs 9 crore. The gadget will test a tri-axle truck under fully loaded condition and generate data about its performance.

According to the annual report, the Free Trade Agreement with Thailand would enable the company to buy components cheaper. Asked about this, Mr Sridharan said there could be as much as 30 per cent difference in costs. Ashok Leyland has initiated steps towards buying from Thailand.

Elsewhere, the annual report said Ashok Leyland's newly floated subsidiary meant to provide transport exchange services, Ashley Transport Services Ltd, had taken off well. "The objective is to be with the truck operators," Mr Sridharan said.

To dilute holding in IndusInd Bank

Ashok Leyland will end up with a stake of about 17 per cent in IndusInd Bank after its subsidiary, Ashok Leyland Finance (ALF), merges with the bank. But since the RBI guidelines cap a promoter's stake in a commercial bank at 10 per cent, the company will need to divest a part of its holding in the bank.

Last year, Ashok Leyland acquired 23 lakh shares of IndusInd Bank from ALF, for a consideration of Rs 8.88 crore. (The price works out to Rs 38.62 a share; the last traded price on the NSE was Rs 45.95.) Since ALF itself is merging with the bank, the shares will otherwise have to be cancelled out.

But apart from this, Ashok Leyland will get 4.438 crore shares in IndusInd Bank when the ALF-IndusInd Bank merger happens. With this, Ashok Leyland will end up having close to 17 per cent stake in the bank.

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