The Hindu Business Line : Ashok Leyland Q4 net flat, to pay 150%

Mr R. Seshasayee (right), Managing Director, Ashok Leyland Ltd, and Mr K. Sridharan, Chief Financial Officer, at a press conference in Chennai on Thursday. The company said it will spend Rs 3,000 crore in capex over the next three years to more than double capacity from 84,000 vehicles now. — Bijoy Ghosh

Our Bureau

Chennai, May 8 Ashok Leyland has reported a flat net profit for the last quarter of last year. The truck maker’s post-tax profit for the full year 2007-08 rose 6.3 per cent, despite record sales in terms of volumes.

The company’s board has recommended a dividend of Rs 1.5 a share (of Re 1 each), or 150 per cent.

Ashok Leyland sold 83,307 vehicles compared with 83,094 in the previous year. “We just got our nose up over the previous year,” Mr R. Seshasayee, Managing Director, Ashok Leyland, remarked at a press conference today.

Because of deferment of purchases due to high interest rates, credit squeeze and rising costs, total industry volumes of commercial vehicles slid 6 per cent, to 270,994 units. However, there were pockets of growth within segments, such as buses, tippers and tractor-trailers.

Within commercial vehicles, ‘buses’ grew 35 per cent, but for which the CV industry would have been drastically hit. Ashok Leyland made most of the situation by selling 18,000-odd buses, capturing 45 per cent of the market. Passenger vehicles came to the company’s rescue last year.

Supply chain constraints

Buses apart, there was a good demand for vehicles used in mining and construction during the year. Mr Seshasayee said that in these areas Ashok Leyland could have produced and sold more but for “supply-chain constraints”.

In other words, components suppliers did not quite rise up to the occasion.

Another area that helped the company offset the down-cycle in goods vehicles was the buoyancy in spare parts sales, which increased 45 per cent to Rs 791 crore.

A substantial (but undisclosed) part of this came from exports of gearboxes to ZF of Germany, the company which has licensed its gearbox technology to Ashok Leyland.

Outlook for 2008-09

Mr Seshasayee finds the current year unpredictable because of the external environment. Total industry volume in the current year would (at best) be in “high single digit”, he said.

Ashok Leyland is on track for completing its proposed expansion programme. At present, the company’s capacity is 84,000 vehicles. It proposes to build two more plants, each with capacity to produce 50,000 vehicles, in Uttarakhand and Tamil Nadu. The expansion programme will cost Rs 3,000 crore. The company will borrow Rs 950 crore in the current year.

“At present, there is no plan to raise equity,” Mr Seshasayee said, while also noting that its investments in the joint ventures with Nissan (for light commercial vehicles, engines and technology development) might call for raising equity at some stage.

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