Ashok Leyland to focus on growth of non-truck products

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Our Bureau

Chennai, Feb. 14 “We also make trucks” could well be Ashok Leyland’s catch phrase in the coming years as it targets more revenues from its non-truck business.

Ashok Leyland hopes that the non-truck products — or the non-cyclical business — will contribute to more than half its income in the next few years. The company sees it as an option to insulate itself from the cyclical changes in the economy, which have hit commercial vehicle sales now.

Primarily this will mean the growth of its engine business. The company now supplies engines that are used as prime movers in generators and marine applications. It sees a growing opportunity in supplying to the telecom tower segment and hence will offer complete generator solutions rather than just supplying the engines. Other areas for growth would be spare parts sales, supply to the defence sector and widening export markets.

revenues, sales

Mr K. Sridharan, Chief Financial Officer, Ashok Leyland, told reporters on Friday that the non-cyclical revenue stream is estimated to increase to about 45 per cent of its revenue in the current year, up from 38 per cent last year, on a turnover of about Rs 8,000 crore. In the coming year, this segment will contribute more than half of Ashok Leyland’s revenue.

The company, which till now has supplied engines to generator manufacturers, will now assemble its own brand of LeyPower Gensets. Investments would be minimal because it will outsource components such as alternators and housing.

The ongoing power shortage and the growth of the telecom infrastructure are factors that will contribute to the business. Mobile service providers need to provide generator sets in the signal towers to keep the network live during power cuts, he said. The company makes its own engines and also imports some from China for the telecom tower business.

Spare parts sales are also expected to grow steadily with the increasing retrofit of CNG and aggregate parts. Spare parts revenue, which is around 5 per cent of its revenue, is set to grow to 7 per cent in the near future, he said.

Growing defence orders

Supply to the defence sector is also growing with steady orders from the vehicle factory at Jabalpur.

Export market is also steady with the company targeting markets in Africa, Latin America and the Indian Ocean countries.

In West Asia, Ashok Leyland has compensated for the drop in Dubai by focussing on Qatar, Iraq, Egypt and Iran.

(This article was published in the Business Line print edition dated February 15, 2009)
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