Ashok Leyland to have no major capex spend for 3-5 years

ashok-leylandRecession and economic slowdown – resulted the company not to declare dividends for the last fiscal — the first time it missed since inception — truck maker Ashok Leyland has decided to check spending on capital expenditure (capex) for the next three years.

CFO Mr. Gopal Mahadevan said:  “There will be no chunky capex spends for another three to five years, but for a few hundred crores which will be used for the routine de-bottlenecking or maintenance,” and added that “The major capex is over and it is now time to reap benefits. Our EBITDA (earnings before interest, taxation and depreciation) is now positive and we need to continue to work on bringing down capex and manage working capital”.

The company, which has been posting losses over the last few quarters, has been trying to bring down its costs and improve efficiencies. It has sold off several non-core assets, reduced manpower to cut costs, reduced debt by rising about Rs 660 crore through a Qualified Institutional Placement (QIP) and controlled various other costs and improved efficiencies. While the company has reduced its losses during the first quarter of the year to almost a third of its losses the previous quarter, it has to continue its cost control measures.

Ashok Leyland has brought down its debt to Rs 4, 500 crore this quarter from Rs 6,200 crore last year, and will continue to work on reducing debt. “The debt to equity ratio is now 1.2: 1 and we will bring this down to 1:1 by end of this year. We might look at selling off more non-core assets which don’t affect the capabilities and capacities of the company though this won’t be done in a desperate measure as our balance sheet is stable,” Mahadevan said.

Apart from managing its costs, the company is also diversifying its business to reduce losses. “We plan to increase exports from 10% now to about a third of our overall revenues,” Mahadevan said. The company will be exporting its buses -Boss, Captain and JanBus to Africa, South America, South East Asia and the Middle East, and this will be contra-cyclical to the domestic truck industry, he said.

In the domestic market, the company, which saw several new launches last year, plans to bring in a range of variants of its existing products, Mahadevan said.

Filed in: Road

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