Ashok Leyland net falls 60% to Rs 190 cr

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Chennai: Hinduja Group flagship Ashok Leyland Ltd (ALL) has reported a net profit of Rs 190 crore during 2008-09 fiscal as against Rs 469.31 crore, a decline of 59.5% while keeping intact its profitable track record of 60 years.

On a reduced sales volume of 54,431 vehicles (as against 83,307 units during last fiscal), the turnover has declined to Rs 5,981.07 crore (Rs 7,742.58 crore), with other income contributing Rs 49.62 crore (Rs 57.61 crore). Faced with a steep fall in demand, the company had curtailed production by resorting to lesser number of working days starting November 2008, which has brought down operating costs, contributing to lower ‘other expenses’ at Rs 493.21 crore (Rs 541.20 crore).

Addressing a press conference here to announce the annual performance as well as future plans, R Seshasayee, managing director of Ashok Leyland, said: “One disturbing trend in the segmental shift is the steeper fall in demand for higher capacity vehicles such as tractor trailers and multi-axle vehicles, at least temporarily retarding the modernisation of India’s vehicle composition.”

These are also segments where Ashok Leyland has a stronger presence and the maximum model options. This segmental reversal and the relatively robust demand in the eastern region impacted the company’s goods volumes. The redeeming feature was the bus demand which was down just 9.7%. The company improved its market share in buses by 0.5% and retained the top position.

In order to offset the possible downturn and to bring up its growth in future, the company will be floating a vehicle finance company in the next two months. “We are waiting for RBI approval and we expect to float the same in the next two months,” Seshasayee said.

Overall, the share of non-cyclical business has gone up to 50% from 34% in 2007-08, with the engines business fetching a revenue of Rs 404 crore (Rs 204 crore). This represents higher volume of genset engines (11,264 nos) and transformation of the business stream from mere trading in engines into the `Power Solutions Business' through greater value addition, he pointed out.

According to Seshasayee, the industry is going through a segmental shift towards multi-axle, conventional, 4X2 tractor trailer and general purpose vehicle which is prevalent in the developed countries.

The slowdown forced a quick redrawal of the capex plans. Investment plan for 2009-12 has been scaled down from Rs 3,000 crore to Rs 2,000 crore, yet protecting product development outlay.