Market conditions to remain challenging; strategy in place for future growth: Ashok Leyland

During the past few months, Ashok Leyland has launched multiple initiatives to enhance cost management. A centralised team has been formed to roll out initiatives for cost reduction. In order to consolidate and further grow its market position, the company is ready with its cost-effective iGen6 mid-nox engine technology for BS-VI and Modular Business Program platform.

By:June 13, 2020 10:34 AM

 

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Hinduja group flagship Ashok Leyland said the company had enough liquidity and an effective strategy in place to take care of necessary obligations and future growth momentum, even as it predicted the market conditions to remain volatile and challenging. In a filing with the stock exchanges on the impact of Covid-19 on its operations/businesses, Ashok Leyland said, “We expect the market conditions to remain volatile and challenging. However, we remain motivated to build a sustainable future over the long term through more proactive steps and create sustainable growth.” The pandemic has impacted the company operations in terms of disruptions in production, supply chain, manpower shortage, lockdown of production facilities, which have, in turn, impacted the sale volumes and consequently revenue and market share. The company is taking several measures to mitigate the negative effects like close collaboration with customers, banks/financial institutions, suppliers and employees.

Its aftermarket division is taking appropriate steps to negate substantial negative impact in areas of inventory management and service-level delivery by close collaboration with employees, channel partners and suppliers. The supply chain team is regularly monitoring the situation, with more focus on service, collaboration with dealers, 3PL partners and vendors. Collaborative projects are being undertaken with long-term business partners to create value for them. Ashok Leyland stressed that the market was expected to revive, and demand pickup would happen in the short term. With pent up demand due to the ongoing lockdown, the aftermarket unit expects the demand for parts and services to bounce back.

With subdued demand for new vehicles in the short term, utilisation of the existing fleet is set to be substantially higher than in the recent past. This will lead to a higher demand for repairs and maintenance of the existing fleet. The company currently has been trying on both the working capital and the long-term credit routes with various banks. The management is closely monitoring the liquidity position to ensure that it is managed efficiently. The company has been meeting its commitments and maintains enough liquidity to take care of necessary obligations. Cash flow forecasts are prepared on a regular basis.

As on March 31, the company had a net debt of Rs 2,028 crore. Since then, the company has been trying up both long-term and short-term loans. These have helped improve the liquidity position. The company claims to be able to service debt and other financing arrangements. The gradual lifting of lockdown will help in resumption of operations in full swing. This should help in generation of cash from operations. With the current levels of debt and available lines of credit, the company maintained that it was sufficiently funded to meet all its financial commitments during the year.

During the past few months, the company has launched several initiatives to improve cost management. These efforts are expected to have beneficial effects. A centralised team has been formed to roll out initiatives for cost reduction. To consolidate and further grow its market position, the company is ready with its indigenous, cost-effective iGen6 mid-nox engine technology for BS-VI and Modular Business Program platform, Ashok Leyland further informed the stock exchanges.

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