H2 FY21 will bring much-needed growth for CV makers: Ashok Leyland

Mahadevan says that as demand grows, plant utilisation will also increase. When that happens, not only the volume performance, but the operational performance of the company will also improve.

By:November 10, 2020 10:16 AM
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Commercial vehicle (CV) makers are facing challenging times in the pandemic, with sales failing to pick up. Ashok Leyland CFO Gopal Mahadevan shares his views on the CV industry’s growth prospects and the company’s plans going forward with Sajan C Kumar.

When do you think the CV segment in general and the company in specific would be able to counter the current slowdown in demand?

The commercial vehicles segment has been making steady improvement, and with further opening up of the economy will grow further. An increase in infrastructure investment by the government and improvement in core industries such as cement and steel should aid demand for commercial vehicles. The total industry volume was 75% lower than the last year. There is an industry estimate which forecast that for the full year, the volume may be decline by 25% to 30%. If that is the case, from a situation of minus 75%, the industry would come down to minus 25%. The sector needs to grow in the remaining third and fourth quarters. As demand grows, plant utilisation will also increase. When that happens, not only the volume performance, but the operational performance of the company will also improve.

How is the capacity utilisation at the plants currently?

Our Hosur plant, which primarily makes light commercial vehicles (LCVs), is back to pre-Covid levels. With demand increasing month on month, the plant’s capacity utilisation would go upwards of 90% soon. The other plants at Ennore and Pant Nagar that cater to the M&HCV segment, are moving towards higher utilisation levels, but at a slower pace, and it will take them some more time to reach the pre-Covid levels.

Is there any rethink on the capex plan for FY21? The company had earlier revised it downward.

We will be extremely tight and vigilant on the capex and at the same time will ensure that we are future-ready. What we do is to constantly look whether any capex is required to grade up production and if yes, we will do that. We had capex plan of Rs 750 crore for financial year 2021 and `290 crore has been spent till the September quarter. The company has headroom for another `500 crore, which will be invested as per requirement.

What are the company’s plans on the export front?

In Q1, the exports were negligible as global economies were under lockdown, and in Q2 we have made some improvement. We believe that Q3 and Q4 will be good for exports as the economies are opening up. Of course, there are issues in Europe due to the second wave of Covid-19 infections. Also some Central Asia, Sri Lanka and Bangladesh markets are yet to open up. We are eyeing new markets such as South East Asia and Africa.

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