Market conditions have forced commercial vehicle maker Ashok Leyland to cut down capital expenditure and borrowings considerably this year.
In an investor meet presentation, the company has said it aims to contain capex and investments to “within” Rs 500 crore in the financial year 2013-14, compared with Rs 1,600 crore in FY13. This entails a capex of Rs 250 crore on product development and IT infrastructure.
This year, the company plans to launch the CNG version of the light commercial vehicle Dost, passenger vehicle Stile, LCV Partner, the A truck (8-15 tonnes) and N truck (16-49 tonnes).
Another Rs 250 crore will be invested in joint ventures — with Nissan (for light commercial vehicles), John Deere (construction equipment) and in the UAE and Germany. (Ashok Leyland has a manufacturing facility in Ras al Khaimah, UAE. It has also invested in German firm Albonair for vehicle emission systems.)
Ashok Leyland hopes to improve its debt position. As on FY2013, the company’s total debt stands at Rs 4,300 crore. Average working capital was Rs 1,800 crore.
It is “targeting a reduction in total debt of Rs 500 crore, mainly in working capital loans,” said the company in the presentation.
The company’s long-term loan outstanding was Rs 3,460 crore last year. This year too, it aims to contain long-term borrowings to under Rs 3,500 crore and the debt/equity ratio to around 1, from 1.38 times now, Ashok Leyland said in the presentation. Last year, Ashok Leyland’s net profit dropped 23 per cent drop to Rs 433 crore.
Total income decreased 3.3 per cent to Rs 12,481 crore. Domestic sales of medium and heavy commercial vehicles (M&HCV) were down 10 per cent. Only the Dost bucked the trend.
This year, Ashok Leyland expects the M&HCV segment to grow 5 per cent, on the back of government spending on infrastructure, “benign” interest rates and a lower base.