Chennai: For the Rs 2,630 crore truck major Ashok Leyland, the current year has begun on a favourable note. The company has sold 2,236 vehicles during April 2002 as against 1,808 units the earlier year.
The major growth has come from the medium-duty segment, with the company selling 1,623 numbers, clocking an increase of 509 units over previous years April sales. While light commercial vehicle sales too perked up, passenger vehicles continue to be lower as in the previous fiscal.
Starting this year Ashok Leyland will be moving towards the single-engine Hino platform from the present three-engines offering, because it is economical for both the company as well as the customer. The company has also developed Hino CNG engines, which will be introduced this year.
"The question is what the market wants. Further, the single-engine and gear-box platform will give us economies of scale", says Ashok Leyland managing director R Seshasayee. Similarly, engine production will be concentrated in Hosur, and ZF gearboxes at the Bandra plant.
According to Seshasayee, the shift-over to the Hino engine platform will entail an additional investment of Rs 45 crore; it will also use the Iveco engine production line at its Hosur plant.
On the products front the company will be launching two new tractor-trailers with air-conditioned sleeper cab. A 15-tonne, 4x2 haulage Comet variant, a factory-built minibus (28-32-seater) for the export market, and a whole new series of modern and economical trucks code named Ecomet are on the anvil, says Seshasayee. The other areas being looked at to improve revenues are annual maintenance contracts, night services, residuals life forecasting and others.
Last fiscal it was sort of a double whammy for the Rs 118.9 crore equity-based company. The year saw the southern market, where Ashok Leyland has a strong grip (60-per cent market-share), collapse. But growth occurred in north India, where Telco lords over the market. The Chennai company's market-share in north is less than 20 per cent. The markets moved adversely proportional to Ashok Leyland's strength, says Seshasayee.
The bus market, in which Ashok Leyland commands nearly 50 per cent market-share, shrank by 33.6 per cent and within that segment state transport undertakings, in which the company enjoys a market-share of 60 per cent, contracted by 42 per cent. Similarly, exports, too, came down by 10 per cent to 2,170 numbers from 2,411, as the company's main market, Sri Lanka, continued to be a disturbed state.
In absolute numbers, last fiscal Ashok Leyland sold 29,673 vehicles down from 32,475 units clocked in the previous year. The only silver-lining was the increasing sales in the goods-carrying segment and the defence sector. The company sold 18, 413 numbers of goods carriers and 668 numbers to the defence sector. The Hinduja company increased its sales to defence by 483 vehicles to 668 vehicles last fiscal.
"In a tough market situation, we had to find the way of moving ahead. So, we sought volumes in segments that grew and protected profitability in shrinking segments", says Seshasayee. The growth segment he refers to is multi-axle trucks and tractor-trailers, while cutting costs and other frills guarded profitability.
The company reduced its interest cost by Rs 14 crore. This, coupled with the Rs 7.7 crore other income, enabled the company to close last fiscal with a net profit of Rs 92 crore. The total expenditure went up by Rs 8.41 crore to Rs 2346.5 crore despite producing a lower number of vehicles as compared to the earlier year.
Outlining the larger economic context, he says though agricultural production (wheat and rice) went up, the same was used as buffer stock and was not transported. This changed the transport requirements. Refuting the suggestion that the investments made in the road sector resulting in better roads would benefit Volvo India rolling out high-haulage trucks and playing on the cost-per-tonne-per-kilometre plank, Seshasayee says: "We cater to the market needs; Indian conditions are unique and there will be demand for our trucks."
Seshasayee is keeping his fingers crossed for the privatisation of major bus routes that will fuel Ashok Leyland's growth. Already rumours are agog about the Tamil Nadu government's plans to privatise routes. While it may take some time to materialise, the company has now bagged a 1,370 vehicle order from Tamil Nadu transport undertakings.
Similarly, he expects the Delhi Transport Corporation to start sourcing CNG buses soon. The company has a stock of 700 CNG buses and has a booking for 560 units by private operators. Deliveries have been made for 300 units and the balance will be executed soon.
CNG buses add heavily to the company's bottomline. While the normal chassis would cost around Rs 7 lakh, a CNG bus chassis is sold for more than double that figure. But profitability remains the same for both, Seshasayee sums up.