Ashok Leyland bets on defence supplies

Chennai, July 18 (IANS) Commercial vehicle major Ashok Leyland Ltd, betting big on supplies to Indian defence forces, is also hoping to reap the benefits of investments made in acquisitions and joint ventures, said a senior official.

The company will be conserving cash and rationalise production across its facilities during the down turn.

"We are part of five defence tenders and with L&T (Larsen and Toubro Ltd) we are the L1 (lowest number 1) in one tender with Super Stallion platform. We have now participated with five different global players in very different applications but can't name them," V. Sumantran, non-executive vice chairman told reporters here Wednesday night.

Queried about the tender size, he said the project is long-term and is intended for testing in 2017. Volumes are going to appear after 2020.

Sumantran said the company depended on Stallion vehicle (200-300 HP) and later developed the bigger vehicle Super Stallion (350-360 HP) which can fulfill the role played by Tatra models.

According to Sumantran, the company is a partner or part of a consortium or sub-system provider for the 150mm mounted gun system on a truck.

Ashok Leyland, partnering with French company Panhard General Defence, has also developed the COLT 4x4 light tactical armoured vehicle.

According to Sumantran, the company may export the Super Stallion platform. Posting a net loss of around Rs.142 crore for the first quarter, Ashok Leyland had announced that it would rationalise manufacturing operations to improve asset utilisation.

Queried about that, Dheeraj G. Hinduja, chairman, said: "The market is down by 25 percent and hence there is a need to optimise what we have. Fortunately, critical investments were made in the last four years ... most of the investments have been done."

Ashok Leyland has decided to close down the Avia truck factory in Prague as rolling out 1,000 units does not make economical sense in the current market, Hinduja added.

Asked about the payback on the investments made by Ashok Leyland in acquisitions and joint ventures, Sumantran said the company is expected to reap the rewards soon.

The backhoe loader in joint venture with John Deere (Ashok Leyland investment Rs.250 crore) is getting good review from the users and more variants are being launched by that company, Sumantran said.

He said Ashok Leyland's associate companies Albonair, Germany and Defiance Technologies are also doing well.

Sensing the changing automobile emission norms, Ashok Leyland invested in Albonair which is now a single source supplier for emission control systems for the second largest truck maker in Europe.

He said Defiance Technologies, the information technology arm, is catering to several clients other than Ashok Leyland.

On the investments made in joint ventures with Nissan Motor Company, Sumantran said initially the partners committed to invest Rs.2,500 crore for the full spectrum of products and till now around 50-60 percent of that has been invested.

He said the joint venture with Nissan has resulted in models like Dost, STILE and an engine and by 2015-16 a new manufacturing facility for rolling out vehicles may be set up.

Contending that Ashok Leyland will be a price-point player to gain market share for its new multi-purpose vehicle (MPV) STILE to take on competing models, Sumantran said: "STILE will give 20 percent more fuel economy than other products in the market and has more interior space. The model incorporated the feedback from customers of Nissan's Evalia like sliding window, second row air conditioner and others."

The assembly facility in United Arab Emirates (UAE) helps the company to address the UAE and African markets.

On the strategy for buses, Sumantran said there is huge room for global strategy for buses but has to be executed locally.

The Jawaharlal Nehru National Urban Renewal Mission-II (JNNURM) should provide the launch pad for the low-cost bus, Janbus.

He said Optare, UK has given good bus designs and the SOLO model is being made in UAE.

Story first published: Thursday, July 18, 2013, 12:02 [IST]
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