Ashok Leyland to set up assembly unit in Africa soon

Chennai, Aug 13 (IANS) Commercial vehicles major Ashok Leyland Ltd will soon finalise its plans to set up an assembly unit in Africa in its efforts to de-risk its business as well as to become a global player, said a senior company official.

“We want to insulate ourselves from the cyclical nature of the commercial vehicles business by focussing on exports, defence supplies, sale of spares, diesel engines and bus,” chief financial officer Gopal Mahadevan told reporters here on Thursday.

One of the strategies to increase exports is to set up a bus assembly unit in Africa with a local partner, he said.

“We are looking at Nigeria, Kenya, Senegal and other countries. We are in talks with local partner. Initially we will assemble small vehicles and once the distribution and service network are in place we may go for bigger vehicles,” Mahadevan said.

According to him, the initial outlay for an assembly unit will be between Rs.30 crore to Rs.50 crore and Ashok Leyland may go for three or four such facilities.

Overall Ashok Leyland would be investing around Rs.500 crore this fiscal in its existing facilities.

“The first such facility will be set up soon.We have the product plan for those markets,” he added.

According to him, in three-five years the share of medium and heavy commercial vehicles (M&HCV) sales in the total turnover should be around 35-40 percent.

“We are not going to de-grow the revenue from M&HCV segment but on the other hand would increase revenue from other avenues,” he said.

On defence supplies, Mahadevan said Ashok Leyland has pre-qualified to participate in several tenders.

Queried about the net profit of Rs.159 crore during the first quarter of the current fiscal, he said the company focussed on cost reduction through measures like increasing the common parts across the various models, choosing alternate materials.

Ashok Leyland had posted a net loss of Rs.47.95 crore for the quarter ended June 30, 2014.

Though the average discounts on the vehicles ranged between Rs.200,000-225,000 during the period under review, the company saw to that the net realisation is better.

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