The billionaire Hinduja family, even in the best of times, is known for being quite media shy. This hasn’t stopped speculation, however, on whether third-generation family memberDheeraj G. Hindujawill propel the next wave of thinking and growth for the Group. The next generation scion, who is currently focussing on the Group’s India business and is the Chairman of commercial vehicle maker Ashok Leyland, is at the helm at a time of economic slowdown and all-round depressed sentiment. In an interview withThe Hindu,Dheeraj talks on the uncertainty in the commercial vehicle industry, defence procurements and more. Excerpts:
This quarter has seen losses and tough shareholder queries. How do you look at the next three quarters for both the industry and Ashok Leyland?
It has become very difficult to predict what is happening in the commercial vehicles industry. Even this slowdown in this quarter, nobody thought it would be this severe. The month of April started and when there was only a slight slowdown, everybody thought that Q2 would be better. But Q2 is here, and it’s looking quite depressed.
So, at this point, sentiments are very depressed… the customers are depressed and there is uncertainty in the economy. I believe that until a few initiatives are taken in terms of infrastructural revival, mining restarting and the JNNURM that they have announced… unless some of these kick-start, it will be difficult.
But in this kind of an economy, what are the positive signals that you are looking towards?
Well, I think the positive from Ashok Leyland is that we are now ready with all new product launches. We have gone through our capital expenditure… we’ve gone through our investments. All these years, all you’ve had to do is look our balance sheet to see high debt, high investment and high capital expenditure. This is because all of these new ventures such as John Deere or Nissan, required a lot of capital.
We’ve now been through it, and the advantage of launching these new products in this depressed economy is that we believe these products will offer better value to the customers. I think that in all customers will be better off in terms of our new offerings. You can see that from the Dost, right up to the new products that we will be introducing, Ashok Leyland has a completely brand new portfolio.
I think at this point, no other commercial vehicle manufacturer can match the type of offering that we have from bottom to the top.
Daimler entered the market nearly six months ago, how has the competition been so far?
We are not afraid of the competition, because we are ready for it and we had foreseen that it would come. The only thing I can say is that in the last financial year, despite the competition, we gained three percentage points in market share. Apart from our new products, we have spent a lot more time improving our network. Today, our touch-points in the North are greater than what we have in the South!
North, South, East, West… Ashok Leyland has a service capability throughout the country. In this industry, the customer looks out for the fact that whether he goes from Chennai to Delhi, if his vehicle breaks down, someone is there to support him. And that’s what we can offer today.
Discounts seem to have dragged this industry down, with Ashok Leyland now refusing to play that game. Is there now a tactical understanding among players to allow this to taper off due to profitability issues?
I don’t think there is any tactical understanding, because every company is doing whatever it feels appropriate. We just felt it no longer made sense to be squeezing our margins even further by giving these levels of discounts. Yes, it could mean a few percentage points drop in market share, but I think that will be very temporary.
Why will it be temporary? This is because you entice somebody to do a one-off buy, but, in the long-run, I don’t think any manufacturer can sustain this kind or level of discounts that we are seeing. So it’s been going on for the last three-four months… we have cut back. I think that if others pursue that strategy [cutting back on discounts] as well, it will be better for all of us and for the whole industry.
With the new defence procurement policy, which comes with more domestic sourcing, and the relaxation of FDI in defence, how will this play out for Ashok Leyland?
Well, I’m not giving you a direct answer, but the whole objective for Ashok Leyland is that we have to move away from these cycles that we experience. So the LCV is one extension, construction equipment is another, and defence is one as well.
I think 49 per cent makes sense because there are a lot of technologies that are not available in India that is required by the Indian Army. You go to manufacturers overseas; they don’t want to part with their technology for 26 per cent. This is because they know that others can easily replicate it in the future.
So, in that context, I think opening up FDI in defence is a very wise move by the Government. I think that this will not only benefit the defence ministry but also for Indian companies. In terms of impacting Ashok Leyland, I think it’s a major positive for us. We have been one of the largest suppliers of logistics vehicles and it gives us an extension into newer areas. We have been exploring this, but we’ve been waiting for the right policies to come in.
Aerospace and aeronautics was one adjacency you were talking of nearly three years ago. What happened to that?
As a Group, we firmly believe in partnerships. This is not an area where we our own domain capability and we have tried to find the right partner. It’s a sector we want to enter in… we do have some specialists already within the Group. Finding the appropriate partner will be the next stage for us.
Do you think belt-tightening measures are in order, as several shareholders have suggested, as a means of combating the current slowdown?
I think that shareholder in question really misunderstood. The salaries for Sesh [sic] and Vinod Dasari are approved by the shareholders at the AGM. I don’t think its fair to compare a promoter , who holds an equity stake, versus somebody who runs the company as a professional. Some of these statements [concerning salaries of senior management] are misinformed.
I think that increasingly, senior management of various companies abroad have some component of their package linked to various incentives, share price being one of them. I think it is a good measure, to look at share price, because it is looking at shareholder value, maximisation and creation of wealth. It is something the nominations committee of Ashok Leyland has looked at, and we might introduce it as well.
raghuvir.s@thehindu.co.in
anuj.s@thehindu.co.in
