Commercial vehicle manufacturer Ashok Leyland Ltd. (ALL) has decided to scale down its operations to the level that prevailed three years ago to make it a much more resilient company.
“The idea is to see that we don’t get into shrinking more because next year, the first quarter and second quarter is not going to be really great,” Gopal Mahadevan, whole-time director and CFO, Ashok Leyland, said in an earnings call.
“We’re going to use this opportunity to scale down the operations of the company even further. What we are trying to do is instead of doing something like cutting ourselves to the bone...why don’t we resize the organisation to the level it was possibly three years ago,” he said.
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“Let’s go back to when we were ₹18,000 crore (in revenue) three years back. Let us look at what were the resources we are deploying and let us take a 20% cut on that,” he said.
“We are extremely determined this time to grow our international, and more importantly, our light commercial vehicle (LCV) business, and the defence [vehicles] business also. We are taking some steps to see how to broad base the overall profile,” he said. Going forward, ALL wanted to invest in the LCV segment as it had a huge business potential.
Regarding defence business, Mr. Mahadevan said ALL’s overall plan was to broad base its capabilities in defence so that it can see a larger addressable market.
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Pruning capex
Asserting that the company will be pruning its capital expenditure (capex) for the current fiscal by 35%, he said: “At the beginning of the year, we said we will invest ₹2,000 crore. So far, we have spent ₹960 crore and we are going to be far, far lower than the projected capex and we will possibly finish the year at about ₹1,200- 1,300 crore maximum.”
On the debt level, he said the firm was in a comfortable position. As of the third quarter, ALL had a debt of less than ₹2,000 crore against ₹2,736 crore in the second quarter.
“Given a very tough quarter, I must state that we have done some very skilled cash flow management, reduction of inventory, all of which has resulted in cash flowing in, and we are doing everything that is right to build a long-term resilience of the company,” he said.