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Ashok Leyland impaired Rs 558 crore in 2015-16

Ashok Leyland set to change track after expansion spree

  Commercial vehicle major Ashok Leyland has said that it has seen an impairment of Rs 558 crore in 2015-16, which is essentially provisions towards its investment. The company said that it also disposed off the shares in Ashok Leyland John Deere at a loss of Rs 233 crore.

In a letter to shareholders, Ashok Leyland's Chairman Dheeraj G Hinduja said that in 2016-17 and beyond, the the company's growth plans would be focused on unwavering commitment towards the core business of commercial vehicles. A portfolio rationalisation which is already in process would see progressive exit from non-core and non-performing businesses.

The impaired Rs 558 crore in 2015-16, made after studying joint ventures, associates and subsidiaries, include a provision of Rs 107 crore towards Albonair Germany, Rs 150 crore towards Optare Plc, UK and Rs 5 crores towards Albonair India.

"The company and its joint venture partner (Nissan Motors Ltd), are in discussions to resolve the uncertainty with respect to the continuity of the joint venture operations represented by three companies," Ashok Leyland said in a statement.

The joint ventures include Ashok Leyland Nissan Vehicles Limited, Nissan Ashok Leyland Powertrain Limited and Nissan Ashok Leyland Technologies Limited.

Ashok Leyland said, considering the significant uncertainty in continuity of the JV operations and the accumulated losses of the JV entities, it has provided for the carrying value of the investment in the said companies aggregating Rs 296 crore.

In 2014-15, Ashok Leyland said after studying its intrinsic value of investments in Nissan JVs, it has made an impairment provision of Rs 214 crore out of total investment of Rs 509 crore in the three Nissan JV entities.

The loss of Ashok Leyland Nissan Vehicles Ltd has come down to Rs 61.87 crore in 2015-16 from Rs 791.16 crore, a year ago. Ashok Leyland has 51 per cent stake in this company. Nissan Ashok Leyland Powertrain Ltd's profit was Rs 71.94 lakh in 2015-16, compared with a Rs 3.08 crore loss a year ago, and Nissan Ashok Leyland Technologies Ltd profit stood at Rs 5.05 crore as compared to a Rs 9.78 crore loss a year ago.

In the major JV, for construction equipment business, with John Deere, the company said it has disposed off the shares in Ashok Leyland John Deere at a loss of Rs 233 crore. The JV company has reported a loss of Rs 75.94 crore in 2015-16 as against Rs 29.55 crore, a year ago. Ashok Leyland attributed the poor performance to market condition.

Ashok Leyland also said that two of the JVs/ associates are under liquidation are Ashley Airways Ltd and Automotive Infortronics Ltd.

The company's Managing Director Vinod K Dasari earlier said that AL decided to focus on its core business, which is commercial vehicle and it would continue to focus on related diversification.

He agreed that it was a bad decision to get into unrelated businesses, though it was done with good intent. He said, "But somehow things didn't work out may be due to bad execution, bad market, timing, execution, strategy, partner we don't know. It doesn't work instead of spending the time and energy to revive a dead business, let it go and focus on the core business and make money."

Hinduja said Ashok Leyland would focus more on international markets. In the target clusters it would develop products specifically for the identified markets. To cater the demand in the international markets Ashok Leyland is doubling its capacity of its Ras-Al-Khaimah plant this year and a new assembly unit in Bangladesh is in the offing and further units in Africa are under active consideration.

To leverage availability of in-house developed Neptune engines and also respond to growing application needs, the Power Solutions Business would be implementing an updated strategic roadmap, he added.

Hinduja said, "the company has maintained its growth momentum last year setting new records of performance. Given the present economic indications and the plans developed for the future, I am confident that your Company will continue to better its performance in the coming years, also riding on the Digital wave".

On future plan, Ashok Leyland said that the plans include introduction of Euro-VI engine and exhaust system variants, commercialisation of hybrid and electric bus and introduction of Modular Business Program for both truck and bus variants.