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Ashok Leyland lines up Rs 800 cr capex

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Hinduja flagship company Ashok Leyland is planning to invest around Rs 4,150 crore in Tamil Nadu. The proposed investment includes an LCV project along with company’s Japanese partner Nissan. As part of the capex for the present fiscal, the company said it will invest Rs 800 crore in joint ventures, research and development, and others.

Vinod Dasari, managing director, Ashok Leyland, said, the proposed investment of Rs 4,150 crore includes setting up a greenfield facility to manufacture Light Commercial Vehicle (LCV), along with Nissan. The facility will be set up by Ashok Leyland-Nissan Motor Company, a JV between Ashok Leyland and Nissan. The facility will come at Pillaipakkam, near Chennai.

It may be noted that last year Ashok Leyland and Nissan launched their first product Dost (which came from Ashok Leyland). The company sold 7,760 units and managed to garner 17 per cent market share in the LCV market now, according to Dasari. The JV partner, in which Ashok Leyland holds 51 per cent, are planning to launch two more products.

“We are seeing good response for the product and our backlog is three months now. So we have to increase our production capacity from 100 units a day now, adding another 50 units a day.” The company set a target to sell 36,000 LCVs in the next fiscal.

Besides investing in the greenfield facility for LCV, the company will also invest in Hosur, Ennore (where Ashok Leyland has its facilities), then in Velli Vaayalsavadi and at Orgadam. This includes expanding the capacity for M&HCV.

As a year whole, “Our capex for the fiscal would be around Rs 800 crore, this including investment in joint venture, plant and equipments (major portion will go into Pantnagar) and in research and development” said Dasari.

It may be noted, the company is planning to launch two products — Jan Bus, which company claims will be the world’s first front engine single step entry bus with full flat floor and five-axle rigid truck-

The launches are scheduled for this year. Besides the products, the company is also planning to launch Neptune Engines in the next 3-4 months and will bring Avia’s cab to India by the fourth quarter of 2012-13 which will replace company’s Comet Cab.

Commenting about company’s sales, he said, overall sales volume rose to 101,990 vehicles in 2011-12 from 94,106, up 8.37 per cent. Company’s market share dropped to 23 per cent from 26 per cent.

“In April 2012, our market share increased to 27.5 per cent compared to 26.3 per cent during the same period last year,” he said.

For 2012-13 the company set a target to sell around 110,000 to 120,000 medium and heavy component vehicles. “What could transpire will be continued economic uncertainity, volatility muted growth in M&HCV, select segment will grow such as the ICVs,” said Dasari

Company’s performance in 2011-12, according to Dasari is due to poor demand in the southern market which is the key market for the company combined with high interest rates and depreciation charges due to capital expenditure, including its investment in overseas arms, has resulted in the company’s net profit fall around 10 per cent to Rs 565 crore.