Ashok Leyland undertakes cost cutting measures to save Rs 500 crore

Commercial vehicle major Ashok Leyland has undertaken cost cutting measures which will save around Rs 500 crore. The company added that it would continue with its capex plans which would be around Rs 1,700-2,000 crore.


Gopal Mahadevan, whole time director and CFO, Ashok Leyland, said that the cost cutting measures had been undertaken in various areas including administration, manufacturing, travel, communication, consulting etc.


When asked if the company would reduce manpower to bring down the cost, he said that instead of adding new people, the company was looking at optimising existing resources.


Speaking on capex, Mahadevan said, the company would go ahead with the capex plans for BS-VI, modular platform and project Phoenix. The company is looking at investimg around Rs 1,700-2,000 crore during the current fiscal, he said.


Ashok Leyland reported a 9 per cent revenue drop for the quarter ended June 30, 2019, at around Rs 5,684 crore from Rs 6,263 crore in the corresponding period last year. The company's PAT dropped to around Rs 230 crore from Rs 422 crore a year ago.


However, an EBITDA of 9.4 per cent in spite of the decline in revenues signifies efficient cost management in the company, said Mahadevan. He added that this did not include defence and exports. Margins were supported by mix of favourable products, price adjustment where possible and a flat steel price, Mahadevan noted.


“With signs of slower demand, we are closely watching the developments in the industry. We continue to take cost out and drive productivity and growth initiatives,” said Mahadevan.


The sales of Ashok Leyland's medium and heavy commercial vehicle (M&HCV), including exports, declined 38.9 per cent to 6,722 units as against 10,996 units during same period of last year. Of this, trucks sales saw a 48.13 per cent drop to 4,858 units in July this year as compared to 9,365 units in the same month last year. Bus sales, however, grew 14.3 per cent to 1,864 units compared to 1,631 units in the corresponding period last year.


Light commercial vehicle (LCV) sales remained almost flat at 4,205 units in July 2019, as compared to 4,203 units in the same period last year.


Total sales in the domestic market declined 28.9 per cent to 10,101 units compared to 14,205 units a year ago. M&HCV sales declined 40.7 per cent in the country to 6,018 units in July this year, compared to 10,152 units last year. Truck sales fell  by 46.5 per cent to 4,668 units as compared to 8,731 units in the same month last year, while domestic bus sales declined 5 per cent to 1,350 units from 1,421 units in the same period last year. LCV sales in the domestic market grew 0.74 per cent to 4,083 units from 4,053 units during the same period last year.