Ashok Leyland hits accelerator

Ashok Leyland was the subject of renewed buying on Monday as the market expects that the company will face up to rising costs by passing these on to vehicle vendors.

That reckoning took Ashok Leyland on the upward path to Rs 103 (up 3.78%) by 10:50 IST. The scrip of the second largest commercial vehicles maker in the country recorded volumes of 55,786 shares on BSE by then.

The issue of rising costs reflecting in lower operating margins had a negative impact on the scrip of late. So far, the company has not been able to bill vendors on increasing costs.

For Q4 ended 31 March 2003, ALL reported a 4.7% fall in net profit to Rs 66.34 crore compared to a net profit of Rs 69.62 crore in the corresponding period of the previous year. Net sales were at Rs 932.35 crore (Rs 9.32 billion). These figures belied capitalmarket.com projections - a 9%-17.5% growth in net profit to Rs 76-82 crore. Net sales came in line with the lower side of expectations - a 19%-31.6% growth to Rs 913-1,011 crore (Rs 9.13-10.1 billion) for Q4 ended 31 March 2003.

For FY 2002-03, ALL posted a 30.3% increase in net profit to Rs 120.21 crore (Rs 1.2 billion) on a 19% jump in total income to Rs 2,713.95 crore (Rs 27.13 billion). The board declared a dividend of 50% or Rs 5 per share for FY 2003.

For FY 2002-03, ALL recorded an impressive growth in volumes. Its sales went up 22.8% to 36,445 vehicles from 29,673 units a year ago. It recorded a 23.2% rise in domestic vehicle sales to 33,895 units, while exports jumped by 17.5% to 2,550 units. The surge in demand for medium and heavy commercial vehicles, due to the shift in demand towards multi-axle vehicles, has boosted the sector in recent years. ALL is also a leading supplier of buses to state governments.

The company has, meanwhile, bagged a $46-million export order for supplying 3,322 trucks to Iraq, under the UN-approved Oil for Food Programme. Repeat orders have also manifested from Seychelles and Afghanistan – two markets tapped by the company in the last financial year.

The Hinduja group company has framed a strong export strategy and is exploring new markets in Argentina, Afghanistan and Seychelles.

ALL is also expected to benefit from the government's thrust on roadway projects as these will enhance sales of commercial vehicles as well as due to the replacement market, which is also expected to gather pace in the southern market where the company is a market leader. Also, the Golden Quadrangle Project has started gathering pace in the southern region, which is expected to further increase the demand for the company's commercial vehicles.

The company has proposed a reduction of up to 1000 jobs, expected to be undertaken over 4-5 years. It may be recalled that the Chennai-based automobile major had reduced its manpower strength from 15,300 six to seven years ago to 11,900, currently. ALL also plans to improve productivity through better processes and standardisation.

BSE code: 500477