Ashok Leyland to invest Rs 6,000-mn in Nissan JV

Mumbai: Ashok Leyland, India’s second largest truck and bus maker, plans to offer an “incentive” to its shareholders by allowing them to own a stake in its joint venture with Nissan Motor Co, which will be setting up a vehicle manufacturing facility in India.

Ashok Leyland, which will be investing Rs 600 crore in the joint venture, is working out the incentive package for its shareholders, and is expected to unveil it within the next few months.

Speaking to newspersons on the sidelines of an analysts meeting in Mumbai, Mr K. Sridharan, Ashok Leyland’s Chief Financial Officer, said basically the company will sell a part of its equity in the joint venture to its existing shareholders.

The shareholders could get an entitlement in the joint venture, which could later be converted into equity once the joint venture gets listed.

Mr Sridharan said the joint venture would eventually get listed, but was not willing to disclose any possible time frame for this exercise.

The joint venture will initially come out with about eight different products within the pay-load range of 1.25 tonnes to five tonnes or gross vehicle weight from 2.5 tonnes to eight tonnes.

Earlier, addressing the analysts meet, Mr R. Seshasayee, the company’s Managing Director, said it has lined up a capital expenditure programme of Rs 3,000 crore over the next three years. The investment will be used to ramp up its production capacity from the present level of 84,000 vehicles a year to 1,84,000 vehicles by 2009-10.

The company has to tie-up additional loans of Rs 1,000 crore to fund the expansion programme. “This year, we plan to invest Rs 1,400 crore, which will be mostly in our upcoming facility at Uttarakhand. This facility, which will have a capacity of 50,000 vehicles, will commence full capacity production by March 2010,” Mr Sridharan said.

Mr Seshasayee said the company was sharpening its focus on non-cyclic business, which at present accounted for about 33 per cent of its revenues. “We intend to increase this to 45 per cent within two years,” he added. Its chief offering in this segment is non-auto engine sets.

Replying to a question, Mr Seshasayee said the company was actively exploring the possibility of its foray into manufacturing of construction equipment. “We are at present supplying aggregates. So, getting into construction equipment will be a logical step forward. And the market is huge,” he said, adding that India could become a good base for manufacture of construction equipment.

An announcement of its foray into this segment could be expected in the next few months, he indicated.

The company is working on a new engine platform and a future vehicle development programme. Plans are also afoot to double its export in the next three years, with the company seeking to replicate its manufacturing facility in the UAE.