Ashok Leyland

Presentation on “Ashok Leyland” PRESENTED BY –Piyush Gupta ROLL –AF 28 Course – PGDM (Finance)

Introduction  Ashok Leyland is a commercial vehicle manufacturing company based in Chennai,

India.  It is the second largest commercial vehicle company in India in M&HCV , with

passenger transportation options ranging from 18 seaters to 52 seaters.  Ashok Leyland is a market leader in the bus segment.  Eight out of ten metro state transport buses in India are from Ashok Leyland.  The company was established in 1948 as Ashok Motors, with an aim to assemble

Austin cars.  Manufacturing of commercial vehicles was started in 1955 with equity contribution

from the British company, Leyland Motors

Major Milestone  1966 Introduced full air brakes  1967 Launched double-decker bus  1968 Offered power steering in commercial vehicles  1979 Introduced multi-axle trucks  1980 Introduced the international concept of integral bus with air suspension  1982 Introduced vestibule bus  1992 Won self-certification status for defence supplies  1992 Launched vestibule buses  1993 Received ISO 9002  1997 India's first CNG powered bus joined the BEST fleet  2001 Received ISO 14001 certification for all manufacturing units  2002 Launched hybrid electric vehicle

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Current status Ashok Leyland is a technology leader in the commercial

vehicles sector of India. Its annual turnover exceeded to 77 billion (Rs) in 2007-08. Ashok Leyland is India's largest exporter of medium and heavy

duty trucks out of India. It is also one of the largest Private Sector Employers in India -

with about 12,000 employees working in 6 factories and offices spread over the length and breadth of India.

 

Cont…. Ashok Leyland is looking to expand its production

operations overseas to make it a more global company Also as part of this global strategy, the company acquired

Czech Republic-based Avia's truck business. The company has a joint venture with Japanese auto giant

Nissan (Renault Nissan Group) which will share a common manufacturing facility in Chennai, India.

Financial Performance of Ashok Leyland

Q1FY09 Results – Key highlights 

 Strong Realization pushes the revenue- Net sales grew by 16.2% y-o-y

to Rs 1,884 crore against Rs 1,621 crore in Q1FY08 driven by 1.4% yo-y growth in volume and realization grew by 14% y-o-y.

 Operating margins declined 430 bps- EBITDA margin drastically fell by

430 bps y-o-y and 530 bps q-o-q to 6.2% due to rise in input prices. Operating profit excluding other income fell by 31.4% y-o-y and 60.1% sequentially to Rs 117.2 crore against Rs 170.8 crore in Q1FY08.

 Forex losses impacted PAT- Net Profit for the quarter stood at Rs 52.7

declining by 40.2% y-o-y. Net profit margin for the quarter was 2.8%, down by 260 bps y-o-y. EPS for the quarter was Rs 0.39. However, if we adjust the profit for the forex loss, Adjusted PAT would be Rs 84.5 crore, which lead to adjusted EPS of Rs 0.63 implying negative growth of 4.7% y-o-y.

Strategies Ashok Leyland cuts capex by Rs.13 bn, floats finance arm

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 Ashok Leyland has adopted a multi-pronged strategy, including cutting

capital sales

expenditure (capex),

and

focusing on non-vehicle segment

floating a finance arm , to weather the tough market

conditions.  The company has also started an austerity drive that includes pay cuts

aimed at saving Rs.500 million.  The company is also planning to bring down inventory levels from the

current 9,000 units by cutting production so as to save on working capital. 

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Cont… 

Ashok Leyland ties knot with BOB for ‘Finance Support’

This tie-up enables Ashok Leyland to utilize Bank of Baroda’s

comprehensive network and reach to service the value chain, from wholesale to retail. “Cost effective funding is what is crucial at these times. And the

solutions offered by Public Sector Banks would help our customers and dealers on this front”, 

Cont… Employees helped Ashok Leyland save Rs 1.67Cr  

The company had implemented 'GEMBA,' a programme to

encourage employees to come out with new innovations, at its Ennore plant in October 2008. It enable the company to save money and reduce the

inventory level to Rs 90 corer (Rs 900 million) from Rs 120 corers (Rs 1.2 billion) a year ago at this plant. 

MARKETING  The company has been offering world class products to millions of

customers to 40 countries across the world.  Its main product line includes Trucks, Buses, Defense & Special

Vehicles and Engines for Indian and overseas market.  Ashok Leyland – is the market leader in Indian bus market, offering

CNG, Double Decker and Vestibule bus variants.  Ashok Leyland – is the market leader and pioneer for multi axle trucks

and tractor-trailers 

Cont… Ashok Leyland – enjoys market supremacy in Diesel

engines for Industrial, Gen-set and Marine applications. Ashok Leyland - is the largest supplier of logistic vehicles

to the Indian army. Ashok Leyland – offers 'Total Maintenance Solutions'

through maintenance contracts for its products, relieving the customers of all maintenance worries. 

Its Various Product Ranges

Strategies & Plans of Ashok Leyland  New Product Launches: The Company is expected to launch a slew of new

products in the markets which is expected to propel the demand for its products.  Joint Venture with John Deere ü Ashok Leyland, the flagship of the Hinduja Group in India, has signed an agreement for a joint venture with John Deere, for manufacturing and marketing of construction equipment. ü The 50:50 JV will bring together Ashok Leyland’s expertise in the automotive sector, their marketing and distribution strength and John Deere’s technical know-how and vast experience in the business of construction equipment.

Cont…. De-risking Strategy: The Company has put in place

a strong de-risking strategy in terms of pushing the growth of Non Cyclical business.

Cont… 

Increasing Global Footprint: The Company is now targeting new strategic markets with increased thrust on the Asian & African countries.

 The company expects to double its export volumes in the next 3 years

due to increased penetration in these new markets. 

Plans to meet the growing needs of the marketThe Company is constantly reviewing their strategies. They are moving into higher value-added jobs because it becomes very important to engage workmen fully, and also their efficient utilization.

Cont.. 

Ashok Leyland to set up its NBFC for offering finance options

quick and easy financing of their vehicles in their bid to accelerate the sales in face of difficult credit situation. To enable

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Ashok Leyland, Nissan to Form Partnership for LCV

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Ashok Leyland and Nissan Motor Co., Ltd., signed a Heads of Agreement (HoA) for the formation of three joint venture companies supporting the Light Commercial Vehicle (LCV) business which covers following areas:-

Cont…  Vehicle Manufacturing Company - a company with exclusive rights to

manufacture LCV products in India for both the partners.  Powertrain Manufacturing Company - Responsible for the manufacture and

assembly of engines and other drivetrain components to be fitted in the LCV products and for exports.  Technology Development Company - Responsible for the development of

LCV products and related powertrains, destined for the Indian and identified emerging markets.  In addition, the two partners are also studying cooperation in the area of sales

and distribution.

HUMAN RESOURCE

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“We consider our employees as our most valuable asset and are committed to provide full encouragement and support to them, to enhance their potential and contribution to the Company's business" - From Ashok Leyland's value statement.

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Qualification Analysis – Executive

Ashok Leyland Philosophy on Corporate Governance

The Board of Directors and the Management of Ashok Leyland commit themselves to: • strive towards enhancement of shareholder value through - Sound business decisions - Prudent financial management, and - High standards of ethics throughout the organisation • ensure transparency and professionalism in all decisions and transactions of the Company • achieve excellence in Corporate Governance by: - Conforming to, and exceeding wherever possible, the prevalent mandatory guidelines on Corporate Governance - Regularly reviewing the Board processes and the Management systems for further improvement 

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Strategies to sustain in Global Meltdown

Ø Ashok Leyland among others that employ people in excess of 1,000 revealed their attempts to cut costs in every possible way other than reducing workforce, including those who were recruited just ahead of the .global meltdown. Ø The initiatives include a near total ban on travel, with a complete no-no for air-travel. Ø Cutting down on production days as also the number of shifts in line with lower demands. Ø Foregoing air-conditioned comforts in office, switching off an extra light during day-time, voluntary salary cuts, a freeze of fresh recruitment, including those for replacement, and even re-visiting the canteen menu.

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Cont… Ashok Leyland opted to reduce the number of working

days and employees also agreed for salary adjustments. Besides reducing travel to the minimum, employees

voluntarily opted to stay at lower options, including accommodating themselves at friends or relatives place, than what they were normally eligible. Focused on re-engineering through small groups on a war

footing to reduce wastage of material and energy,”

Cont.. Ashok Leyland has utilized the period to motivate its employees

to come up with ideas for improving productivity and efficiency resulting in significant savings in cost. Employees form groups and quality circles that work on projects

and processes which identify wastage and reduce it, increase productivity and enhance savings. Ashok Leyland has also implemented Gemba, an initiative

improve productivity and efficiency in the shop floor

OPERATIONS Ashok Leyland is trying to improve efficiency and production

quality, reduce costs and increase customer satisfaction. Among the means company is adopting just-in-time inventories

system. Strategic Sourcing... Strategic sourcing recognizes that people,



including innovative suppliers, are a valuable part of an organization and focuses on reducing waste or non-valueadded costs.

Cont…  Technology Upgradation:The Company has a strong focus on

technology upgradation in order to meet the growing demand for newer & better models. ü The technology upgradation initiative the Company expects to produce more fuel efficient vehicles with robust designs which are globally best in their class.  World-class Technology To offer world-class technology that is

relevant and affordable to the Indian customer is the philosophy that drives R&D at Ashok Leyland

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Cont…. Value to the Customer The immediate R&D priorities are to pro-actively address safety and environmental issues, harness and adopt technologies that provide value to the customer in an atmosphere enabling creativity and innovation.

Test Tracks But company R&D is not confined within walls. It extends to the test tracks as well. Rigorous tests are carried out under stringent simulated conditions that replicate the most treacherous landscapes.

Innovations Ashok Leyland product development successes have come from a keen sense of anticipation and attentiveness. The company initiated research into alternative fuels well before legislative debate had even begun in the country.

Cont…. Best practices The new lines, apart from being state-of-the-art in terms of machines and tools, also incorporate many global industry best practices. The automated coolant management system significantly reduces coolant consumption. The Manufacturing Execution System (MES) allows for online monitoring of all operational parameters such as breakdowns, tool change and power consumption - both current status and history. Automation New benchmarks have been set in automation to minimize activities that cause human fatigue or pose hazards and achieve speed. Gantry Systems are used for axle-beam, axlearm, camshafts and crankshafts lines. Robots are used for ‘handling’ hot axle arms and axle beams. 

Cont.. 

Compact and versatile

A significant addition to capacities, the new lines are

extremely versatile. “Transformation training becomes crucial in such

movement of men from accustomed work situations to a whole new set-up” 

Conclusion 

At last I conclude that recession has badly effected on the sales and profit of the company. But in spite of all this company is running successfully. And to over come with recession company is adopting various strategies such cost cutting, freezing recruitment , financing to NBFC company , upgrading its technology , adopting de risking strategies and so on. Which help the company to survive easily in this global meltdown.

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