Ashok Leyland has chalked out plans to hive off its engine unit into a separate joint venture. Ashok Leyland Limited (ALL) is the second largest manufacturer of medium/heavy commercial vehicles (M/HCVs) with nearly 35% market share in December 1999.
ALL is currently valuing its engine unit. Post hive-off, Iveco (of the Fiat group) will hold 51% stake in the venture. At present, Iveco is the largest shareholder in ALL.
According to a report carried by a leading financial daily, ALL managing director R Seshasayee revealed that the engine unit spin-off will ease ALL's cash flow position considerably. He also said that there was the likelihood of Iveco shifting production of a certain engine to this unit to meet its global requirements. The capacity of the unit currently stands at 30,000 units p.a. which will be enhanced to 45,000 p.a.
The hive-off will free the company's resources for its main business - CVs. At the same time, the engine unit will get regular technical inputs from Iveco. The inputs will increase as and when Iveco begins manufacturing more and more engines at the Indian unit to meet its global requirements. Demand for the engines is expected to be strong as even New Holland (an Iveco associate) will source its engines from this unit.
However, ALL will have to buy its engines from this unit at a higher price, which will increase its cost of production, as compared to before when it used to manufacture these engines in-house. So essentially it is a trade-off for the company between hiving off the engine unit and buying from the outside, as compared to manufacturing it in-house.
For the quarter ended December 2019, ASHOK LEYLAND has posted a net profit of Rs 278 m (down 92.7% YoY). Sales on the other hand came in at Rs 40 bn (down 36.5% YoY). Read on for a complete analysis of ASHOK LEYLAND's quarterly results.
For the quarter ended September 2019, ASHOK LEYLAND has posted a net profit of Rs 389 m (down 91.5% YoY). Sales on the other hand came in at Rs 39 bn (down 48.4% YoY). Read on for a complete analysis of ASHOK LEYLAND's quarterly results.
Here's an analysis of the annual report of ASHOK LEYLAND for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of ASHOK LEYLAND. Also includes updates on the valuation of ASHOK LEYLAND.
More Views on NewsA tiny chemical company, started in the Licence Raj era, is a great example of a new wealth creating opportunity.
In this video I'll show you exactly how I go about picking stocks for trading.
Rather than predicting the market, successful investing is more about preparing well and placing your bets accordingly.
What should you do if the market falls? In this video, I'll tell you what I will do.
Ajit Dayal on how India's vaccine strategy will impact the markets.
More
Equitymaster requests your view! Post a comment on "Ashok Leyland to hive-off engine unit". Click here!
Comments are moderated by Equitymaster, in accordance with the Terms of Use, and may not appear
on this article until they have been reviewed and deemed appropriate for posting.
In the meantime, you may want to share this article with your friends!