The experts aren’t too bullish on the growth as they are of the view point that the company will see some more declines in the domestic sales figure in the next few months. However, they too agree upon the fact that after few months, when the comparable base for the company will be low, it will be back on the growth path. Moreover, the lower prices of raw materials will surely benefit Ashok Leyland; but it needs to clock better volumes to be able to reap considerable benefits. In fact, the company seems to be too cautious in its approach now and has already announced a reduction in its capital expenditure and investment plans for the current fiscal, taking it down to just Rs.1,000-2,000 crore during the next three years. This will certainly help the consumer vehicle manufacturer to save on working capital once it clears the inventories and pipeline stocks.
Though the company has cut costs aggressively, enabling it to record an operating margin of around 9% in the past two quarters, it’s the sharp rise in interest cost that has pushed Ashok Leyland (they had taken loans to increase capacity just before the start of the downturn) to the brink. In fact in 2009, the interest cost rose 139% to over Rs.118 crore. Moreover, the company had adopted pending modification in Accounting Standard 11 (that deals with the effects of changes in foreign exchange rates) by ICAI that placed a gloomy picture among investors this year. Had the earlier practice been followed, profits in the quarter and FY 2009 would have been higher by Rs.1 crore and by Rs.34.6 crore, respectively (as per a report by Angel Broking).
But then, the company isn’t looking too bullish on the product launches during this fiscal unlike India’s largest commercial vehicle maker by sales, Tata Motors that has already announced the launch of six new trucks as a part of its ‘world trucks range’. Tata Motors is trying to change its reputation of being a maker of low payload and fuel efficiency commercial vehicles via its new range. “Launching new products in the slowdown always helps in adding excitement to the market,” explains auto expert Tutu Dhawan.
Certainly, Ashok Leyland will have to look at the option of launching some new products in the market and especially in the light commercial vehicle segment if it wants to escape the avalanche fury. The launch of new vehicles will not only help in infusing excitement in the market but also will be very beneficial for the company in the long-run. Moreover the company should take an effort to augment its presence in the the light commercial vehicle segment too, if it doesn’t want itself to get stuck in the same situation again in future. Though, the experts believe that despite easier access to money, fleet operators may wait for freight volumes to pick up before they invest in new trucks but in the long run there is definitely a great demand for the segment in the market. Overall, as per the industry experts, the current fiscal will be a lot easier for the sales team at Ashok Leyland and who knows they might hit a safe base before the avalanche crushes them to pieces!
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
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Though the company has cut costs aggressively, enabling it to record an operating margin of around 9% in the past two quarters, it’s the sharp rise in interest cost that has pushed Ashok Leyland (they had taken loans to increase capacity just before the start of the downturn) to the brink. In fact in 2009, the interest cost rose 139% to over Rs.118 crore. Moreover, the company had adopted pending modification in Accounting Standard 11 (that deals with the effects of changes in foreign exchange rates) by ICAI that placed a gloomy picture among investors this year. Had the earlier practice been followed, profits in the quarter and FY 2009 would have been higher by Rs.1 crore and by Rs.34.6 crore, respectively (as per a report by Angel Broking).
But then, the company isn’t looking too bullish on the product launches during this fiscal unlike India’s largest commercial vehicle maker by sales, Tata Motors that has already announced the launch of six new trucks as a part of its ‘world trucks range’. Tata Motors is trying to change its reputation of being a maker of low payload and fuel efficiency commercial vehicles via its new range. “Launching new products in the slowdown always helps in adding excitement to the market,” explains auto expert Tutu Dhawan.
Certainly, Ashok Leyland will have to look at the option of launching some new products in the market and especially in the light commercial vehicle segment if it wants to escape the avalanche fury. The launch of new vehicles will not only help in infusing excitement in the market but also will be very beneficial for the company in the long-run. Moreover the company should take an effort to augment its presence in the the light commercial vehicle segment too, if it doesn’t want itself to get stuck in the same situation again in future. Though, the experts believe that despite easier access to money, fleet operators may wait for freight volumes to pick up before they invest in new trucks but in the long run there is definitely a great demand for the segment in the market. Overall, as per the industry experts, the current fiscal will be a lot easier for the sales team at Ashok Leyland and who knows they might hit a safe base before the avalanche crushes them to pieces!
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2009
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
For More IIPM Info, Visit below mentioned IIPM articles.
2300 IIPM students get jobs
The Most Revolutionary Concept In Education PLANMAN CHE CENTRE FOR HIGHER EDUCATION, Supported by IIPM India’s Leading B-School
Detail of all IIPM branches
IIPM set to beat economic slowdown
IIPM Admission Detail
IIPM - Admission Procedure
IIPM, GURGAON
