Ashok Leyland plans to wrap up 23 of 27 joint ventures

New Delhi: Ashok Leyland Ltd, India’s second-largest truck maker by sales, is planning to wrap up 23 of its 27 joint ventures in a bid to cut its debt and focus on core businesses, a top company executive said.

“What’s the point of having a joint venture if you are losing money in it? And we have too many of them. We plan to wrap up 23 of 27 joint ventures in the near term as the company plans to focus on its core business,” the Ashok Leyland executive said on condition of anonymity.

Of the 23 joint ventures, three with Nissan in the areas of vehicle manufacturing, engine manufacturing and technology development stand terminated as the Indian company has moved the court against its Japanese partner over breach in partnership.

The other firms which the Chennai-based firm may sell or divest stake in are Ashley Alteams India Pvt. Ltd (manufacturer of aluminium high pressure die castings), Ashok Leyland John Deere Construction Equipment Co. Pvt. Ltd, Ashley Airways Ltd and Automotive Infotronics Pvt. Ltd, said a second person familiar with the development.

The company also divested its stake in Mangalam Retail Services Ltd and made it an associate of a subsidiary earlier.

“We evaluate all subsidiaries continuously for their performance and relevance, and then take decisions on the basis of strategic fit. There is no such mandate to hive off all subsidiaries. This is normal procedure for any business,” said an Ashok Leyland spokesperson in response to a detailed questionnaire.

In the year ended 31 March, Leyland sold off Ashok Leyland Wind Energy Ltd and Avia Ashok Leyland Motors (along with its subsidiaries Avia Trucks UK Ltd, Great Britain, and Avia Ashok Leyland Rus, Russia).

Automotive and defence are going to be key focus areas for the Chennai-based company, said the second person quoted above on condition of anonymity.

The company is trying to pare its debt by selling non-core assets and has so far managed to bring it down from Rs.4,690.32 crore in 2013-14 to Rs.3,349.72 crore in 2014-15, according to data provided by corporate database provider Capitaline.

The management has also cut employee costs. In January 2015, the company, in a first, announced a voluntary retirement scheme which was opted by 500 executives.

This was followed by many other initiatives to deleverage its balance sheet. A sale of non-core assets, which included the sale of a residential property in Chennai and a stake sale in IndusInd Bank Ltd, among other things, yielded Rs.670 crore. A qualified institutional placement (QIP) helped raise another Rs.666 crore. The company also restructured the loan book and replaced short-term loans with long-term ones, helping it cut monthly interest payments and freeing up cash flow. It also put Albonair GmbH, the German arm which works on reducing vehicle emissions, and Czech Republic-based Avia up for sale.

In 2009, Ashok Leyland formed a 50:50 joint venture with US-based John Deere for earth-moving equipment business and the first product was launched in November 2011. But since then only one product has been launched.

With the infrastructure industry slowing down, and mining taking a hit due to a Supreme Court ban, the joint venture failed to scale up. Ashok Leyland now wants to get out of it. In November, the company wrote off Rs.157 crore as a diminution in the value of its investment in the business.