Ashok Leyland to double capacity within three years

Q: The other aspect that you touched upon is key for other sectors. How will rates shape up in FY09, what is the kind of estimates that you are working with, given the current interest rate scenario? What’s the kind of projection that you are making in terms of volume growth for FY09 and FY10?

A: The one issue that is going to be quite critical in the current year is just the availability of truck financing and that is not related much to interest rates alone. The fact that some of these large institutions are probably going to go a bit slow on this financing is because of several issues relating to recovery and so on. I don’t see major panic, and don’t see a very tight situation.

I am just wanting to look at the potential, which could threaten. Otherwise, there is good growth possibility because freight is available. There are no operators who are complaining of the lack of freight, the turnaround time is good, the economy and manufacturing sector is bound to grow, so there are mixed signals. How they play out is something which we need to watch out. I would say that this is not an year where the arrow is going north or south, somewhere in between is what we need to watch out.

Q: Does it stay above 10% FY09, and about 9% FY10? Would those estimates work well for volume growth?

A: A high single digit growth is what we are expecting in the current year.

Q: The other aspect that you also highlighted in numbers is the fact that interest cost has come off quite considerably. What is the debt currently standing in the books of Ashok Leyland? In FY09, how much of interest cost pressure can we expect to impact the bottom-line?

A: Firstly, we are in the midst of creating fairly large capacities. We are adding this new plant in Uttarakhand for 50,000 vehicles and we are not cutting down on capacity creation. Therefore, capital expenditure is in full stream. This year, they would probably have a borrowing of about Rs 900-950 crore and certainly interest on that would have certain impact. We are able to control our capital expenditure. To prove our internal generation, this number might come down quite significantly and interest costs will be larger than last year. In the current year, this is part of the capacity creation which will have to be paid off in the coming years.

Q: Were there any mark-to-market losses on ECB that you have right now on your books, about USD 250 million this quarter around?

A: No.

Q: In terms of the capex that you have laid out for FY09, we came to understand that it is about Rs 1,600 crore in total. Is that a fair number or are you going to be looking at investing more in FY09 and FY10?

A: No. Rs 1,600 crore is quite a large amount for us to push through in the current year, considering that we are not in a very high growth year. But at the same time, we need to create capacity, so I don’t expect that to go outside or more than this number. If anything, then it could probably be lower than this number.