Narayanan Somasundaram / Reuters
Mumbai: Ashok Leyland, India’s second biggest truck and bus maker, is considering selling some of its stake in a joint venture with Nissan Motor Co to existing shareholders, a top official said.
“We are looking at options to incentivise our own shareholders by giving them some sort of entitlement in the JV,” Chief Financial Officer K Sridharan said on 16 J une on the sidelines of a analyst conference.
Leyland, the flagship of the diversified Hinduja group, owns 51% of the joint venture with Nissan in India for making light trucks, transmission and components.
The joint venture, which will start production in 2010/11, is being set up at a total cost of Rs24 billion ($560 million) with an equal mix of equity and debt. Ashok Leyland needs to put in about Rs6 billion as its share of equity.
“We will offer some portion to shareholders and scale back the company’s stake to that extent,” Sridharan said.
“The decision to offer a stake to the shareholders would be made in the next few months, and company listed subsequently,” he said.
The Hinduja group owns 51% of Ashok Leyland and would also be interested in subscribing to the shares, he said.
The company’s shares have fallen 36.4% so far in 2008, more than a 26.3% drop in the auto index and 22.6% fall in the main share index.
The Ashok Leyland-Nissan venture will have an initial capacity of 100,000 vehicles in a range of up to 8 tonnes, a segment that is growing fast in India, the world’s fifth-biggest truck and bus market with annual sales of nearly half a million units.
Outside the joint venture, Ashok Leyland aims to spend Rs30 billion over the next three years to add 100,000 vehicles to its current capacity of 84,000 vehicles to take on market leader Tata Motors as well as the likes of Volvo and MAN.
It has raised about $200 million overseas debt and plans to raise another Rs10 billion in the next 18 months to fund the expansion, Sridharan said.
Leyland sold 11,281 vehicles in April-May, 3.2% lower than the same period a year earlier, but has forecast high single-digit growth in 2008/09.