Mumbai: India’s second biggest maker of trucks and buses, Ashok Leyland Ltd, plans to borrow as much as Rs1,000 crore in the next two years to build plants and sell commercial vehicles.
It will raise the debt in two equal parts of Rs500 crore, chief financial officer K. Sridharan said in an interview in Chennai. The borrowing is to more than double capacity to 184,000 vehicles a year and quadruple exports.
Borrowing in India would raise loan costs and hurt profits, with interest rates at a six-year high, said Vaishali Jajoo, an analyst at Angel Broking Ltd in Mumbai.
Higher borrowing costs have also deterred customers, curbing profit growth in the year that ended on 31 March to 6.3% from 34.8% a year earlier, according to Bloomberg data.
“It’s bad luck that interest rates are catching up,” Sridharan said. “We can’t afford to delay our expansion plans.”
Ashok Leyland’s shares fell 4.5% to Rs30.90 each, the lowest in almost 18 months, in Mumbai trading. The stock has declined 41% so far this year.
The company and its partner, Nissan Motor Co. Ltd, are spending $575 million (Rs2,466 crore) in their India ventures. The company is setting up a plant in Uttarakhand to produce 50,000 vehicles a year by 2010, Sridharan said. He said the company plans to quadruple revenue from exports to about $1 billion in four years by selling more in Sri Lanka, West Asia, the Philippines and Bangladesh.