Company Update: Ashok Leyland

Company Update: Ashok Leyland

Ashok Leyland has put ‘on hold’ the proposed Rs700-800 crore investment at its facility in Pantnagar and its mother plant at Chennai owing to slowdown in the domestic market.

Ashok Leyland sales fell 12.5% to 35,302 vehicles in the April-October 2008 period with buses and medium and heavy truck sales posting maximum decline. The company has cut production to a four-day week in tune with slowing demand.

The company’s proposed new plant at Pantnagar in Uttrakhand had an initial investment outlay of Rs1,200 crore. The plant, which has a capacity to produce 40,000 vehicles a year, has been delayed and is now expected to go on stream next year.

Ashok Leyland has already invested around Rs1,000-1,050 crore at its brownfield operations in Chennai, Hosur, Bhandara and Alwar in Rajasthan. Investment was deferred for the heavy commercial vehicle making units in Chennai and Pantnagar.

We maintain NEUTRAL view on the stock.