Interview with Dr V Sumantran

Ashok Leyland’s vice-chairman speaks to Shobha Mathur on the company’s plans for targeting the defence sector, the growing LCV business and exports.  

Ashok Leyland has outlined a two-pronged strategy for growth in the defence business. Will this help ALL tide over the slowdown?
This is part of our overall strategy going back five years that the core commercial vehicle business is cyclical. So
we wish to be present in other sectors so that we have counter-cyclical revenue. The defence sector has been identified and is a good source of stability. We are one of the largest private sector suppliers to the armed forces with the Stallion truck.
Going forward, our strategy is better defined with this two-pronged approach. One is more trucks as we have trebled our product portfolio. We had Stallion, now we have Super Stallion which itself is available in 6x6, 8x8 and 10x10. For the first time, we have put below the Stallion a 2.5T platform with the Garuda 4x4 so it has trebled our product line-up.
On the other side, we wish to get more involved with weapon system integration even though we are only mobility providers. There is an opportunity in better integration of integrated systems. For instance, the Saab BAMSE short range surface-to-air missile is mounted on a Super Stallion.
The Nexter 155mm Mounted Gun System is now mounted on a Super Stallion. We are not only broadening the opportunity of business with trucks but are also broadening our participation in more and more tenders.

But defence is still a very small portion of ALL’s portfolio, so how will it help the company grow?
If you think about the trebling that we have done in some product opportunities, we will definitely grow at a much faster rate than ALL’s growth itself. So over time, revenue as a fraction of total revenue for Ashok Leyland will see significant growth.
Today, ALL is about a 100,000 units company per annum and we do about 2,500-3,000 units per month for defence. If we add kits and exports, it adds up to 4,000 units. We hope to move closer to 5,000-6,000 units, which is almost a doubling from where we are.
Defence systems are a lot more complicated. The value of a Super Stallion 10x10 is obviously much more, so in revenue terms, it will be a more magnified proportion of the total business.

Ashok Leyland recently announced a VRS. Your comments.
The entire industry has been in a downturn for well over a year now and so we had to trim costs. We have tried to do it responsibly and selectively. We had to bring the company’s cost structure in alignment with current reality.

But debts have also been piling up. . .
We have improved working capital and most of our investments are behind us, so going forward we have less capex and less investments. We are looking for an upturn in revenue and are becoming more efficient in working capital. We have trimmed our costs and have pulled all the levers that a company should to rectify a bad environment.

So which segments will drive future growth?
Our core business itself should revive and become more efficient. LCVs should become a bigger and bigger component, so too defence, power solutions and exports. Added together, we will see the improvement that we are looking for.

What direction will the export strategy take?
With our broader and more modern range of products, we can reach more markets. We are targeting many more markets than those we had before. While some of our products have already gone to South Africa, we are targeting Malaysia, Indonesia and parts of Africa. The Middle East has always been a strong market for us.

How about the sales volumes that you expect to garner from the new launches?
The MiTR and Partner are in a much smaller segment than the Dost, so they will not add to Dost-like numbers but if you look at the industry volumes, they are just in the range of 30,000-40,000 units per annum. So we will achieve double-digit market share.

Would the Ashok Leyland-Nissan JV consider developing a small car?
A small car is out of the question. On the LCV story, I feel a huge sense of relief now because in the first phase we said we will do three platforms and we have. We launched the Dost, Stile and the twin products of MiTR and Partner. So it seems, we have had a heavy meal and till dinner there will be nothing more in between than a little bit of snacking.