November 22, 2008

Ashok Leyland may open Nissan JV to shareholders

Reuters reported that Ashok Leyland Limited is considering selling some of its stake in a JV with Nissan Motor Company to existing shareholders. Leyland owns 51% of the JV with Nissan in India for making light trucks, transmission and components. The JV, which will start production in 2010-11, is being set up at a total cost of INR 24 billion with an equal mix of equity and debt.

Mr K Sridharan CFO of Ashok Leyland said that "We are looking at options to incentivise our own shareholders by giving them some sort of entitlement in the JV."

Mr Sridharan said that "We will offer some portion to shareholders and scale back the company's stake to that extent. The decision to offer a stake to the shareholders would be made in the next few months, and company listed subsequently."

He further added that it has raised about USD 200 million overseas debt and plans to raise another INR 10 billion in the next 18 months to fund the expansion. It sold 11,281 vehicles in April to May 2008 period down by 3.2% YoY, but has forecast high single digit growth in 2008-09 fiscal.

The Ashok Leyland Nissan JV 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. Outside the JV, Ashok Leyland aims to spend INR 30 billion over the next 3 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.