Ashok Leyland Limited · NSE:ASHOKLEY
Ashok Leyland — Investor Presentation (June 2008)
38 slides from Ashok Leyland's investor presentation, Jun 17, 2008
Slide 1: Equity Analysts Meet
Equity Analysts Meet June 17, 2008
Slide 2: Presentation outline
Presentation outline Overview of Hinduja Group and AL Indian Economy and CV Industry CV Industry Outlook and Prospects Performance of AL Strategies and Plans of AL AL / 17-06-08 2
Slide 3: Presentation outline
Presentation outline Overview of Hinduja Group and AL Indian Economy and CV Industry CV Industry Outlook and Prospects Performance of AL Strategies and Plans of AL AL / 17-06-08 3
Slide 4: Hinduja Group businesses
International Trading Banking & Finance _— HINDUJA initia Automotive Foundries Media & Entertainment Philanthropy tnvestment Banking 4 + : fy = + — = ‘| LY ao " c . me . <e Energy & Chemicals ~wy =~ Real Estate
Slide 5: The Hinduja Group Profile
The Hinduja Group Profile India’s first transnational conglomerate Been in existence for over 90 years The Group was established in 1914 in Mumbai Entered Middle East in 1919 to grow trading initiatives Presence in more than 32 countries and operates across the globe ; Employs over 35,000 personnel
Slide 6: About Ashok Leyland
About Ashok Leyland Second Largest Commercial Vehicle manufacturer in India with turnover around USD 2 Bn. Operating in CV Truck & Bus segments > 7.5T GVW Employing over 13,000 people ISO / TS 16949 certificate – representing International quality standards Exports to over 15 countries in Asia, the
Slide 7: Presentation outline
Presentation outline Overview of Hinduja Group and AL Indian Economy and CV Industry CV Industry Outlook and Prospects Performance of AL Strategies and Plans of AL AL / 17-06-08 7
Slide 8: Indian Economy & CV Industry
Indian Economy & CV Industry '08-09 9.5 (Estimate) '07-08 8.8 th IIP w '06-07 9.6 ro 2% 8.7% G 2 s '05-06 9.4 R r CV AG 5 y Agriculture '04-05 7.5 C for 6.7% '03-04 8.5 Exports Energy 24.1% 4.6% 0.0 2.0 4.0 6.0 8.0 10.0 Growth over 5 yrs (Avg. p.a) Annual Real GDP Growth (%) Source : CMIE NHAIRoad R
Slide 9: CV Industry growth
CV Industry growth 246863 M & HCV TIV 232339 After 6 years of continuous growth…. Pass Trucks segment fell by 6% Goods 179345 172868 • largely due to deferment of 136804 purchases as a result of 95741 – Poor sentiments 73185 – ‘Base effect’ 24591 25638 28127 28693 38655 Bus Volumes up 34.7% 16814 19
Slide 10: Freight Rates movement – Key Growth driver for CV Industry
Freight Rates movement – Key Growth driver for CV Industry CV demand driven by Truck operators viability and their sentiments for future prospects Shift from Medium duty range (7.5T to 16T) to Heavy duty and lower end (Hub and Spoke model) 100% Freight rates Vs diesel prices 90% 80% 70% Truck operat
Slide 11: Improving Road Infrastructure – to drive CV growth
Improving Road Infrastructure – to drive CV growth NHAI Projects Projects Total Length 33,097 Kms 6 500 Kms Completed Phase V Nil 12,109 Kms Phase IIIA 4% 1 342 Kms Port & Others 52% 7 300 Kms NS-EW 30% Phase V covers 13 states with estimated cost of USD 10 Bn. 5 846 Kms GQ 97% Completed Under Imp B
Slide 12: Medium term outlook
Medium term outlook Recent developments & Concerns Fuel price hike – Freight rates will eventually move up Interest rate hike – Concern; But less sensitive to operators viability Inflation – likely to affect every segment of economy Higher price of vehicles: For 5% increase in prices, increase in EM
Slide 13: Outlook – CV Industry (Contd.)
Outlook – CV Industry (Contd.) Medium Outlook for M& HCV – Domestic Bus - 4.4 % CAGR upto 2012-13 Trucks - 5.3 % CAGR upto 2012-13 (Source: CRISIL Research) Outlook for Bus Segment Increasing private participation will increase Bus Demand Low penetration levels offer high growth potential High fuel
Slide 14: Outlook – CV Industry (Contd.)
Outlook – CV Industry (Contd.) Build up of capacity and increased intensity of competition through new entrants Enhanced features to attract customers Pressure on margins Despite this incumbent manufacturers will succeed because of Intimate knowledge of a complex business and the customers,thus enab
Slide 15: Presentation outline
Presentation outline Overview of Hinduja Group and AL Indian Economy and CV Industry CV Industry Outlook and Prospects Performance of AL Strategies and Plans of AL AL / 17-06-08 15
Slide 16: Composition of Sales
Composition of Sales 2006-07 2007-08 % Inc Exports : Sales reached (Dec) 7,285 numbers; up 21% Domestic Engines : Volumes Buses 12007 18244 51.9 grew to 12,169 nos, up Trucks 65062 57778 (11.2) 37% Total 77069 76022 (0.1) Spares : Sales reach Rs. 7,912 million, up Exports 6025 7285 20.9 45% Total ve
Slide 17: M & HCV: TIV and MS
M & HCV: TIV and MS Year Bus Truck Total FY08 TIV 38,655 232,339 270,994 AL 17,582 57,846 75,428 Growing segments MS % 45.5% 24.9% 27.8% Bus TIV 35% AL 51% FY07 TIV 28,693 246,863 275,556 Tipper TIV 19% AL 11,674 65,069 76,743 AL 22% MS % 40.7% 26.4% 27.8% FY06 TIV 28,127 179,345 207,472 AL 13,409 4
Slide 18: Financial Performance – FY08 Vs FY07
Financial Performance – FY08 Vs FY07 Rs million % FY 2006-07 % FY 2007-08 % Growth Net Sales / Income from operations 71,682 100.0 77,291 100.0 7.8 Expenditure Material Cost 54,633 76.2 57,647 74.6 5.5 Staff cost 4,807 6.7 6,162 8.0 28.2 Other expenditure 5,215 7.3 5,443 7.0 4.4 Gross operating marg
Slide 19: Capital Employed
Capital Employed Rs. Million 2007-08 2006-07 Application of Funds Fixed Assets 20,548 15,445 Investm ents 2,448 2,211 Working Capital 1,519 5,070 Cash & Bank incldng Mutual Funds Investm ents 8,165 4,349 Total 32,680 27,075 Sources of Funds Shareholders' Funds 21,267 18,702 Loan Funds 8,875 6,404 De
Slide 20: Performance Highlights – 5 years
Performance Highlights – 5 years 03-04 04-05 05-06 06-07 07-08 R O N W (%) 19.5 24.1 23.7 23.9 22.3 R O C E (%) 17.6 18.6 21.2 24.7 23.2 Debt : Equity 0.5 0.8 0.5 0.3 0.4 EPS (In Rs.) 1.63 2.28 2.74 3.38 3.53 Consistent in profitability over the years Adequate space for borrowings to fund capacity b
Slide 21: Product Launches - Trucks
Product Launches - Trucks 3121 8 X 2 A new breed in MAVs; delivers 25% extra rated payload, faster turn around time with greater fuel efficiency. Powered to take on the Indian Highways. 4921 TT 6 X 4 The highest permitted pay load in CVs under the CMVR. Well accepted giving AL leadership in the 49-t
Slide 22: Product Launches - Buses
Product Launches - Buses Luxura Marking the entry of AL into the luxury bus segment 12 Meter ULE 390mm - CNG BS3 12 m BS II 635 mm RE Durable luxury bus with lowest SLF Diesel operating costs for intercity and BS2 / Enviro intra city operations CNG AL / 17-06-08 22
Slide 23: Emission Roadmap
Emission Roadmap Bharat Stage III in 11 cities Euro-V eqvt. in Euro-IV Cities & Euro-IV eqvt. in 200 eqvt. PAN INDIA 5 16 cities BS II 201 PAN INDIA 0 BS III 201 PAN INDIA 5? AL / 17-06-08 23
Slide 24: Presentation outline
Presentation outline Overview of Hinduja Group and AL Indian Economy and CV Industry CV Industry Outlook and Prospects Performance of AL Strategies and Plans of AL AL / 17-06-08 24
Slide 25: Strategies and Plans
Strategies and Plans Product Launches (Focus on Fully built solutions) Strategic Technology Initiatives upgradation Plans and Spreading global Priorities Capacity footprint Build-up Operating Margin Management De-risking AL / 17-06-08 25
Slide 26: Product Launches – Truck Segment
Product Launches – Truck Segment 4930 TT Slated for pilot launch by current year-end New Concept Vehicles: An innovative side tipper that renders tipping easier, more convenient, more stable and whole lot quicker. Ideal for operations at roadsides and closed sheds 4018 super - 132 kw H series engine
Slide 27: Product Launches – Bus and Others
Product Launches – Bus and Others Bus Segment and… Full scale production and all-India availability of: 3121 4921 with NEWGEN Cab 12-metre direct The iBus drive a/c bus Post concept validation at Auto Expo 2008, slated for pilot launch by year-end. Phase 1 version for full scale production AL / 17-0
Slide 28: Technology up gradation
Technology up gradation Programme includes Future vehicle development New Engine platform: 110 kw to 280 kw; Euro IV / Euro V under development Targeting to achieve Low fuel consumption Robust design Globally best in class AL / 17-06-08 28
Slide 29: Capex / Capacity plans
Capex / Capacity plans Target: 184,000 vehicles by 2010 50,000 2009-2010 vehicles 50,000 2008-09 vehicles Current 84,000 vehicles Capacity Additional loans to be tied up Rs.10 Bn in FY09 / FY10 Capex spend in FY08 Rs.7 Billion. Planned at Rs.30 Bn.+ over 3 years including Product Development / Techn
Slide 30: Increasing Capacities
Increasing Capacities Uttarkhand Integrated manufacturing plant for 50,000 vehicles per annum to maximise in-house value addition Layouts made for lean manufacturing and automation Production start up : by II half of 2009; Full capacity production by March 2010 Fiscal incentives will repay cost of t
Slide 31: De-Risking - Non Cyclical business to grow
De-Risking - Non Cyclical business to grow Bus, Exports , Engines and Spare Parts, defence kits contributing 33% of revenue. Engines Business Engine volumes to double in two years Tied up with Global sources for procurement of 25hp to 75hp engines Scale up Leypower Genset operations Defence Share of
Slide 32: Operating Margin Management
Operating Margin Management A. Cost Management Initiative Mission Gemba: A successful movement with 94 GEMBA units across the Company Improve : In overdrive with 2,100 projects implemented by employee teams making a substantial difference to the bottom line Cost reductions to yield 100 bps improveme
Slide 33: Spreading Global Footprint
Spreading Global Footprint The focus on second hemisphere markets to continue New strategic markets being targeted Thrust markets identified in ASEAN, African countries using mix of European and Indian design. With availability of factory fitted cabins and high power / weight ratio product offerings
Slide 34: Other Initiatives Bearing Fruit
Other Initiatives Bearing Fruit ALTRUX The pre-owned trucks business was launched in the states of GPS based Telematics products Rajasthan, Kerala and Tamil Vehicle trace and track device Nadu Vishwas Passenger information system Annual maintenance solutions A host of applications like online were o
Slide 35: Going beyond M & HCVs
Going beyond M & HCVs Partnership with Nissan Motor Company The proposed entry into LCVs; first products to roll out by 2010; Project Outlay Rs.24 Bn (USD 575 Mn) Ashley Alteams Foray into HPDC (High Pressure Die Casting) products for the automotive and telecommunication sectors; Project outlay Rs.1
Slide 36: Prospect for Shareholder Value Enhancements
Prospect for Shareholder Value Enhancements Business growth prospects Improvement in ROIC Debt infusion to maximise financial leverage Consistent dividend policy – payout around 50% ; Dividend yield > 4% p.a Strategic investments (e.g. HFL) to appreciate in value Prospect of shareholder participatio
Slide 37: Shareholding pattern
Shareholding pattern Hinduja Automotive 51% Body corporate 2% Banks & MFs FIIs 3% 15% Resident Individuals / Trust / Clearing Fis, Insurance members Co, State Govt, 13% Govt Companies 16% AL / 17-06-08 37
Slide 38: Thank you
2 Thank you AL / 17-06-08 38