CHENNAI: Ashok Leyland has completed the divestment of 100 per cent of its stake in its Czech subsidiary Avia Ashok Leyland Motors S R O to a strategic investor for a cash realisation of $10.96 million. The divestment is part of a restructuring programme announced by the company late last year, in which most non-core assets were to be pared off.
Avia, which Ashok Leyland had acquired in December 2006 for around $35 million, was meant to complement the company’s business in two areas - manufacturing for its European market and for its Cab technology. The entire BOSS platform that the company launched following Avia’s acquisition was based on its Cab technology. “Without Avia’s Cab technology, getting the platform out would have been impossible. We earned the value of acquisition by developing a new Cab,” said a senior company official.
But Avia has apparently exhausted its usefulness to Ashok Leyland. In December last year, CFO Gopal Mahadevan had said that its stake in Avia would be divested because it had “ceased to bear fruit now”.
In fact, Ashok Leyland had already ceased all production activities in the subsidiary’s plant in Prague as early as July 2013, due to a slowdown in the European auto markets.
Hit simultaneously by mounting debt, which had reached a peak of `6,280 crore in August 2013, Ashok Leyland began a series of debt reduction efforts - the most recent of which was to pare off the company’s non-core assets. In December last year, it put on sale two of its overseas subsidiaries - Avia and Albonair.
With the Avia divestment complete, Ashok Leyland has also announced that it has divested 48.5 per cent of its stake in Ashok Leyland Wind Energy Ltd to an undisclosed buyer, making ‘a profit of `6 crore.”
“Consequently, the shareholding of the company in ALWEL has come down from 60 per cent to 11.5 per cent and hence ALWEL ceases to be a subsidiary of the company with immediate effect,” Ashok Leyland said in the statement.
Leyland has so far managed to reduce its debt level by almost 36 per cent(current debt is around `4,000 crore) and is now looking to bring it down by 50 per cent of the current level by three years, for which it has been selling its non-core assets and taken measures to reduce working capital and optimise costs.
Ashok Leyland made a net profit of `32.09 crore for the third quarter of FY14-15 as against a net loss of `167.21 crore for the same period last year.