Ashok Leyland (AL) has w/off direct investment of INR1.5bn in Avia; however, indirect investment of INR1.4bn held through associates is still carried at book value. The company’s cash exposure to associates, loss making JVs and other group companies increased by INR3bn to INR16.5bn (39.1% of FY12 networth). MTM forex losses capitalised stood at INR2.1bn (30.4% of FY12 PBT).
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Non‐consolidation of associates/JVs presents obscure picture
AL does not consolidate associates (17) and JVs (6) since Indian regulations do not stipulate the same if the company does not have any subsidiaries. Aggregate amount invested in JVs, associates and group companies stood at INR16.5bn (FY11: INR13.3bn), 39.1% of FY12 networth (FY11: 33.6%). AL’s share of losses in JVs stood at INR803mn (FY11: INR562.8mn); results of associates have not been disclosed.
INR3bn invested in Avia; INR1.5bn written off
Aggregate investments in Avia stood at INR2.9bn, of which INR1.4bn has been held through investment companies (Ashley Holding and Ashley Investments). During FY12, the company sold 46.3% stake in Avia to its investment companies and recognised loss on sale of investments of INR1.5bn. The company also recognised gain of INR1.6bn on part stake sale of Hinduja Leyland Finance and Defiance Technologies, thus resulting in net gain of INR0.1bn.
Further infusion of INR3.5bn in investment companies
AL continued to infuse funds in investment companies Ashley Holdings and Ashley Investments, which more than doubled from INR3.2bn in FY11 to INR6.7bn in FY12. This is carried at book value despite investment of INR1.4bn in Avia.
Optare continues to incur loss, leading to further cash infusion
During FY12, AL along with its associates increased its stake in Optare (UK), a bus manufacturer, from 26.0% to 75.1% and had direct cumulative exposure of INR1.8bn. Optare posted loss of GBP13.4mn (‾INR1.1bn) and restructured its capital in FY12.
Other financial highlights
· Debtors o/s for more than six months from the due date of payment were high at INR2.5bn in FY12 (FY11: INR1.9bn), 1.9% of FY12 sales (FY11: 1.7%).
· AL incurred forex loss of INR2.3bn (33.3% of FY12 PBT) during FY12, of which INR2.1bn is being capitalised under fixed assets.
· During FY12, the company capitalised intangible assets of INR795mn primarily pertaining to development of new ERP software.
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