MUMBAI: Ashok Leyland, Indias second-largest truckmaker, is planning to raise about Rs 600 crore to Rs 700 crore through an qualified institutional placement to pare debt. Ambit, Kotak Mahindra, and Citigroup have been appointed bankers for this transaction. ET learns that the fund raising is likely to be concluded in the next couple of weeks.People close to the company told ET, the QIP may lead to the equity dilution of 6.1% in the company, which will bring down promoters stake down to 39% from 41.25% in March-2014, according to BSE filing. Despite the stake dilution in the company, experts say the move will hardly make a difference to its overall debt which stands at Rs 3,883 crore. At best, it may ease the debt burden by 15-20%. Due to an extended working capital cycle for the commercial vehicle business, the peak debt of the company touched Rs 6,200crore in August-2013. The company subsequently has been reducing its debt burden gradually through several measures.
The outstanding debt at end of FY-14 stood at Rs 3,883 crore compared with Rs 3,504 crore in FY13, and it's debt to equity ratio stands at 0.87 in FY14 against 0.78 a year back. Ashok Leyland had plans to reduce about Rs 1,500-crore debt in FY14. Having faced the brunt of a falling medium and heavy commercial vehicle market which has more than halved in the last few years, the company has seen its volumes decline and profitability taking a hit with discounts scenario continue to be stubborn. The financial performance of the company remain under pressure on continues decline in the sales volume of commercial vehicles and historic high discount levels on vehicles. Net sales dropped by 20% to Rs 9,943 crore in FY14, compared withRs 12,481crore in FY13 and net profit reduced to justRs 21.38 crore in last financial year. An email sent to Ashok Leyland did not elicit any response at the time of going to press.
In the past, Ashok Leyland's officials have said the company has gone on record to say that Ashok Leyland is committed to managing this difficult period by focusing on a few specific goals, viz: reduce levels of debt, reduce levels of operating costs and reduce levels of working capital.