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Rediff.com  » Business » Leyland slashes investment size, staff salary

Leyland slashes investment size, staff salary

February 14, 2009 01:52 IST

Ashok Leyland, the Hinduja group flagship company and a leading manufacturer of commercial vehicles, on Friday said it would cut its proposed investment size and would undertake cost-cutting measures, including a 20 per cent reduction in wages, in view of the slowdown in the industry.

Speaking to reporters, K Sridharan, chief financial officer, said the company's margin outlook is currently under pressure and it may continue like that till next month. The company has set a target of 10 per cent earnings before interest, taxes, depreciation and amortisation margin for the next financial year.

To achieve this target, Sridharan said, the company had taken measures, including cutting down the capital expenditure from around Rs 1,000 crore to Rs 800 crore, reduction in salaries by around 20 per cent across the board compared to last year and increasing the revenue from non-cyclical business.

The proposed measures would convert the company into a "cash-positive" one in the coming years, he said.

The company, which was planning to invest around Rs 3,200-3,300 crore during the next three years, has now decided to spend only Rs 2,000 crore.

He added that the company has to "knock out" around Rs 700-800 crore, which will bring down the interest rate.

Sridharan said the company was planning to increase the non-cyclical revenue to 45-46 per cent for the overall business, compared to 38-39 per cent currently.

The company is also cutting down the travelling and publicity expenses, by which it is planning to save around Rs 40-50 crore. Sridharan noted that in the last quarter the company had saved around Rs 20 crore by adopting these cost-cutting measures.

The number of working days has also come down to three in a week, which would help to bring down the inventory level, he said.

The commercial vehicle manufacturer has also revised its total capacity to 150,000 units as compared to earlier 180,000.

However, the investment in research and development would continue, Sridharan said. He said the company's average spend on R&D is around Rs 110-120 crore.

Commenting about the current market situation, he said "the worst is over" and the industry should start witnessing growth in the next six months. "The growth will mainly driven by the government spending on infrastructure projects, including construction of new roads, bridges and on the public transportation system. These would give boost to the commercial vehicle industry," he added.

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