Ashok Leyland’s CFO View on Scrappage Policy

Scrappage policy will not only benefit industry but will rev up economy, says Ashok Leyland’s CFO

24 Feb 2016 02:14 PM

Gopal Mahadevan, CFO of Ashok Leyland, discussed the company’s expectations from the Budget as well as their performance, during an interview with the CNBC-TV18.
 
Scrappage policy to directly benefit industry
As the market is abuzz that the government might announce a scrap-page policy for older vehicles, Mahadevan said that the move will benefit the segment by inducing replacement demand. He pointed to the positives associated with such decision as better vehicles will come on the road that will align with the pollution norms.
 
At the same time, Mahadevan noted that the policy will not only help boost industry but also the economy as it will propel investments. Based on the current total annual volumes, which stands at 260,000-270,000 units, Mahadevan predicts a 10% to 15% surge in demand if the policy is imposed in a phased manner.
 
Growth at comfortable pace
Mahadevan did not specify the numbers or percentage by which demand for Ashok Leyland will rise, but said that given the company’s record of outperforming industry growth, such a policy will have a positive effect on its sales. It is to be noted that in the recent quarter, Ashok Leyland posted 38% in volume growth versus 22% industry growth.
 
Mahadevan prefers to adopt a wait and watch policy to get clarity on how the government will implement such scrappage policy. He believes that such a policy can be undertaken in phased manner, and there would not be any overnight implementation.
 
While giving a brief about the company’s performance in bus segment, Mahadevan said they have been able to perform well in the segment. He added that the 54% volume growth during the last nine months came from both trucks and buses equally. As far as AMRUT (Atal Mission for Rejuvenation and Urban Transformation) scheme is concerned, Mahadevan holds the view that that the company will be capable of boosting bus segment even if the scheme delays. He said that the company holds tenders for most of the significant schemes or private tenders, which will help it to offset the demand loss in case AMRUT scheme gets pushed further.
 
In the end, Mahadevan declined to comment on termination notice from Nissan, stating that the matter is sub-judice.