Most- Annual Report Threadbare-errgrp- Ashok Leyland Fy14

8/10/2019 Most- Annual Report Threadbare-errgrp- Ashok Leyland Fy14

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ART|Ashok Leyland FY14

ACCOUNTING/AUDITING AND KEY FINANCIAL INSIGHTS

Incremental investments, loans to subsidiaries/group companies

moderates in FY14; all future investments to be closely monitored

n ALs incremental investments/ loans to group companies was ~INR4b in FY14 to

INR29.4b in FY14 (90% of net worth), from INR25.6b in FY13 (~81% of net

worth).

n The increase in FY14 was led by investments, loans and advances in Ashok

Leyland Nissan Vehicle (~INR1.1b) and Albonair GmbH (~INR2.6b).

n Investment in unrelated energy businesses: There were no incremental

investments in unrelated associates. Unrelated investments are in Hinduja

Energy of INR1.9b and Ashok Leyland Wind Energy (ALWE) of INR0.8b. The

increase in ALWE is due to merger of investment companies. The management

has stated that it does not intend to make any further investment in unrelated

businesses.

n Investments held for sale: Albonair GmbH and Albonair India are held for sale as

at FY14 end with net carrying values of INR3.6b and INR211.4m respectively.

Since, the sale value of these investments are not finalized, the company is

unable to comment on the recoverability of these investments. Further, net

investments in Avia stood at INR646m in FY14.

n Investments in JVs: ALscumulative investment in Nissans JV (3 JVs) stood at

INR4.7b and John Deeres at INR1.5b in FY14. All the JVs, being in nascent

stages, are incurring losses; however, the company has continued its

investments in these JVs. Among these JVs, Ashley Alteams India (AAIL) and

Nissan Ashok Leyland Technologies are EBITDA positive, whereas others are

EBITDA negative. Further, AL has impaired more than 50% of investments(INR294m) of AAIL. One of the JVs, Automotive Infotronics, has gone into

liquidation. Total net assets of Automotive Infotronics were INR130.9m in FY14.

Exhibit 1:Investments, loans and advances made in group companies (subsidiaries /

associates / JVs / others) lowest in FY14 in past four years (INR b)

Note: Numbers from the standalone cash flow statement is considered

Source: Company Annual Report, MOSL

5.8 6.3 9.6 5.0

FY11 FY12 FY13 FY14

ART #1

Albonair group companies

and Avia is held for sale at

their net realizable value

Investments continue in JVs

in FY14; operational

performance of JVs

continues to be poor

On a cash flow basis,

investments made in group

companies in FY14 is the

lowest in past four years


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Exhibit 2:

Standalone investment in group entities at INR29.4b, 90% of net worth (INR m)

Particulars FY11 FY12 FY13 (A) FY14 (B) (B-A)

Hinduja Leyland Finance (Equity) 1,092 570 305 7,785 7,480

Optare plc 503 845 1,004 2,008 1,004

Equity investments 503 584 584 1,499 915

Loans and advances 0 261 419 509 89

Avia Ashok Leyland Motors sro * 1,684 1 0 646 646

Equity investments 1,307 1 0 16 16


Albonair GmbH * 596 1,097 1,708 3,616 1,908

Equity investments 596 596 596 3,616 3,020

Loans and advances 0 501 1,112 0 -1,112

Albonair (India) Pvt Ltd (Equity) * 40 40 40 211 171

Defiance Technologies 314 326 479 1,154 675

Equity investments 314 234 234 819 585


Defiance Testing and Engineering Services Inc 671 807 585 0 -585

Equity investments 69 69 341 0 -341

Loans and advances 602 738 244 0 -244

Hinduja Foundries 459 459 3,459 3,459 0


Preference shares 217 217 3,217 3,217 0

Hinduja Energy (India) (Equity) 0 0 1,871 1,871 0

Ashok Leyland Wind Energy (Equity) 0 0 0 780 780

IndusInd Bank (Equity) 921 1,514 980 381 -598

Ashok Leyland Nissan Vehicles (Equity) 1,688 2,071 2,536 3,729 1,193

Ashok Leyland John Deere Construction (Equity) 424 609 1,104 1,536 432

Nissan Ashok Leyland Powertrain (Equity) 544 735 735 740 5

Nissan Ashok Leyland Technologies (Equity) 255 255 255 261 5

Ashley Alteams India (Equity) 350 400 147 281 134

Ashley Holdings 1,585 3,349 4,875 0 -4,875Equity investments 1,435 3,199 4,725 0 -4,725

Preference shares 150 150 150 0 -150

Ashley Investments 1,596 3,377 4,893 0 -4,893

Equity investments 1,446 3,227 4,743 0 -4,743

Preference shares 150 150 150 0 -150

Other Investments 1,157 1,064 592 912 320

Non equity 20 20 20 38 18


Loans and advances 600 582 171 0 -171

TOTAL INVESTMENTS 13,880 17,518 25,567 29,370 3,802

EQUITY INVESTMENTS 11,763 14,808 19,840 24,642 4,803

NON-EQUITY (PREFERENCE SHARES/OTHERS) 537 537 3,537 3,255 -282LOANS AND ADVANCES 1,580 2,173 2,191 1,473 -718

Investment as % of net worth 52% 61% 81% 90%

Note: *Investments classified as held for sale; Source: Company Annual Report, MOSL

No additional investment in

Hinduja Energy (India)

during FY14

Roped in strategic investor

in 3QFY15 in Defiance

Technologies reducing their

stake to 62% from 100%

Part of the increase in

individual investments is on

account of merger of

investment companies

Additional investment of

INR1.1b in Ashok Leyland

Nissan Vehicles in FY14


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Exhibit 3:

Consolidated: Investments in associates and other entities remain high at 25% of

net worth (INR m)

Particulars Consol (FY14)

Hinduja Foundries

- Preference shares 3,217

- Equity investments 242

Hinduja Energy (Equity) 1,871Ashok Leyland (UAE) (Equity) 494

IndusInd Bank (Equity) 381

Lanka Ashok Leyland (Equity) 242

Others (Equity) 9

Others (Non equity) 446

Total 6,902

Investment as % of net worth 24.5%


Additional exhibits on unrelated businesses/JVs

Exhibit 4:

Investment in unrelated businesses at 6.8% of consolidated net worth (INR m)

Particulars Nature FY13 FY14 Consol (FY14)

Hinduja Energy (India) Ltd Associate 1,871 1,871 1,871

Ashok Leyland Wind Energy Subsidiary 0 780 0

Ashley Aviation Ltd Associate 20 38 38

Total 1,891 2,689 1,909

As a % of net worth 6.0% 8.2% 6.8%


Exhibit 5:Performance of Ashok Leyland Nissan Vehicle deteriorates over years (INR m)

Particulars FY11 FY12 FY13 FY14*Share capital

NA NA NA3,905

Reserve and surplus -1,655

Net worth -137 1,773 2,077 2,250

Turnover 21 1,157 5,782 5,366

PBT/PAT -11 -161 -311 -890

Note: * - FY14 figures have been presented considering company's share of 51% for comparability;


Exhibit 6:All JVs continue to incur losses at PAT level in FY14 (INR m) (AL's share in JV)

Particulars

Ashok

Leyland

Nissan

Vehicles

Ashok

Leyland John

Deere

Construction

Nissan Ashok

LeylandTechnologies

Nissan Ashok

LeylandPowertrain

Ashley

AlteamsIndia

Share capital 3,905 1,536 260 740 575

Reserves and surplus -1,655 -1,099 -862 -134 -547

Net worth 2,250 437 -602 606 28

Turnover (net) 5,366 329 559 1,092 602

EBITDA NA -305 162 -27 40

PBT -890 -391 -142 -50 -99


No major incremental

investments in FY14 in

unrelated businesses

Ashok Leyland NissanVehicle posting losses since

past four years

2 out of 5 JVs reported

positive EBITDA in FY14


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Exhibit 7:

Investment provided or loss on sale of investments lower during FY14 (INR m)

Particulars FY12 FY13 FY14

Ashley Alteams 0 (278) (16)

Automotive Infotronics (under liquidation) 0 (112) (31)

AVIA Ashok Leyland Motors s.r.o (1,514) (12) (49)

Ashley Bio-Fuels (75) 0 0

Ashley Transport Services (59) 0 0Total -1,648 -402 -96


Cash conversion cycle improves in FY14 on back of lower inventory days;

rises again in 1HFY15 in anticipation of recovery

n Cash conversion cycle turned negative 2 days for FY14 as compared to 18 days in

FY13. Further, inventory days reduced to 57 days during FY14 from 76 days in

FY13.

n Payable days have also increased marginally to 106 days for FY14 from 99 days

in FY13. However calculation of payable days includes acceptances, which in our

view is quasi-debt and hence shouldnt be forming part of the cash conversion

cycle. However, break-up for acceptances is not disclosed.

n In 1HFY15, cash conversion cycle increased again to 17 days primarily due to

higher inventory days at 68 (in anticipation of recovery) and lower payable days

at 98.

Exhibit 8:

Cash conversion cycle increases in 1HFY15 on back of higher inventory and lower

payable days (number of days)

Note: For 1HFY15, sales and COGS has been extrapolated for 12 months for the purpose of cash

conversion cycle; Source: Company Annual Report, MOSL

Monetization of non-core assets to pare debts

n AL continues to sell its non-core assets in order to bring down its overall debt

position. During FY14, AL realized INR7.1b on account of sale of such assets

(FY13: INR4.1b).

n Further, during 1HFY15, AL sold a part of its immovable property for a profit of

INR1,090m.

n The management would continue to scout for monetization of any such non-

core assets (energy businesses, aviation, etc).

86

35

107

14

76

42

99

18

5748

106

-2

68

47

98

17

Inventory days Receivable days Payable days Cash conversion cycle

(Days)

FY12 FY13 FY14 1HFY15

Cash conversion cycle has

improved during FY14,

though it increased again in

1HFY15


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Exhibit 9:

Sale of non-core assets by the company to reduce its debt (INR m)

Particulars FY13 FY14 1HFY15 #

IndusInd Bank 3,058 3,612 0

Hinduja Leyland Finance 1,060 0 0

Defiance Technologies 0 0 0

Defiance Testing and Engineering Services Inc. USA 0 1,015 0

ICICI Bank 28 0 0

Sale of immovable properties* 0 2,036 1,090

Others 0 470 0

Total 4,146 7,132 1,090

Note: * FY14 sale proceeds include receivables of INR1,062m; # - Amount stated is only profit on sale

of immovable property and not proceeds on sale; Source: Company Annual Report, MOSL

Simplifies corporate structure, restructuring results in capital reserve of

INR0.9b; reports consolidated financials for the first time

Structure for consolidation during FY14

n During FY14, AL, for the first time, consolidated its financial statements with 13

subsidiaries, five joint ventures (JVs) and four associates.n Before consolidation on March 31, 2014, AL merged its investment arms viz.,

Ashley Holdings (AHL), Ashley Investments (AIL) and Ashok Leyland Project

Services (ALPS) into one of the group operating entities viz., Ashley Services

(ASL) w.e.f April 1, 2013. ASL, a resultant company after amalgamation, was

then merged w.e.f July 1, 2013, with AL (holding company).

n For the above consolidation, three of the subsidiaries viz., Avia Ashok Leyland

Motors Ltd s.r.o (Avia), Albonair GmbH and Albonair India Pvt Ltd have been

excluded from consolidation as these entities are held for sale i.e; these

entities are kept for sale within next 12 months.

Scheme of merger of three investment companies

n Under the scheme of merger of AHL, AIL and ALPS with ASL, all the assets

including investments and liabilities of the three investment companies were

transferred and recorded at their respective fair value by ASL.

n As per the scheme, the difference between the excess of fair value of assets

over the face value of equity and preference shares allotted by ASL shall after

taking into account, the credit on account of cancellation of equity share capital

be credited to Capital Reserve account.

n As a result, ASL recognized INR3.3b as capital reserve on April 1, 2013 and issued

equity and preference shares worth INR9.8b in lieu of the merger of threeinvestment companies to AL.

n Accordingly, ASL became the wholly-owned subsidiary of AL pursuant to the

issue of shares.

Consolidated financial

statements presented

for the first time in FY14

annual report

Merger of investment arms

results in creation of capital

reserve of INR0.9b (post

w/off of Avia of INR2.5b)


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Exhibit 10:

Flowchart of merger of investment companies

Source: Company Annual Report, Scheme of arrangements, MOSL

Exhibit 11:Shares to AL on merger of AHL, AIL & ALPS in ASL

(m)Particulars AHL AIL ALPS

Shares held by AL 472 474 3

Total number of equity shares 946 949 22

AL shareholding (%) 49.95 49.95 15.40

Total shares issued by ASL to AL 950


Exhibit 12:

AL's investment in ASL during FY14

Particulars

Amt

(INR m)

Equity shares 9,502

2% redeemable non-convertible pref. shares Series 'A' 65

6% redeemable non-convertible pref. shares Series 'B' 235

Issued by ASL as per scheme of arrangement 9,802

Additional investments during FY14 1,606

Share application money pending allotment 765

Investments in ASL as on Sept 30, '13 12,173


ASL operations during FY14n AL additionally invested INR1.6b in ASL during FY14.

n Pursuant to the amalgamation scheme, during FY14, ASL recorded diminution

on one of the subsidiaries investment (Avia) of INR2.4b.

n The loss in P&L of INR2.4b was then set-off against the capital reserve of

INR3.3b and INR0.9b (INR3.3b INR2.4b) was recorded as net capital reserve.

n AL then merged the wholly-owned subsidiary ASL with itself.

Exhibit 13:Fair value of INR5.4b added on amalgamation of investment companies

Particulars Amt (INR m)

AHL net assets - Book value (A) 3,719

AIL net assets - Book value (B) 3,758

ALPS net assets - Book value (C) 176

Book value of net assets (D = A+B+C) 7,653

Less: share cancelled of ASL (E) -1

BV of net assets over shares cancelled (F = D-E) 7,652

Purchase consideration

Equity shares 9,502

2% redeemable non-convertible preference shares Series 'A' 65

6% redeemable non-convertible preference shares Series 'B' 235

Total purchase consideration (G) 9,802

Capital reserve/(Goodwill) as per calculations (H=F-G) -2,150

Actual capital reserve recorded as per amalgamation (I) 3,256

Fair value added on amalgamation (I-H) 5,406

Note: (A),(B) and (C) Net assets of companies have been computed after netting-off merging

companies investments ; Source: Company Annual Report, MCA, MOSL

Ashok Leyland

Ashley Services Ltd

Wholly-owned subsidiary

Approval date -

July 15, 2013Effective date - Apr

1, 2013

MergerApproval date -

Mar 21, 2014

Effective date - July

1, 2013

Merger

Ashley Holding LtdAshley Investments

Ltd

Ashok Leyland Project

Services Ltd


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Exhibit 14:

Capital reserve created on amalgamation of INR879m (INR m)

Particulars FY13 FY14

Opening net worth (incl revaluation reserve) 42,123 44,551

Add: Profit for the year 4,337 294

Less: Dividend (including tax) -1,868 0

Add/Less: Other adjustments

Capital reserve created on amalgamation 0 879Debenture issue expenses adjusted from securities premium -13 -12

Adjustment on sale of revalued assets -10 -1,076

Net movement in hedge reserves 189 32

Adjustment for depreciation on revalued assets -157 -152

Other adjustments -51 -39

Closing net worth (incl revaluation reserve) 44,551 44,478


Technical know-how capitalized of INR1.3b in FY14; intangible assets under

development (ITUD) of INR106m w/off in FY14

n AL had capitalized intangible assets of INR1.4b in FY14 (FY13: INR1b) primarilyon acquisition of technical know-how of INR1.3b (FY13: INR0.1b) in FY14.

n AL also had intangible assets under development (ITUD) balance of INR264m at

FY14 end (FY13: INR1,263m). Further, the company has written-off INR106m

(0.1% of revenue) during FY14 and disclosed it as R&D expenditure.

Exhibit 15:

Significant additions in technical know-how in FY14 (INR m)

Particulars FY12 FY13 FY14

Computer software 813 850 84

Technical knowhow 425 115 1,346

Intangible assets additions 1,237 965 1,430

ITUD closing balance 1,130 1,263 264


Goodwill on consolidation at 28 % of consolidated net worth

n Goodwill stood at INR7.8b on account of consolidation of subsidiaries, 27.8% of

consolidated net worth.

n In case of any future w/offs or provisions on any investments/loans and

advances in subsidiaries, there is a risk of goodwill being impaired which might

impact the profitability of the company.

Contingent liabilities increases on back of sales tax demands; majority of

such cases ruled in favor of company in FY15

n ALs contingent liability jumped to INR3.2b in FY14 from INR2b in FY13; ~10% of

FY14 standalone net worth (FY13: 6.3%). The increase was primarily due to sales

tax demands increasing to INR1.2b in FY14 from INR0.4b in FY13.

n This was primarily on account of entry tax demands in some states. However,

the company has received favorable judgment in many of such cases in FY15.

n On account of the higher sales tax demand, the company also paid higher

amount as protest money. This has increased from INR272m in FY13 to

INR468m in FY14.

Future w/off or provisions

on any investments may

result in goodwill

impairment


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Exhibit 16:

Contingent liabilities jumps primarily due to higher sales tax demands (INR m)

Particulars FY11 FY12 FY13 FY14 Consol (FY14)

Sales tax 319 311 375 1,168 1,168

Others 272 287 279 246 246

Guarantees 3,793 4,759 1,350 1,827 16

Total contingent liabilities (INR m) 4,384 5,357 2,004 3,241 1,430

Sales tax paid under protest 238 238 272 468 468Source: Company Annual Report, MOSL

Exhibit 17:

Contingent liabilities at 9.9% of net worth

Note: Net worth is after excluding the revaluation reserve; Source: Company Annual Report, MOSL

Capitalization of forex differences to result in higher depreciation in future

years

n As per Indian Accounting Standard-11, companies had an option to either

expense the foreign exchange losses in P&L or capitalize it. AL, in FY09, had

opted for capitalization of these forex differences (done by many companies).

n Accordingly, forex differences on translation or settlement of long term foreign

currency monetary items, insofar as it relates to acquisition of depreciable

assets are adjusted to the cost of fixed assets and depreciated over the

remaining useful life of such assets. In other cases, these are accumulated in

Foreign currency monetary item translation difference a/c (FCMITD) and

amortized as income or expense over the balance term of such items, but not

beyond March 31, 2020.

n During FY14, AL capitalized forex loss of INR2.3b (FY13: INR1.6b) in carrying

value of assets; 138.2% FY14 EBITDA (FY13: 18.5%). Also, AL capitalized forex

loss in FCMTD of INR44m in FY14 (FY13: INR39m) to be amortized over the

period of loan.

n This will lead to higher depreciation charge over the years; however finance cost

will be lower in the years of capitalization of forex differences.

Exhibit 18:Capitalization of exchange difference as percentage of EBITDA (INR m)

Particulars FY11 FY12 FY13 FY14

Exchange differences capitalized in

- Tangible assets -92 2,096 1,558 2,205

- Intangible assets -1 28 28 52

- Reserves 0 -35 39 44

Exchange differences capitalized -94 2,088 1,625 2,301

% of sales -0.1% 1.6% 1.3% 2.3%

% of EBITDA -0.8% 16.6% 18.5% 138.2%

Source: Company Annual report, MOSL

4,384 5,357 2,004 3,241 1,430

16.5% 18.5% 6.3% 9.9% 5.1%

FY11 FY12 FY13 FY14 Consol (FY14)

Contingent liabilities (INR m) % to net worth

During FY14, AL capitalized

forex loss of INR2.3b in

carrying value of assets


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Exhibit 19:

Forex loss stands at 2.3% of sales in FY14 (INR m)


Loan raising expense amortized over period of loan; debenture issue

expenses adjusted against securities premium

n As disclosed in the annual report, AL has a policy of amortizing the expenditure

incurred on issue of loans over the period of such loans. This might result in a

higher P&L charge despite lower cash cost in certain years. During FY14, AL

incurred cash cost of INR88m while amortizing INR51m through P&L.

n Further, as per the companys accounting policy, it adjusts the expenses

incurred on issue of debentures against the Securities Premium Account.

Exhibit 20:Treatment of unamortized loan raising/debenture issue expenses (INR m)


O/s unamortized loan raising expenses (net) 29 73 120 143

Expenses amortized during the year 16 22 38 51

Cash expenses for the year 7 90 114 88Expenses on issue of debentures adjusted through reserves 0 13 13 12


Other financial highlights

n On a consolidated basis, cash deposits and stamps on hand stood high at

INR439m. These cash deposits and stamps represent cash and cheques in hand

lying with Hinduja Leyland Finance. This has been realized subsequent to the

year-end.

Exhibit 21:

Cash deposits and stamp on hand figured high due to cheques in hand with

Hinduja Leyland Finance (INR m)

Particulars Standalone Subsidiaries (derived) Consolidated

Cash deposits and stamp on-hand 2 437 439


n During FY14, AL has given inter-corporate deposits (ICDs) of INR300m. These

deposits are given within the AL group and the same have been received post

FY14-end (i.e. during FY15). These ICDs are at arms length price and interest-

bearing.

n During FY14, the company has correctly changed its accounting policy to adjust

the amount in revaluation reserve of revalued assets against the carrying valueof such assets and recognize the consequent profit/sale thereof. This resulted in

FY14 profits being higher on sale/disposal of immovable properties by INR1.1b.

-94

2,088 1,625 2,301-0.1%

1.6%1.3%

2.3%

FY11 FY12 FY13 FY14

Exchange differences capitalized % of sales


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Exhibit 22:

Revaluation reserve adjusted on sale of revalued assets (INR b)


Opening balance 13.3 13.1 13.1 13.0

Less: Adjustment of depreciation 0.3 0.2 0.2 0.2

Less: Adjustment on sale of revalued assets 0.0 0.0 0.0 1.1

Add: Other adjustments 0.0 0.2 0.0 0.0

Closing balance 13.1 13.1 13.0 11.7Source: Company Annual Report, MOSL

Exhibit 23:

Average borrowing cost marginally down in FY14


Exhibit 24:Higher interest cost results in increase in finance cost (INR m)

Particulars FY11 FY12 FY13 FY14 Consol (FY14)

Interest expense 1,771 2,244 3,523 4,009 4,719

Int exp relating to vehicle financing 2,863

Other borrowing costs 136 324 516 589 611

Total finance cost 1,907 2,568 4,039 4,598 8,055


Exhibit 25:Free cash flow post interest remained negative during FY14 (INR m)

Particulars FY11 FY12 FY13 FY14 Consol

EBITDA (Operations) 12,137 12,561 8,765 1,666 4,220

Add/Less: Non-cash adjustments 194 -109 103 495 -2,270

Less: Direct taxes paid -1,503 -1,500 -1,100 -297 -966

Operating profit before w/cap changes 10,828 10,952 7,768 1,864 984

Inventories -5,707 -217 3,346 7,073 6,572

Trade receivables -1,606 -592 -1,909 1,168 2,623

Loans and advances -1,263 -3,360 -311 -845 -4,033

Other current assets 0 143 88 147 -737Trade payables 0 4,134 0 0 0

Current liabilities and provisions 3,665 110 -1,699 -3,376 -5,978

Cash generated from operations before exceptional Items 5,917 11,170 7,283 6,031 -571

Add/(Less): Exceptional Items 0 0 0 -467 -469

Cash generated from operations 5,917 11,170 7,283 5,564 -1,040

Less: Financial cost -1,542 -2,166 -3,628 -4,358 -5,078

Operating cash flow post Interest 4,375 9,004 3,654 1,206 -6,118

Less: Capital expenditure -3,526 -6,978 -6,492 -2,198 -4,081

Less: Investment in long-term investments -9,052 -5,543 -9,282 -5,379 -5,440

Free cash flow -8,203 -3,517 -12,120 -6,371 -15,638

Proceed from sale of long term investment 14 2,511 4,146 5,097 5,206

Net cash flow -8,189 -1,006 -7,973 -1,274 -10,432Source: Company Annual Report, MOSL

1.9 2.6 4.0 4.6 8.1

8.0%9.1% 10.8% 10.2%

9.5%

FY11 FY12 FY13 FY14 Consol (FY14)

Finance cost (INR b) Avg borrowing cost (%)


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Exhibit 26:

Net deferred tax liability decreases on higher unabsorbed depreciation (INR m)


Deferred tax liability

Depreciation / Research and development expenditure 4,650 5,103 5,754 6,072

Other timing difference 23 59 123 170

Sub-total(A) 4,673 5,163 5,877 6,242

Deferred tax assetVoluntary retirement scheme compensation -8 -3 -2 -128

Carry forward of losses-unabsorbed depreciation 0 0 -287 -1,679

Provision for compensated absences 0 -206 -216 -197

Other timing difference -226 -49 -99 -170

Sub-total(B) -234 -259 -604 -2,174

Deferred tax liability (net) 4,439 4,904 5,274 4,068


Exhibit 27:Subsidiaries snapshot for FY14 (INR m)

Subsidiary Share capital Net worth Turnover PBT PAT

Ashok Leyland Nissan Vehicle 7,657 4,411 10,522 (1,745) (1,745)

Hinduja Leyland Finance 5,103 8,042 5,962 1,230 812

Optare Group 68 (1,473) 5,373 (359) (359)

Gulf Ashley Motor 141 143 2,476 8 5

Defiance Technologies 800 (136) 1,187 (63) (85)

Irizar - TVS 99 214 908 (39) (36)

Albonair GmbH* 2,483 294 700 (694) (694)

Hinduja Leyland Finance

Services1 9 446 1 1

Optare UK 492 (1,193) 354 (30) (30)

Defiance Tech Gmbh 81 0 338 (125) (125)

Ashok Leyland Wind Energy 301 386 298 30 20

Avia Ashok Leyland Motors* 6,728 1,387 297 (842) (842)

Avia Ashok Leyland Rus, Russia 0 (65) 224 (52) (52)

Defiance Technologies, USA 42 (13) 117 24 24

Albonair (India)* 100 82 101 (6) (6)

Asohk Leyland (Nigeria) 4 12 92 13 9

Asohk Leyland (UK) 11 8 67 8 (2)

Asohk Leyland (chile) 4 10 52 6 6

Mangalam Retail Services 1 1 0 (0) (0)

Optare plc 898 2,513 0 (18) (18)

Jamesstan Investments 499 465 0 0 0

Optare Holding 127 243 0 0 0

Optare (Leeds) 421 1,240 0 0 0

East Lancashire Busbuilders 0 0 0 0 0Albonair Automotive

Technology38 (8) 0 (8) (8)

Total 26,096 16,573 29,511 (2,662) (3,126)

Note: *Companies classified as held for sale; Source: Company Annual Report, MOSL

Except Hinduja Leyland

Finance, most of thesubsidiaries are loss-making

at the PAT level in FY14


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26 November 2014 13


MANAGEMENT SPEAK/KEY PLANS

Deceleration in CVs in FY14 due to economic slowdown; recovery expected

in 2HFY15

n Continued economic slowdown in India has severely affected the domestic

commercial vehicle industry. The industry is currently going through one of its

longest down cycles in recent periods. Having declined by 2% in 2012-13, the

market experienced a much sharper (20.2%) drop in volumes in 2013-14.

n With expected revival in the industrial and mining sectors, the CV industry is

likely to show some recovery in 2HFY15.

n Projected growth rates by SIAM for FY15 of M&HCVs and LCVs is 5-7% and 4-7%

respectively.

AL manages to maintain its M&HCV market share; looses in LCV segment

n Despite slowdown, AL maintained it market share in the declining M&HCV

segment industry of 26.1% in March 2014 (27.1% in September 2014) facilitated

by focus on meeting customer requirements, network expansion and new

product launches.

n Unlike M&HCV segment, the Light Commercial Vehicle (LCV) segments DOST

model had a decline in its sales volume due to aggressive discounting and

competition. However AL continued its penetration in this segment with

introduction of new models like Partner, Mitr & Stile.

IMPROVE leads to improved product, quality and cost

n IMPROVE An employee involvement initiative has made huge strides in terms

of increasing employee participation, actionable suggestions and ideas and has

blossomed into a company-wide innovation programme.

n Involvement in contributing ideas and taking ownership for implementation has

led to significant improvements in product, process, quality and cost.

n 15th edition of IMPROVE witnessed 11,000 innovative ideas, with participation

of about 45% of employees, and has lead to one-time savings of INR26m and

recurring savings of INR52m.

ART #2


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26 November 2014 14


GOVERNANCE MATTERS

Most directors are regular in attending board meetings

n The company is regularly calling its board meeting as per the prescribed laws.

During FY14, the company held six Board meetings.

n All directors have attended at least 50% of the meetings (at least 3 meetings for

FY14) except Mr Shardul S Shroff who attended merely 1 meeting during FY14.

n Our analysis of Mr Shardul Shroffs attendance at board meetings for last four

years indicates that he has attended less than 50% of the meetings in each of

these years.

n Further, the company has appointed Dr Andreas H Biagosch, Mr Anil Harish, Mr

D J Balaji Rao, Mr Jean Brunol, Mr Sanjay K Asher and Mr Shardul S Shroff for a

term of five consecutive years, i.e; upto July 25, 2019 on non-rotational basis to

comply with statutory requirements.

Exhibit 28:Most directors attended Board meetings regularly

NameDirector's

positionFY11 FY12 FY13 FY14

Mr Anil Harish NEI 6 4 4 6

Mr D J Balaji Rao NEI 5 5 6 6

Mr Jean Brunol NEI 2 4 5 5

Mr Sanjay K Asher NEI 3 3 6 5

Mr Shardul S Shroff NEI Nil 2 3 1

Dr Andreas H Biagosch NEI NA NA NA 6

Mr Dheeraj G Hinduja NENI 6 8 6 6

Mr A K Das NENI 5 7 5 4

Mr F Sahami NENI 4 6 6 6

Dr V Sumantran* NENI 6 8 5 5

Mr R Seshasayee NENI 5 8 5 5

Mr Vinod K Dasari ED 6 8 5 6

Total meetings held 6 8 6 6

Note: * Dr V Sumantran ceases to be director in FY15; NEI - Non-executive independent director; NENI

- Non-executive non-independent; ED - Executive director Source: Company Annual Report, MOSL

Managerial remuneration of directors goes down

n The managerial remuneration paid by the company to its key managerial

personnel has gone down from INR63m in FY13 to INR21m in FY4.

n This is primarily due to no remuneration paid to Mr R Seshasayee, Non-executive Vice Chairman, during FY14. As per our discussion with management,

remuneration is not paid on account of inadequacy of profits.

n Further, for remuneration paid to Mr Vinod K. Dasari, Managing Director, the

Company has made relevant application to the Central Government for its

approval and during FY15, the company has received the approval on the same.

Exhibit 29:Remuneration paid to directors declined steeply during FY14 (INR m)

Key Management Personnel FY11 FY12 FY13 FY14

Mr. R Seshasayee 28 32 35 0

Mr. Vinod K. Dasari 10 25 28 21

Total remuneration 39 57 63 21

% of EBITDA 0.3% 0.5% 0.7% 1.3%


ART #3


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26 November 2014 15


N O T E S


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