New Delhi, January 14, 2006 (Business Line)

Commercial Vehicle manufacturer and Hinduja Group flagship Ashok Leyland (ALL) has announced additional investments to the tune of Rs 550 crore to be pumped in during the next two years for increasing production capacities at its existing plants and for setting up two new bus body and chassis assembly units, one of which will be located in Dubai, U.A.E.

The investment in the proposed new bus assembly unit in Dubai will go towards enabling the company to make its first overseas manufacturing foray. While the exact location and nature (joint venture or otherwise) of the Dubai venture has not been finalised, the unit is expected to aid ALL in supplying its buses to countries in the Gulf region, North Africa, West African and Iran. Making the announcement at the Auto Expo here on Friday, R. Seshasayee, Managing Director of ALL, said the proposed assembly unit would have capacity to manufacture 2,000 buses and prove to be a major hub for the company.

He also mentioned that the company had already sold more than 1,000 buses in the Gulf region and expected to see continued growth in demand in these markets. The unit would start operations within the current calendar year.

Seshasayee also said the company was looking at other export markets, including Pakistan. However, ALL would wait for the political climate to improve and become clearer before attempting to export to Pakistan. Trials were going on in many other overseas markets and the company was hopeful of bagging a number of orders.

Talking about the proposed expansion of production capacities, Seshasayee said the company would ramp up from 77,000 units per annum to one lakh units per annum. The funds for the expansion had been earmarked and would be part of the Rs 550-crore investment plan. The funds for the capacity ramp-up would come from the company's internal accruals and as such not affect its equity or debt structure. ALL was also planning to set up a new gear shop for the manufacture of new generation gearboxes, and would be making an investment of Rs 60 crore for the same.

Part of the new investment strategy also includes the setting up of another bus body building unit in North India. In keeping with ALL's strategy of providing only fully-built buses for the passenger market, the company is planning to increase its footprint in this market by setting up this satellite plant in the North to cater to the markets here, according to Seshasayee. The company will shortly identify a location in the North to set up a manufacturing facility for city buses, in partnership with Irizar-TVS, its joint venture partner. Starting from mini-buses to its 12-metre buses, progressively, ALL is hoping to offer all its buses in fully-built form.

The ALL chief also said the company's presence in the defence market was expanding with the entry into the 4X4 field artillery tractor segment. In the first three quarters of the current fiscal, the company's total sales at 41,253 units represented a jump of 13.3 per cent. Volumes in the domestic market had grown from 32,247 vehicles to 37,554 vehicles, a growth of 16.5 per cent, Seshasayee said. He felt the last quarter of the current fiscal should witness a further increase in volume growth.

Along with the proposed new investment of Rs 550 crore and the funds invested during the previous two years, ALL would have put in place investments of about Rs 1,000 crore by the end of 2008. In the meanwhile, ALL's other venture Ashley Design and Engineering Services recently commenced work and has procured orders from overseas OEMs (original equipment manufacturers) and Tier I component suppliers for developing, testing and validating vehicular and component design.