Hinduja group flagship Ashok Leyland has decided to merge its light commercial vehicle subsidiaries such as Ashok Leyland Vehicles, Ashley Powertrain and Ashok Leyland Technologies, with itself, subject to necessary regulatory and other approvals, including from the National Company Law Tribunal’s (NCLT) Chennai branch.
The board has approved the merger of these subsidiaries, which were acquired by the company from its erstwhile joint venture partner Nissan. In the JVs, Ashok Leyland held a 51% stake in Ashok Leyland Vehicles and Ashley Powertrain, and a 50% stake in Ashok Leyland Technologies.
On November 25, 2016, Ashok Leyland announced that it has completed the acquisition of Nissan Motor Co’s stake in each of the three joint ventures (JVs) formed between the two companies way back in 2008. With all necessary statutory approvals now in place, the acquisition was completed for a consolidated consideration of `3 paid by Ashok Leyland for all the shares of the three JVs, the company then informed the stock exchanges.
In a filing, Ashok Leyland said that the amalgamation will enable the consolidation of the LCV businesses of the transferor companies into one entity, which will facilitate focused growth, operational efficiency, integration synergies and better supervision of the business of the entities.
The amalgamation will enable pooling of resources of the transferor companies with the resources of the transferee company to their advantage, resulting in more productive utilisation of the said resources, and cost and operational efficiency, which would be beneficial to all stakeholders. The amalgamation would facilitate scaling of operations, reduce administrative costs and garner greater visibility in the market. The amalgamation would reduce the layers of shareholding and enable the transferee company to hold the assets and business of the transferor companies directly; the amalgamation will enable smoother implementation of policy changes at a higher level from a management perspective and shall help enhance the efficiency and control of the entities, Ashok Leyland said further.
According to the sources, close to Rs 1,000 crore was invested in these three companies over the years and Ashok Leyland had to make an impairment provision of `214 crore a few years ago.
According to its filings with the stock exchanges, Ashok Leyland said that as on March 31, 2018, the net worth of its first subsidiary Ashok Leyland Vehicles is negative with `248.31 crore on a turnover of `1,655 crore. The second subsidiary, Ashley Powertrain, has a positive net worth of `191 crore with a turnover of Rs 358.36 crore. The third subsidiary, Ashok Leyland Technologies, has a negative net worth of `92.38 crore and a turnover of Rs 60 crore.
Earlier on November 25, in a press release, Ashok Leyland chief executive officer and managing director Vinod K Dasari said, “This is an important milestone in the history of Ashok Leyland. We are very positive on the future of the LCV business, which is growing. While we have acquired 100% ownership of the JVs, we will continue to be associated with Nissan for the technology of the existing Dost, Partner and Mitr models. These are important products for us and hold tremendous potential both within and outside India. Our association with Nissan continues in a new relationship.”
Under the new arrangement, Ashok Leyland will continue to build, under a licensing agreement, the successful Dost, Mitr and Partner light commercial vehicles, which are based on Nissan’s design, engineering and technology.
