Please see attached case study i need you to do the time/entry cost analysis. (3 paragraphs) Also i need you to write a paragraph that explains (summarize) what is going on with the case study. As well as a paragraph that explains time/entry cost analysi

20180828225908valuation_of_ashok_leyland1.pdf

Home >Applied Sciences homework help >Please see attached case study i need you to do the time/entry cost analysis. (3 paragraphs) Also i need you to write a paragraph that explains (summarize) what is going on with the case study. As well as a paragraph that explains time/entry cost analysi

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FINC/091

IBS Center for Management Research

Valuation of Ashok Leyland

This case was written by Nagendra Kumar M V, under the direction of D Satish, IBS Hyderabad. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

To order copies, call +91 9640901313 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 203, Andhra Pradesh, India or email: [email protected]

www.icmrindia.org

mailto:[email protected]

http://www.icmrindia.org

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FINC/091

Valuation of Ashok Leyland

“What we are experiencing is one of the harshest and steepest of downturns and while we are combating it, the situation also affords us an opportunity to streamline our processes towards becoming a leaner and far more customer- oriented organization.”1

– Vinod K Dasari, Managing Director, Ashok Leyland. “Extremely poor results. The reported loss is more than double the loss we had anticipated.”2

– Yaresh Kothari, Analyst, Angel Broking Ltd.

In July 2013 Ashok Leyland (AL) surprised market participants by reporting a negative Profit after Tax (PAT) of Rs.1420 million for Q1-FY2014 adjusted to Rs. 1,350 million3. Though analysts had expected AL to report a loss, the figures were much higher than they had anticipated. According to the estimations of Angel Broking Ltd analysts, AL was expected to generate a net loss of Rs. 740 million for the period4 (Refer to Exhibit-I for Actuals vs. Estimates of AL for Q1-FY2014). The results had an impact on the market value of AL’s stock. The stock traded at a three-month low price of Rs. 15.65 on the Bombay Stock Exchange (BSE) (Refer to Exhibit-II for Market Prices of AL’s Stock at Bombay Stock Exchange). Without being constrained by the performance of the company, the management of AL decided to continue with their efforts planned for the current fiscal year 2014 (2014) “Although the entire commercial vehicle industry has had a tough Quarter 1, we, at Ashok Leyland, have remained focused on being future-ready by staying committed to our product development, network expansion and cost control programmes,” said, Mr. Vinod K. Dasari, Managing Director, AL5. During the fiscal year 2013 (2013), the company’s stock price moved between Rs. 30.60 and Rs.21.95 on BSE6 with Beta (β) value estimated at 0.957.

COMPANY OVERVIEW

AL was a leading commercial vehicle manufacturer in India. It offered a wide range of products and services catering to the requirements of different industrial segments. In the trucks segment, AL manufactured vehicles with a capacities ranging from 2.5 Ton Gross Vehicular Weight (GVW) to 49 Ton GVW and in the bus segment, its vehicles ranged from 18 seater to 88 seater buses. The company also manufactured special purpose vehicles for Indian Defense services and engines for industrial, marine, and genset applications (Refer to Exhibit-III for AL’s Product Range). AL’s origins can be traced back to the year 1948. It was founded by Raghunandan Saran as Ashok 1 Press release, www.ashokleyland.com, July 16, 2013. 2 Ashok Leyland post quarterly loss of Rs.142 Crore, www.livemint .com, July 16, 2013. 3 Press release, www.ashokleyland.com, July 16, 2013. 4 1Q-FY2014 Result Update, www.angelbroking.com, July 17, 2013. 5 Press release, www.ashokleyland.com, July 16 2013. 6 Archives, www.bseindia.com. 7 Quarterly Reports, www.angelbroking.com, 2012-13.

http://www.ashokleyland.com,

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Motors (Ashok) with its headquarters in Chennai, Tamil Nadu. Ashok started its operations that year as an assembling unit of Austin cars (A40 and A70 cars) in collaboration with Austin Motor Company, England.

Ashok continued to move ahead by offering quality and standard products to the customer in the Indian market. In the year 1950, Ashok collaborated with UK-based Leyland Motors (Leyland) and reached to an agreement to import, assemble, and manufacture Leyland trucks for seven years. Following this, Ashok got the Government of India’s (GoI) approval to manufacture 1000 Leyland commercial vehicles per year. In the year 1955, Leyland acquired an equity stake in the company. From then onward, the company was called Ashok Leyland (AL). The most significant event in AL’s history was its acquisition by UK-based Hinduja Group (Hinduja) in the year 1987. Hinduja, along with Iveco Fiat Spa, Europe, acquired a controlling stake in AL. Since then, it was regarded as a flagship of Hinduja.

AL was supported and guided by an experienced and dynamic management which worked with the clear vision of turning the company into a market leader. They initiated various projects aimed at improving the company’s operational base and product quality and at introducing new products. The company’s basic strength lay in expanding its operations and improving product quality and the product base. AL believed that this approach would not only give a boost to its strategy to become market leader, but would also help the management overcome any adverse business conditions. From the beginning, AL had focused on forming collaborations and Joint Ventures with renowned companies. Most of its capital expenditures were incurred on forming Joint Ventures, Collaborations, and Research and Development (R&D) activities (Refer to Exhibit-IV for Capital Expenditure Details of AL).

In R&D activities alone, AL invested at an average of around 2.77% per year of its turnover for the years 2007 to 20138. In R & D, specific importance was given to the development of products under the condition of Green Initiatives, Fuel efficiency, Designing and development of new categories of engines. Even during turbulent times, the company continued its efforts to improve infrastructural and financial support for R&D activities. AL tried to stay ahead of the competition by delivering innovative and customer centric products and services. The outcomes of the successful R&D activities included compliance with emission standards; development of a modern engines; launch of new vehicles superior in terms of price, performance, and value proposition; driver cabs with enhanced safety; filing of provisional patents, engines with increased performance and fuel efficiency; development of new models that were critical for further growth; and introduction of a new lean development process.

Besides concentrating on in-house development activities, AL also associated with companies like Albonair GmbH, Defiance Technologies, and TVS IRIZAR. For the development of a new range of products and services, it entered into Joint Ventures with Nissan Motor Company, Japan (Nissan), John Deere, USA (John), Continental AG, Germany (AG), and Alteams O.Y. Group, Finland (Alteams). It aimed to produce Light Commercial Vehicles (LCVs) with Nissan, Construction Equipment with John, Infrotronics Products and Services with AG, and High Pressure Die Casting (HPDC) aluminum components with Alteams. After 2013, it planned to launch a new range of Intermediate Commercial Vehicles (ICV) and a Driver’s Cab with new styling.

To improve its operations, AL concentrated on enhancing the capacity of its existing production units and also associated with foreign companies to expand its production operations. To capture the overseas demand and markets, it opened three manufacturing units in collaboration with companies in the Czech Republic, the UAE, and the UK. These associations aimed at meeting the demands and requirements of international customers. It had an association with international authorities and companies such as Ras Al Khaimaih Investment Authority, UAE, AVIA Motors 8 Ashok Leyland’s Annual Reports (2008-2013), www.ashokleyland.com.

http://www.ashokleyland.com.

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Limited, Letnany, Czech Republic, and Optare Plc, UK. It had around nine manufacturing units operating in India and abroad. In India alone, it had around seven manufacturing units and their production capacity was expected to be around 150,000 units9.

ECONOMIC OUTLOOK

After withstanding the 2008 crisis, the Indian economy managed to sustain its resistance for another two fiscal years. It registered a growth rate of 8.6% for 2009-10 and 9.3% for 2010-11. It then started to decline for the periods 2011-12 and 2012-13, registering a growth rate of 6.2% and 5.0% respectively. It was estimated that the Cumulative Annual Growth Rate (CAGR) of the Gross Domestic Product (GDP) for over a decade stood at 7.9%. The decline in the economic performance was attributed to the weak performance of different components of the GDP. For the Fiscal Year (FY) 2013, the growth rates for the agriculture, industry, and services sectors were 1.8%, 3.1%, and 6.6% respectively and their contribution to the overall GDP stood at 8%, 27%, and 65% respectively. With a contribution of 27% to the overall GDP, the industrial sector and its various components had registered reduced growth rates for FY2013 in comparison with FY2012. Besides, the inflation rate stood at 9.08% in comparison with the previous fiscal year’s rate of 7.91%10. There was a constant increase in the prices of animal products, cereals, vegetables, international prices of fertilizers, petrol, and diesel.

The measures taken by the Reserve Bank of India (RBI) to control inflation resulted in a decline in investment prospects and severely impacted growth prospects. There was a decline in gross domestic savings. As a ratio of GDP at current market prices, the savings rate declined from 34.0% during 2010-11 to 30.8% in 2011-1211. The prevailing interest rate on government securities at the end of 2013 was stood at 7.50%12. On the other hand, the growth rate of advanced countries was declining. Their growth rates stood at 3%, 1.6%, and 1.3% for the years 2010, 2011, and 2012 respectively13. The euro-zone crisis especially, had a serious impact on the performance of the world markets. A report ‘World Economic Outlook’ published by the International Monetary Fund (IMF) stated that the growth rate of world output was 3.9% in 2011 and 3.2% in 201214. The weak performance of the global markets also had an impact on Indian exports. For the period 2012-13 (April-December), exports registered a negative growth of 5.5% in terms of dollar value and a growth rate of 9.35% in rupee terms15.

INDUSTRY OUTLOOK

Until the economic reforms were introduced in the year 1992, the scope of the Automobile Industry was very limited (Refer to Exhibit-V for Automobile Industry Structure in India). The introduction of liberalized norms and policies gave scope for expansion of the Industry. According to a report released by India Brand Equity Foundation at the end of March, 2013, it was estimated that the Commerical Vehicle (CV) segment contributed around 4% of the total industry volume16. It was expected to grow at a CAGR of 15.02% over the years 2012-201617. Out of the total production volume, LCVs led the segment in the year 2013 with a production of around 55.9%, 9 www.ashokleyland.com. 10 Economic Survey Report, http://indiabudget.nic.in, 2012-13. 11 Economic Survey Report, http://indiabudget.nic.in, 2012-13. 12 www.rbi.org.in, March 19, 2013. 13 Economic Survey Report, http://indiabudget.nic.in, 2012-13. 14 World Economic Outlook, www.imf.org, April, 2013. 15 Economic Survey Report, http://indiabudget.nic.in, 2012-13. 16 Indian Automobile Industry Analysis, www.ibef.org, March 22, 2013. 17 Commercial Vehicle Market in India: Who Will Reign Supreme?, www.technavio.com, June 7, 2013.

http://www.ashokleyland.com.

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whereas the remaining 44.1% was contributed by the Medium & Heavy Commercial Vehicle segment (M&HCV) segment18. On the other hand, there was a decline in the sales volume of the various products offered under M&HCV (Refer to Exhibit-VI for CV Industry Sales Volumes (in units) for 2011-12 and 2012-13).

The weak industrial performance was attributed to various economic factors like the increase in fuel charges, inflation, interest rates, and vehicle prices. In addition, the availability of finance and passive freight charges also had an impact on the performance. This impact was felt by all the participants of the segment. The sales growth rate of the listed manufacturing companies in the private sector declined from an average of 28.88% in the first quarter of 2010-11 to 11.4% in the second quarter of 2012-1319. Interest expenditure increased significantly, together with a decline in the growth rate in sales. The ratio of net profit to sales also declined further (Refer to Exhibit – VII & Exhibit-VIII Operating Performance and Market Shares of Market Players). Tata Motors with a market share of 63% led the segment whereas the shares of other participants were: Ashok Leyland 23%, Eicher Motors 7%, and others 7%20.

OPERATIONAL AND FINANCIAL PERFORMANCE

Operating in a dynamic business environment, it was not only important for AL to improve its business prospects, but also essential for it to better its operational performance. During the fiscal year 2013, AL hired McKinsey and Co. and Boston Consulting Group (BCG) in a bid to improve its operational performance. Though it was able to increase its market share by 3% during the fiscal in the M&HCV segment, it faced a setback in maintaining its Earnings before Interest Tax and Depreciation (EBITDA) margins21. This was against the backdrop of total industry volume, which declined by 2% and the M&HCV segment by 25%22. Though, AL saw some ups and downs due to the uncertainties in the business environment, it had maintained a consistency in generating year-to-year revenues since its inception (Refer to Exhibit-IX for Revenue Details of AL).

Facing stiff competition from the other participants in the market, AL invested considerably in promotional activities and offered discounts on products. “Discounts in fourth quarter moved to Rs.0.13 million (Rs.1.3 lakh), up from Rs.0.11 million (Rs.1.1 lakh) in third quarter, impacting margins. High cost of annual maintenance contracts under JNNURM (especially Delhi Transport Corporation contracts) are further hurting margins,” Sorabh Talwar, Analyst, HDFC Institutional Research23. Also, during the year, there was a moderate increase in the expenses relating to materials, employees, power, depreciation, and finance. Analysts pointed out that coupled by the impact of these factors, the company faced a setback in maintaining its EBITDA margins. Though the company looked confident about managing expenses, it seemed to be concerned over the increasing burden of finance expenses and other expenses which included promotional and power costs (Refer to Exhibit-X for AL’s Profit and Loss Account Details).

In order to bring in more efficiency in terms of managing liquidity, AL continued the “Cash and Carry” system of sales during the year; this policy was introduced in May 2009 and it helped the company manage its liquidity position to some extent. During the fiscal year 2012-13, the company incurred Rs. 6,801.26 million on meeting its working capital requirement and for packing credit. It also raised short-term loans to the extent Rs. 868.56 million. Trade payables included an

18 Indian Automobile Industry Analysis, www.ibef.org, March 22, 2013. 19 Economic Survey Report, http://indiabudget.nic.in, 2012-13. 20 Indian Automobile Industry Analysis, www.ibef.org, March 22, 2013. 21 Ashok Leyland, Annual Report 2012-13. 22 Ashok Leyland, Annual Report 2012-13. 23 Ashok Leyland hires McKinsey, BCG to improve performance, www.livemint.com, May 14, 2013.

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amount of Rs. 29.18 million due to Micro, Small, and Medium enterprises24. Current liabilities included current maturities of long-term debts, interest accrued on borrowings (no due), income received in advance, unclaimed dividends, and other payables. Short-term provisions included provisions for employee benefits, proposed dividend, and corporate dividend tax on proposed dividend and product warranties.

On the other side, current assets included inventories of raw materials and components, work-in- progress, finished goods, stock-in-trade, stores and spares, consumables stores, and carbon emission rights. Trade debtors included an amount of Rs. 14194.11 million – considered to be good – and Rs. 3.94 million – considered as doubtful25. Cash and cash equivalents included balances with banks in current account, bank cheques, drafts, cash, and stamps on hand and other bank balances. Loans and advances included related party loans, security deposits, employee advances, material advances, balances with customs and port trusts, central excise, etc. Other current assets included interest accrued, export incentive receivables, and current portion of unamortized loan rising expenses (Refer to Exhibit-XI for AL’s Balance Sheet Details).

CASH FLOWS

AL’s long-term borrowings included secured non-convertible debentures to the tune of Rs. 6,000 million which were issued in sets of Rs. 3,500 million and Rs. 2,500 million with a maturity period of 3 years and 5 years respectively. During the year, there were no redemptions in terms of debentures but the company repaid its External Commercial Borrowings (ECBs) loan installment obtained from Japanese banks which were equivalent to $81.66 million and $16.66 million, availed of during 2011-12 and 2012-13 respectively26. Also during the same period it could raise unsecured ECBs in Japanese yen from banks for an average tenure of 5 to 5.6 years during 2011- 12 and 2012-13, equivalent to $60 million and $115 million respectively27. Out of this, $110 million was utilized during the year 2012-13. The total shareholders’ funds as on March 31, 2012, accounted for Rs. 44,550 million, out of which equity share capital accounted for Rs. 2,660 million28 (Refer to Exhibit-XII for AL’s Cash Flow Details).

FUTURE FOCUS

The long-run slowdown of India’s mining industry and slower growth of industrial output were expected to impact the performance of the CV segment during the first half of FY2014 “It continues to be down and the situation is likely to continue till the first half of next fiscal. It may pick up in the second half but it is too early to say anything now” said, Vinod K. Dasari, Managing Director, Ashok Leyland29. On the other side, the global markets were also expected to perform moderately during the upcoming fiscal year. As a result, expecting a decline in the demand for commercial vehicles, the management of AL focused on expanding its business within the country and planned to reach for alternative international markets. In order to de-risk its business further, it focused on improving its non-cyclic business areas like spares, engines, and defense products. Its entry into the LCV segment helped the company considerably in de-risking its business further. The sales of ‘Dost’ under the LCV category were expected to be strong during 2013-14. The company also planned to launch new products and other variants under the LCV segment in the short-run as well as the long-run.

24 Ashok Leyland, Annual Report 2012-13. 25 Ashok Leyland, Annual Report 2012-13. 26 Ashok Leyland, Annual Report 2012-13. 27 Average dollar value during 2011-12 and 2012-13 was Rs.47.87 and Rs. 54.37,

www.exchangerates.org.uk. 28 Ashok Leyland, Annual Report 2012-13. 29 Ashok Leyland to launch Avia trucks in India by July, www.livemint.com, February 19, 2013.

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Not confining itself to improving its business prospects, the AL management also focused on improving its operational performance. In order to overcome the impact of the economic downturn, it focused on optimizing its fixed costs and reducing its working capital requirement. Its target was to reduce its debt of Rs. 5,000 million in which the majority of the loan was raised to meet working capital requirements. Further, it targeted reducing long-term borrowings to less than Rs.35,000 million and to maintain a debt-equity ratio of 1:1. It concentrated on improving its financial position by raising Rs. 3,000 million to Rs.5,000 million by disinvesting from non- profitable ventures. It planned to cut down its capital expenditure to Rs. 5,000 million from around Rs.16,000 million invested during 2012-1330. It followed techniques like deep dives, value engineering, and alternative sourcing to work on material cost optimization and to sustain profitability by mitigating the risk of an increase in the cost of material. The company was equipped with adequate infrastructure which could help it to manage any kind of demand and supply requirement.

Amid weak economic and industrial forecasts, it was expected that the initiatives taken by the government to boost economic prospects and, further, to carry on with previously announced policies, would provide the momentum for a demand in the CV segment. Also, an announcement that railway freight charges on the bulk movement of goods would be increased was expected to shift a portion of the short haul segment toward commercial vehicles. In view of these circumstances, the total industry volume was expected to increase marginally over the previous year. In the vehicle segment, truck sales were expected to rise marginally, whereas bus sales would remain flat. Within the ICV segment, the bus sales were expected to grow and medium duty vehicles were expected to remain marginally contracted. Further, competitive intensity was likely to be more pronounced across segments. Despite an increase in competitive intensity, AL targeted increasing market share with the support of newly launched products during the fiscal year 2013. Without taking a claim on the prevailing business conditions and profitability of the concern, AL followed a policy of declaring dividends regularly (Refer to Exhibit -XIII for AL’s Dividend Pay- out Details).

30 Ashok Leyland Investor Meet, www.ashokleyland.com, June, 2013

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Exhibit-I Actuals vs. Estimates of AL for Q1-FY2014

Value in (Rs.) Millions

Particulars Actuals Estimates Variation (%)

Net Sales 23,640 24,320 (2.8)

EBITDA 230 1100 (78.9)

Adj. PAT (1350) (740) -

Source: Q1-FY2014 Quarterly Report, www.angelbroking.com.

Exhibit-II Market Prices of AL’s Stock at Bombay Stock Exchange (BSE)

Year* Stock Price

2008-09 18.10

2009-10 55.85

2010-11 56.90

2011-12 30.30

2012-13 21.95

2013-14** 15.65

* As on 31st March of concerned year. ** As on Q1-FY2014 Results Publication date (16/07/2013). Source: www.bseindia.com.

Exhibit-III AL’s Product Range

Buses Trucks Light Vehicle Defense Vehicles Power Solutions

 City Bus  Suburban Bus  Inter-city Bus  School &

Staff Bus  Special Bus

 Long-haul  Mining and

Construction  Distribution

Trucks

 Dost  Stallion  Super Stallion Special Applications  Multi Fuel Dispenser  Truck Fire Fighting  Refrigerated Truck  Water Browser  Ambulance 4x 4  Ambulance 4 x 2  Long Chassis Bus  Short Chassis Bus  Snow Clearing

Vehicle

 Diesel & Natural Gas Generating Set

 Marine Engines and Aggregates Industrial Engines

 Engines for Fire Fighting Applications

Source: www.ashokleyland.com

http://www.angelbroking.com.

http://www.bseindia.com.

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Exhibit-IV Capital Expenditure Details of AL

(Rs. in million)

Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

Total Capital Expenditure 6,959.00 9708.60 6840.00 4900.00 5990.00 7250.00

Capital Expenditure on R&D 954.39 1,500.15 1,024.92 1,313.25 1,380.82 659.45

Revenue (Excluding Depreciation)

1,068.84 1,153.66 1,315.89 1.812.96 2,250.22 2,450.30

Less: Amount Received by R & D Facilities

-- -- -- -- 807.50 71.14

Total R & D Expenditure 2,023.23 2,653.82 2,340.81 3,126.21 2823.54 3,038.61

% of Total Turn over 2.3% 3.98% 2.97% 2.59% 2.59% 2.28% Source: Ashok Leyland’s Annual Reports (2008-2013)

Exhibit-V

Automobile Industry Structure in India

Source: IBEF, Automotives Industry Report, March - 2013

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Exhibit-VI CV Industry Sales Volumes (in units) for 2011-12 and 2012-13

Domestic Exports

2012-13 2011-12 Change (%) 2012-13 2011-12 Change (%)

M & HCV Passenger

46,553 49,882 (6.7) 7,110 9,209 (22.8)

M & HCV Truck 221,710 299,334 (25.9) 11,909 19,286 (38.3)

LCV Passenger 48,153 48,868 (1.5) 3,477 4,206 (17.3)

LCV Truck 476,734 411,415 15.9 57,448 59,557 (3.5)

Total CV 793,150 809,499 (2.0) 79,944 92,258 (13.4) Source: Ashok Leyland’s Annual Reports (2008-2013)

Exhibit-VII Operating Performance of Market Players

(Rs. in million)

Sales Turn Over Total

Revenue

Operating Costs

EBITDA

Net Profit/ Loss

Enterprise Value

Expected Growth Rate**

Tata Motors 49,3197.3 47,0797.7 46,2531.2 3,3803.1 3018.1 97,0103.2 11%

Ashok Leyland 13,9479.8 13,2555.3 12,0271.6 1,2283.7 4337.1 10,4078.4 12%

Eicher Motors 1,1793.0 1,1163.1 9251.0 1912.1 1447.6 8,0009.8 4%

Force Motors 2,2763.5 2,0468.1 1,9492.9 975.3 142.8 3140.0 20%

SML Isuzu

1,1123.2 1,0194.2 9401.3 792.9 364.3 5282.1 10%

** Growth rate was calculated as an average of growth rates of sales for the previous five fiscal years (2008-09 to 2012-13).

Source: Compiled based on the information collected from stock broking websites and from the annual reports of the companies. Data was related for the period ending on March 31, 2013.

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Exhibit-VIII Market Shares of Market Players

Market Cap

(Rs. in million)

Outstanding Shares

(Rs. in million) Market

Price (Rs.)* EPS (Rs.)

Book Value (Rs)

Tata Motors 806742.256 2694.08 299.45 0.70 59.90

Ashok Leyland 60663.504 2,660.68 22.80 1.53 11.87

Eicher Motors 79838.859 27.01 2955.90 52.82 232.98

Force Motors 4971.5965 13.03 381.55 10.32 874.84

SML Isuzu 4411.1795 14.47 304.85 23.8 182.38

Source: Compiled based on the information collected from stock broking websites and from the Annual Reports of the companies. *As on 30/04/2013.

Exhibit-IX

Revenue Details of AL** (Rs. in million)

Particulars 2008-09 2009-10 2010-11 2011-12 2012-13

Commercial Vehicles 55194.99 67455.82 108364.78 120095.85 112335.06

Engines and Gensets 4422.77 3687.97 3558.14 3492.10 4835.16

Spare Parts and Others 7996.94 8850.58 10613.47 15539.99 18145.81

Revenue from Services 225.21 356.77 203.17 826.67 1382.54

Other Operating Revenue -- -- 1188.22 2008.70 2781.21

Other Incomes 496.22 704.45 444.51 403.50 623.51

Total Revenues 68336.13 81055.59 124372.29 142366.81 140103.29

** Total Revenue was taken at its gross value without making any adjustments for discounts, rebates, etc. Source: Ashok Leyland’s Annual Reports (2008-2013)

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Exhibit-X AL’s Profit and Loss Account Details

(Rs. in million)

Particulars March 31, 2013 March 31,

2012 March 31,

2011 March 31,

2010 March

31, 2009

Income

Revenue from Operations 1,32,985.58 1,37,208.05 1,21,530.03 78,725.97 66,666.40

Less: Excise Duty 8,173.58 8,164.78 9,758.97 6,278.86 6,855.66

Revenue from Operations (Net) 1,24,812.00 1,29,043.26 1,11,771.06 72,447.10 59,810.73

Other Income 623.51 403.50 444.51 704.45 496.22

Total Income 1,25,435.51 1,29,446.76 1,12,215.57 73,151.55 60,306.96

Expenses

Cost of materials consumed 75,394.16 91,214.83 80,645.00 64,818.71 55,116.38

Purchases of Stock-in-Trade- Traded Goods

13,117.39 5,073.73 2,733.69 -- --

Changes in inventories of finished goods, work-in- progress and stock-in-trade

2,719.76 (1,670.13) (1,652.24) -- --

91,231.32 94,618.44 81,726.46 64,818.71 55,116.38

Employee benefits expense 10,755.13 10,203.94 9,597.16 -- --

Finance costs 3,768.85 2,552.53 1,889.23 811.30 1,187.08

Depreciation and amortization Expense

3,807.83 3,528.13 2,674.31 2,041.07 1,784.14

Other Expenses 14,060.85 11,659.93 8,310.41 -- --

Total Expenses 1,23,624.00 1,22,562.98 1,04,197.58 67,671.09 2,971.22

Profit before exceptional items and tax

1,811.50 6,883.78 8,017.99 5,480.46 2,219.35

Exceptional items 2,895.56 15.97 - 32.71 134.88

Profit before Tax 4,707.06 6,899.76 8,017.99 5,447.74 2,084.46

Tax expense:

Current tax 775.20 1,111.50 -- --

Deferred tax 370.00 464.80 593.50 1,211.00 124.50

Fringe Benefit Tax -- -- -- -- 60.00

370.00 1,240 1,705.00 4,236.74 184.50

Profit for the period from continuing operations

4,337.06 5,659.76 6,312.99 5,774.49 1,899.96

Earnings per share (Face value Rs.1) – Basic and Diluted (in Rs.)

1.63 2.13 2.37 3.18 1.43

Source: Ashok Leyland’s Annual Reports (2008-2013).

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Valuation of Ashok Leyland

Exhibit-XI AL’s Balance Sheet Details

(Rs. in million)

Particulars March 31, 2013 March 31,

2012 March 31,

2011 March 31,

2010 March 31,

2009

EQUITY AND LIABILITIES

Shareholder’s funds

Share Capital 2,660.68 2,660.68 1,330.34 1,330.34 1,330.34

Reserves and Surplus 41,890.36 39,462.58 38,299.27 35,357.23 33,408.64

44,551.04 42,123.26 39,629.62 36,687.58 34,738.99

Non-Current liabilities

Long-term borrowings 27,378.41 22,933.51 23,481.28 22,038.91 19,581.43

Deferred Liability -- -- -- 765.48 --

Deferred tax liabilities (Net) 5,273.66 4,903.66 4,438.86 3,845.36 2,634.36

Other long-term liabilities 17.78 -- -- -- --

Long-term provisions 785.12 765.63 784.63 -- --

Foreign currency monetary item translation difference – net

-- -- -- (124.50) 38.41

33,454.99 28,602.81 28,704.78 26,525.27 22,254.21

Current Liabilities

Short-term borrowings 7,669.82 1,017.50 -- -- --

Trade payables 24,853.68 25,709.67 23,085.06 29,607.57 21,369.45

Other current liabilities 17,350.63 17,500.48 10,344.22 -- --

Short-term provisions 3,086.83 4,203.74 4,169.44 -- --

52,960.97 48,431.39 37,598.73 29,607.57 21,369.45

Total 1,30,967.02 1,19,157.47 1,05,933.14 92,820.42 78,362.66

ASSETS

Non-current Assets

Fixed Assets

Tangible Assets 49,184.34 45,657.12 43,443.80 42,495.59 33,991.16

Intangible Assets 3,634.48 3,477.81 2,894.11 -- --

Capital WIP 5,626.18 4,351.90 2,007.00 5,614.69 9,982.89

Intangible assets under development

1,263.09 1,130.30 1,572.65 -- --

59,708.10 54,617.15 49,917.57 48,110.28 43,974.05

Non-current investments 23,376.31 15,344.78 12,299.96 3,261.54 2,635.57

Long-term loans and advances 4,796.95 6,082.39 3,846.30 --

Other non-current assets 120.32 74.27 31.57 --

88,001.69 76,118.60 66,095.42 3,261.54 2,635.57

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Particulars March 31, 2013 March 31,

2012 March 31,

2011 March 31,

2010 March 31,

2009

Current Assets

Inventories 18,960.20 22,306.25 22,089.03 16,382.40 13,300.14

Trade Receivables 14,194.11 12,307.64 11,644.98 10,220.61 9,579.74

Cash and Bank Balances 139.42 325.55 1,795.27 5,189.20 880.83

Short-term loans and advances 8,909.80 7,265.74 3,343.94 9,604.62 7,895.43

Other current assets/ 761.77 833.66 964.48 -- --

42,965.32 43,038.86 39,837.71 41,396.84 31,656.15

Miscellaneous Expenditure -- -- -- 51.74 96.88

TOTAL 1,30,967.02 1,19,157.47 1,05,933.14 9,28,20.42 78,362.66

** Equity Share Capital of Ashok Leyland includes 201,43,62,154 equity shares of Rs. 1 each and 64,63,14480 equity shares of Rs.1 each issued through Global Depository Receipts and 760 shares forfeited earlier were added back to the total share capital.

Source: Ashok Leyland’s Annual Reports (2008-2013).

Exhibit-XII AL’s Cash Flow Details

(Rs. in million)

Particulars March 2013 March 2012

March 2011

March 2010

March 2009

Cash flow from Operations activities

Profit before tax 4,707.06 6,899.76 8,017.99 5,447.74 2,084.46

Adjustments for:

Depreciation, Amortization and impairment – net of capitalization

3,807.83 3,528.13 2,674.31 2,041.07 1,784.14

Other amortizations 57.13 (56.98) 106.80 86.06 153.49

Foreign exchange (gains) / losses (127.74) 107.26 45.84 (190.95) (290.99)

Loss/(Profit on disposal of tangible Assets

(41.72) (34.80) (18.85)

Loss/(Profit) on sale of long-term Investments

(3,297.19) (15.97) -- -- --

Provision for diminution in value of long-term investments

401.63 2.65 -- -- --

Interest expense-net of capitalization 3,768.85 2,552.53 1,753.67 912.14 1,405.20

Interest income (332.43) (137.33) (210.10) (253.23) (385.86)

Dividend income (75.62) (90.60) (39.03)

Interest from Investments -- -- -- (26.42) (45.00)

(Profit)/Loss on disposal of fixed assets/long term investments / division - net

-- -- -- (547.74) (253.96)

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Particulars March 2013 March 2012

March 2011

March 2010

March 2009

Diminution in value of investments -- -- -- (14.42) 36.48

Operating profit before working capital changes

8,867.80 12,754.64 12,330.63 7,454.24 4,487.95

Adjustments for changes in:

Current liabilities and provisions (1,699.43) 4,244.19 3,664.56 8,122.23 (2,294.68)

Trade receivables/Debtors (1,908.97) (597.10) (1,606.09) (824.21) (5,611.70)

Inventories 3,346.04 (217.21) (5,706.63) (3,082.25) (1,061.00)

Loans and Advances (311.05) (3,355.00) 1,263.17 123.40 (163.78)

Other current assets 88.26 143.49 -- -- --

Other Non-current assets (2.83)

Cash generated from operations 8,382.65 12,972.99 7,416.46 11,793.42 (4,643.22)

Income tax paid (1,099.65) (1,499.86) (1,502.64) (892.80) (595.81)

Net cash flow from operating activities before exceptional item

-- -- -- -- (5,239.03)

Compensation under voluntary retirement scheme

-- -- -- -- (16.80)

Net cash flow from Operating activities (A)

7,282.99 11,473.13 5,913.82 10,900.61 (5,255.84)

Cash flow from investing activities

Payment for acquisition of assets (6,491.62) (6,978.39 (3,526.02) (6,947.23) (7,641.31)

Proceeds on sale of fixed assets 53.23 72.07 25.08 36.32 62.49

Proceeds from sale of Long-term Investments

4,146.45 2,511.43 13.70 1,974.36 274.90

Purchase of Long-term investments (9,282.42) (5,542.92) (9,051.64) (1,926.88) (,46.22)

Interest received 188.07 77.59 100.27 361.04 62.39

Dividend received 75.62 90.60 39.03 26.42 45.00

Changes in Advances (Net) (332.55) (805.59) 3,222.29 (1,422.50) 1,000.96

Proceeds from Sale of Division 66.80

Net cash flow used in investing activities (B)

(11,643.20) (10,575.20) (9,177.29) (7,831.67) (6,641.78)

Cash flow from financing activities

Proceeds from long-term borrowings 11,713.84 5,773.15 4,600.00 5,231.85 9,733.56

Repayments of long-term borrowings (7,347.09) (3,487.84) (860.11) (982.28) (867.21)

Proceeds from short-term borrowings 1,02,693.29 11,783.29 -- -- (993.32)

Repayments of short-term Borrowings

(96,056.11) (10,829.18) -- -- --

Debenture / Loan raising expenses Paid

(113.52) (89.64) (6.92) (2.14) (7.43)

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Particulars March 2013 March 2012

March 2011

March 2010

March 2009

Interest paid – Net (3,628.29) (2,468.69) (1,542.38) (1,457.85) (939.12)

Dividend paid and tax thereon (3,092.30) (3,092.30) (2,326.93) (1,556.42) (2,334.64)

Net cash flow from financing activities (C)

4,169.80 (2,411.22) (136.36) 1,233.14 4,591.82

Net cash inflow / (outflow) (A+B+C)

(190.40) (1,513.29) (3,399.82) 4,302.08 (7,305.79)

Opening cash and cash equivalents 274.63 1,753.72 5,153.55 851.46 8,157.26

Exchange fluctuation on foreign currency bank balances

(6.11) 34.19 -- -- --

Closing cash and cash equivalents 78.10 274.63 1,753.72 5,153.55 851.46

Source: Ashok Leyland’s Annual Reports (2008-2013)

Exhibit-XIII AL’s Dividend Pay-out Details

Particulars 2008-09 2009-10 2010-11 2011-12 2012-13

Proposed Dividend (Rs. in million)

1,330.33 1,995.50 2,660.67 2,660.67 1,596.40

Corporate Dividend Tax (Rs.in million)

226.09 331.42 431.62 431.62 271.30

Dividend Payout (Rs. in million)

2,334.64 1,556.42 2,326.93 3,092.30 3,092.30

Dividend Per Share* (Rs.) 1.00 1.50 2.00 1.00 0.60

* Face Value of the Share was Rs.1/- per share. Source: Ashok Leyland’s Annual Reports (2008-2013) and other sources.

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