Chairman's Speech - Ashok Leyland Corporate
Ladies and Gentlemen,
I have great pleasure in extending to you a warm welcome to this fifty-seventh Annual General Meeting of the Company. The Report of the Directors and the audited results for the year ended March 31, 2006 have been with you for sometime, and with your permission I shall take them as read.
We have arranged for a presentation to be made to you, highlighting the Company’s performance during the last fiscal and for the first quarter of this year. In what was the fifth consecutive year of volume growth, your Company has set new records in production, sales and profit. Significantly, it registered market share gains in practically all the segments it operates; which signifies the market demand for its vehicles and the enhanced capability to meet it, thanks to the expanded annual capacity of 77,000 vehicles.
Commercial Vehicle Business
After remaining flat through the first three quarters of the last fiscal, demand for medium and heavy commercial vehicles witnessed a spurt in the last quarter, caused principally by Supreme Court’s directive for strict enforcement of the payload restrictions.
Market demand so far in the current fiscal has shown high growth which is a good augury for the year, even after discounting for the low base of the first quarter of 2005-06 which was affected by the uncertainties in switch over to new emission norms. Consecutive years of high growth are at once a testimony to the robust economic growth and the resilience of the Indian economy, which has so far taken in its stride the ballooning energy cost. With macro fundamentals in good shape, expectations of a continuing growth would seem reasonable. However, we need to keep a watch on fuel prices for its impact on inflation and on vehicle demand .
Enforcement of the rated payload regime has also quickened the segmentation of the commercial vehicle industry wherein the 4x2 rigid segment, as anticipated, is giving way to high end, high capacity vehicles and low end of LCVs. We have been able to benefit from the resultant growth momentum in multi-axle vehicles and tractor-trailers wherein we have traditionally enjoyed higher market shares thanks to the market preference for our vehicles.
A Significant Phase
You are aware of IVECO’s association with Ashok Leyland for nearly 20 years. A few days back, the Hinduja Group acquired IVECO’s stake in LRLIH Ltd., U.K., the holding company of Ashok Leyland. This acquisition is as a result of the changed business plans of both the partners and Ashok Leyland’s strategic priorities in the changed global scenario.
I would like to place on record our appreciation and gratitude for IVECO’s support through these years, and particularly the freedom enjoyed by your Company, during this period, to access technology from any source — this facilitated the alignment of our product offerings with market needs.
These years have not only been important years in the Company’s history and growth but also mark a significant chapter for the Indian CV industry. In anticipation of India’s liberalization process, your Company set for itself international benchmarks of technology and in the last one-and-half decades of phased globalisation, has steadily enhanced its competitiveness. The challenges of short product lifecycles were brought to the Indian commercial vehicle industry by the emission agenda in the 1990s. The success of the BS2 and BS3 versions of our engines, continues to provide a competitive advantage and tremendous market pull for our vehicles. What is remarkable is that we have managed this transition with our own skills and without any compromise on fuel efficiency.
Vehicle Integration Skills
The last two decades have been important for deepening our vehicle integration skills. Complementing our CAD facilities, which match the best in global automotive industry, through recent investments, we have added testing and validation facilities that are equally state-of-the-art. Our new Technical Centre campus in Chennai, featuring very comprehensive testing and validation infrastructure, will become operational shortly.
Along with growing investments to create world-class infrastructure, we have also been successful in developing a talent-pool to extract the best out of these facilities. We have in our fold many Indian engineers with years of experience with global MNCs and technology leaders. Within the Product Development function, a core team has been formed to address future technologies some of which transcend traditional automobile technology, in nascent areas that offer leapfrog potential.
Alliances and Partnerships
As explained, we have used our insight into the market and customer’s operations to offer products that make best economic sense to him. You are aware of the longstanding technology tie-ups we have with aggregate technology leaders such as Hino, Dana and ZF, thereby securing our long-term technology needs. We approach collaborations and alliances in this spirit, of choosing the best and appropriate technology. A case in point is the three-way joint venture between IRIZAR, TVS and Ashok Leyland which has resulted in an international class luxury bus slated for market launch in the last quarter of this fiscal. This is yet another international product with intrinsic India cost advantage which should help establish itself in the small but growing top end of the luxury coach market.
While it is true that for over a decade, we have not accessed ready vehicle technology but have moved on our own internal strengths and by accessing technology as appropriate, we recognize that alliances and partnerships are increasingly the norm in the global automobile world. From a position of self-confidence which is backed by our success with self-sufficiency, we will assess global opportunities for market and technology access, and recognize partnerships to be one of the options. They have the potential to shrink to-market time and costs. The partnerships we seek to conclude will be win-win – that leverage mutual strengths for mutual benefits.
You must be aware of your company’s proposed acquisition of Czech truck maker AVIA, the first European acquisition by an Indian commercial vehicle manufacturer. Besides access to modern, Euro IV compliant vehicle technology, the AVIA acquisition offers us a significant window to Europe and adjoining territories. We shall vigorously pursue acquisitions as a means to technology and or territory access in pursuance of our ambition to establish a significant presence in the second hemisphere market.
Mr F J Colon Martinez, Director, who represented IVECO S.p.A. on your Board retires at this AGM and is not seeking reappointment.
Mr H Kingele stepped down from the Board after serving as a Director for about 18 years. On behalf of all of you, I wish to place on record the Company’s deep appreciation of Mr Klingele’s active involvement and support, particularly in technical and exports related matters.
Mr E A Kshirsagar who has been the Chairman of the Audit Committee retires at this AGM and for personal reasons is not seeking re-appointment. On behalf of the members and the Company, I wish to thank him for his contribution to the Board and to the processes of the Audit Committee, as its Chairman.
Your Board has appointed Mr P N Ghatalia, former Senior Partner of Price Waterhouse to takeover as Chairman of the Audit Committee.
Mr Stephen Young who was appointed as Additional Director during the year ceases to hold office at this AGM. After the issue of the Notice of the AGM, he has taken up another assignment and hence does not wish to seek re-appointment.
I am grateful to all our shareholders for their continued trust in the management of the Company. I would also like to thank our principal shareholder, the Hinduja Group for its nurturing role throughout and for its continuing commitment to the growth and success of Ashok Leyland not only as a prominent player in the Indian commercial vehicle market but also in the global scene. The Hinduja Group has reiterated its wholehearted support to Ashok Leyland’s efforts to achieve technological excellence and global competitiveness. I would like to end by commending the dedication and contribution of the employees of your Company without which the continuous growth and market performance would not have been possible.
Mr. R . J. Shahaney
Chairman, Ashok Leyland Limited