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N Madhavan
Chennai, Aug 18: Commercial vehicle major Ashok Leyland is negotiating with financial institutions to prepay some of its high cost debts including debentures. This will help the company bring down its average cost of funds from 11.3 per cent at present.
Chennai, Aug 18: Commercial vehicle major Ashok Leyland is negotiating with financial institutions to prepay some of its high cost debts including debentures. This will help the company bring down its average cost of funds from 11.3 per cent at present.
Speaking to The Financial Express, company executive director (finance) T Anantha Narayanan said the cash flow as a result of asset reduction will enable Ashok Leyland to prepay the high cost debts. Its working capital requirements are very much on the lower side as production levels have declined sharply from the peak levels of 43,000 vehicles earlier to around 20,000 levels.
He, however, refused to quantify the amount of prepayments planned this fiscal as the discussions were in a preliminary stage. In 1997-98 Ashok Leyland had repaid debts worth Rs 85 crore.
The company has approached domestic financial institutions like UTI, LIC and GIC. The institutions, it is learnt are not very enthusiastic with the prepayments as they are presently facing deployment problems. Moreover, these loans were sanctioned when the interest rates were high. Hence, if the prepaid amount is redeployed now the spreads will be much thinner. For these reasons the financial institutions had not opted for the Rs 10-crore early option scheme in the debenture series XV in June this year.
Ashok Leyland has to repay loans amounting to Rs 355.46 crore in the current fiscal 1998-99. This also includes a significant portion of the debentures it had issued earlier. In 1998-99, debentures worth Rs 62.71 crore are coming up for redemption, while the figure for 1999-2000 is much higher at about Rs 168.21 crore. Anantha Narayanan said the company had the wherewithal to meet these obligations without resorting to reissue of debentures, which it can to the extent of Rs 38.46 crore.
The company had to dispose of investments to impart some respectability to its bottomline during 1997-98. It had sold 50,000 HDFC shares to rake in a profit of Rs 14.61 crore, but for which its net profit would have been only Rs 3.80 crore.
Interestingly, in 1997-98, the company began to evaluate the closing stock of machinery spares rather than writing them off as done earlier. But for this move the profits of 1997-98 would have been lower than that of the previous year.
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This story was printed from Net Express located at http://www.expressindia.com. Net Express provides a portal to India, with news from The Indian Express and The Financial Express along with sites on travel and tourism, the entertainment industry, the power sector, the environment and much more.
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