1) Study of Fixed Assets

Years

Fixed Assets
(Rs. Crores)

12-13
13-14
14-15
15-16

Fixed Assets %
Change
(Rs. Crores)

Capital
Work-InProgress

Depreciation and
Amortization

Cost of Materials
Consumed

(Rs.Crores)

(Rs.Crores)

(Rs.Crores)

5,970.81

--

562.62

380.78

7,539.42

5,841.39

-2.17%

155.13

377.04

5,909.69

5,375.70

-7.97%

69.8

416.34

8,626.64

5,129.35

-4.58%

54.62

443.67

12,252.17

The increased Depreciation from 2013-14 to 2015-16 and the Capital Work in
Progress show that Ashok Leyland was continuously investing in Long and Fixed
Assets during this period. But the bulk of the investment was done during 2013-14.
The capacity creation is evident from the increased Cost of Materials over the years
2) Study of Operating Revenues, EPS, DPS and Enterprise Value due to Long
Term Asset Creation
Year
s
1213
1314
1415
1516

Total
Operating
Revenues
(Rs Crs)

Total
Operating
Revenues %
Change

Basic
EPS (Rs
Crs)

Basic
EPS %
Change

Dividen
d/
Share
(Rs Crs)

Dividend
/ Share %
Change

Enterprise
Value
(Rs Crs)

Enterpris
e Value %
Change

12,481.20

--

1.63

--

0.6

--

9,331.07

--

9,943.43

-20.33%

0.11

-93.25%

-100.00%

10,178.03

9.08%

13,562.18

36.39%

1.2

990.91
%

0.45

0.00%

22,771.50

123.73%

18,821.58

38.78%

2.54

111.67%

0.95

111.11%

31,308.27

37.49%

The Capital Expenditure has led to Long term Asset creation and improved capacity
to create finished goods from Raw Materials. The improved top line and investment
in R&D, Land and Production Capacity has allowed the company to raise the market
share from 26% to 29% in its main market segment* during 2014-15.
The increased operating profits have led to the EPS to rise heavily in the period
under consideration. A total increase of 2000% from 2013-14 to 2015-16.
The DPS has also aggressively increased even though the number of stocks
increased by approx 10%. This shows the companies willingness to share the profits
from the expansion in 2013-14
The increase in the Fixed Assets has increased the Enterprise Value to a new high.
From 2013-14 to 2015-16 the enterprise value has increased by about 200%.

*http://www.business-standard.com/article/companies/ashok-leyland-posts-rs-334-cr-net-profit115060400047_1.html

4) Study of Capital Expenditure over 2013-14 to 2015-16

The capex increased by ~47% owning to both organic and inorganic

investments
Company incurred ` 121 Crores towards capital expenditure, predominantly
towards sustenance of existing capacity and product development activities.
Further, an exchange difference of ` 85 Crores has been capitalized during
the year.
The Company and its Joint Venture (JV) partner (Nissan Motors Limited) have
a carrying investment value of aggregating 296 Crores
Further segregation of the capital can be given as:

Capex during 2014 and 2015

Capex declined in 2015 by ~64% compared to 2014

During the year, Your Company incurred ` 70 crore towards capital
expenditure, predominantly towards sustenance of existing capacity and
product development activities
An exchange difference of ` 71 crore has been capitalised during the year
Payments to suppliers of capital goods to the tune of ` 122 crore during the
year. Investments (current & non-current) have come down by ` 141 crore
during the year

Invested ` 95 crore in cash in Joint Venture (JV) / Associates / Subsidiaries

during the year
Further bifurcation of Capex can be seen as:

Capex during 2014 and 2015

Incurred ` 160 Crore towards capital expenditure, predominantly towards

sustenance of existing capacity, product development activities and
improvement in post-production storage facilities
Exchange difference of ` 226 Crore has been capitalized during the year

In total, investments have gone up by ` 452 Crore during the year. Out of this
amount, ` 189 Crore is on account of merger with Ashley Services Limited.
Balance ` 333 Crore is invested in Joint Venture / Associates
Further bifurcation of capex is given as:

Impact of capital investments on fixed assets, operating revenues, and market price

Accumulation of fixed assets (land, building, machinery, new equipment) over

three years, which are shown in the above tables
Ashok Leyland has made sure to, continuous investment during the poor
market conditions and increased the topline of the company by 90%
(Rs.10353.15 Cr in 2013-14 to 19,632.73 Cr in 2015-16) which in turn
translates to increase in operating profit by 89% (9943.43 Cr in 2013-14 to
18821.58 Cr in 2015-16) through the increased capacity and net income
Correct allocation of capex to business functions such as fixed assets, R&D,
capital equipment ensure Ashok Leylands topline growth while the market
was not favorable and the sales were dropping and future capacity planning
in terms of anticipating demand growth

Increase in gross and operating margin are healthy indicators of optimized

allocation of resources and correct investment of capital in key revenue
generating areas. It is very important for the company to perform the capital
budgeting (allocation to capex and revenue expenditure) correctly as per
market conditions
From the Capital Expenditure and Dividend figures we can also see that the
company is generating good shareholder returns and is willing to distribute
them rather than keeping the money idle (cannot invest it due to poor
conditions) - Company has paid dividends in all years except in 2014-15,
when it made huge capital investment
Overall Ashok Leyland has made capital investments and Research and
Development while the market and its own profits were on a down turn to
pick up the Operating Revenues and turned around with market to generate
more revenue.