ASHOK LEYLAND FY16
AL’s annual report for FY16 highlights stellar standalone operating
performance. While revenue grew 39% to INR188.2b, EBITDA
doubled to INR21.7b, driven primarily by domestic business.
Subsidiaries excluding Hinduja Leyland Finance (HLF) played
spoilsport and continued to incur losses. The standalone entity
infused INR1.8b of fresh investments while writing-off investments
of INR5.8b (INR1.7b goodwill on consolidated basis) towards these
subsidiaries. Goodwill-on-consolidation of INR6.4b (13% of NW)
remained outstanding as at the end of FY16. Standalone operating
cash flows declined on high cash tax payment and increased
working capital requirements.
The
ART
of annual report analysis
INR1.8b infused in ailing subsidiaries
Receivables outstanding > 6 months
remain high at INR2.7b.
ICDs of INR5b given and squared off
during the year to unknown recipients.
A
NNUAL
R
EPORT
T
HREADBARE
28 July 2016
Standalone business performance impressive:
Net revenue
grew 39% to INR188.2b (FY15: INR135.6b), led by domestic
business. Market share in MHCVs grew from 27.2% to 31.3%.
Gross margin expansion of 300bp drove up EBITDA margin to
11.5% (FY15: 7.6%).
Subsidiaries (ex HLF) and JVs continued to drag earnings;
required cash infusion:
Hinduja Leyland Finance’s PAT grew 34%
to INR1.5b. However, other subsidiaries/JVs continued to make
losses. Albonair Gmbh, which incurred a loss of INR0.2b in FY16,
has been reclassified from held-for-sale to non-current (and has
been consolidated) from March31, 2016; which could impact
FY17 earnings. The standalone entity infused INR1.8b to these
entities in FY16 to support their operations while writing-off
INR5.8b of investments.
Capitalization of exchange losses supported earnings:
Following the amended AS11, AL capitalized exchange losses of
INR1b (6.0% of PBT) to the balance sheet. Ind-AS will require
MTM losses on new loans availed post April 1, 2016 (if any) to
be charged through the income statement.
Higher tax outgo impacted operating cash flows:
Standalone
operating cash flows declined to INR16.8b (FY15: INR17.8b) on
account of high tax payments and INR1.2b increase in working
capital. Receivables exceeding six months increased to INR2.7b
(22% of total receivables) v/s INR2.4b as at the end of FY15.
ICDs of INR5b given and squared off during the year:
Cash flows
highlight inter-corporate deposits (ICDs) extended of INR5.0b,
which were squared-off during the year. The beneficiary of this
is not available. However, the management has highlighted that
the maximum outstanding pertaining to this during the year
stood at INR2b.
Stock Info
Bloomberg
CMP (INR)
Equity Shares (m)
52-Week Range (INR)
M.Cap. (INR b)/(USD b)
1,6,12 Rel. Perf. (%)
AL IN
290
475.1
341/201
137.9/2.1
-9/-14/22
Y/E Mar
Sale Sales
EBITDA
Adj. PAT
EPS (INR)
EPS Gr. (%)
BV/Sh (INR)
Payout (%)
P/E (x)
P/BV (x)
E: MOSL Estimates
Standalone financial summary (INR b)
2016
112.4
7.5
4.3
9.1
24.2
40.8
33.7
32.0
7.1
2017E
129.9
9.7
5.8
12.3
34.8
49.7
27.0
23.8
5.9
2018E
147.0
12.2
7.6
16.1
31.2
62.2
22.4
18.1
4.7
Auditor’s name
MS Krishnaswami & Rajan and Deloitte Haskins & Sells LLP
ART will present a threadbare portrait of annual reports - statistical, strategic and structured. We believe ART's wide canvas - from accounting and auditing issues to
operating performance to management insights to governance matters - will help readers paint a clearer picture of the stock's investment worthiness.
Sandeep Ashok Gupta
(S.Gupta@MotilalOswal.com); +91 22 39825544
Mehul Parikh
(Mehul.Parikh@MotilalOswal.com); +9122 3010 2492 /
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(Somil.Shah@MotilalOswal.com); +91 22 3312 4975
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

ART|
Ashok Leyland FY16
Intangibles including goodwill at 27% of adjusted net worth:
AL
has goodwill-on-consolidation of INR6.4b (16% of net-worth).
Further, other intangible assets remain high at INR4.5b, 11% of
adjusted net-worth. These other intangibles primarily comprise
computer software of INR1.2b (INR0.8b self-developed) and
knowhow of INR3.2b (INR2b self-developed).
Sale of non-core investment supports debt reduction:
Consolidated debt (excluding Hinduja Leyland Finance) reduced
to INR38.8b (FY15: INR42.4b), aided by sale of shares in IndusInd
Bank for INR4.6b.
Qualified opinion by statutory auditor:
The statutory auditors
have issued a qualified opinion for consolidation of three JVs, the
accounts of which were un-audited and awaited board approval
when considered for consolidation.
Un-hedged foreign currency exposure increases considerably:
Un-hedged foreign currency exposure increased considerably to
INR11.6b (FY15: INR2.9b), primarily on account of ~53% increase
in foreign currency receivables to INR30.5b (FY15: INR20b). The
management has highlighted that the spike is on account of
export orders on hand and INR depreciation.
28 July 2016
2

ART|
Ashok Leyland FY16
ART #1
EBITDA margins expand by
390bp to 11.5%
ACCOUNTING / AUDITING MATTERS
Growth in standalone business impressive
In FY16, AL’s standalone net revenue grew 39% to INR188.2b (FY15: INR135.6b),
led by revival in the commercial vehicle (CV) industry on account of replacement
demand.
Vehicle volumes grew 34% to 140,457 (FY15: 104,902), primarily driven by
domestic business. Market share in MHCVs grew from 27.2% to 31.3%.
Gross margin expanded 300bp to 29.5% (FY15: 26.5%). This along with
containment of employee benefit expenses (7.4% of revenue) drove EBITDA
margin to 11.5% (FY15: 7.6%).
However, operating cost increased to INR19.9b (FY15: INR13.9b), primarily on
account of 45% increase in packing charges to INR5.9b, 27% rise in selling
expense to INR5.5b, and 61% rise in service & warranties to INR2.8b.
Other income includes interest income (including bills discounting income) of
INR0.4b (FY15: INR0.3b).
Royalty (paid in foreign currency) increased to INR42.1m (FY15: INR9.5m), the
beneficiary of which is not known.
PBT (before exceptional items) increased to INR15.6b (FY15: INR3.4b).
Exhibit 1: Stellar performance of core business (INR b)
Standalone
Particulars
Net Revenue (Operations)
Raw Materials Consumed
Gross Margin
Operating and Administrative Expenses
Personnel Cost
EBITDA
Depreciation
EBIT
Financial Charges
EBT
Other Income
PBT (Before Exceptional Items)
Exceptional Items
PBT
Tax
PAT
FY15
(INR b)
135.6
99.7
36.0
13.9
11.8
10.3
4.2
6.1
3.9
2.2
1.2
3.4
1.0
4.4
1.1
3.3
(% of
revenue)
100.0
73.5
26.5
10.2
8.7
7.6
3.1
4.5
2.9
1.6
0.9
2.5
0.7
3.3
0.8
2.5
FY16
(INR b)
188.2
132.6
55.6
19.9
14.0
21.7
4.4
17.2
2.7
14.5
1.1
15.6
(3.9)
11.7
4.5
7.2
(% of
revenue)
100.0
70.5
29.5
10.6
7.4
11.5
2.4
9.2
1.5
7.7
0.6
8.3
(2.1)
6.2
2.4
3.8
Source: Company Annual Report, MOSL
Exports sales muted; Expenses in foreign exchange
rise
While export sales remained at muted INR20.1b (FY15: INR19.1b), the costs
incurred in foreign currency on exports have increased significantly to INR3.8b
(FY15: INR2.8b). The management has highlighted that the increase in foreign
currency expenses is on account of change in contractual terms wherein earlier
certain expenses were reported net of revenue which are now reported on
gross basis.
28 July 2016
3

ART|
Ashok Leyland FY16
Exhibit 2: Expenses incurred in foreign currency rising (INR b)
Particulars
Export sales (FOB Value)
Commission on export sales
Packing and Forwarding
Freight charges
Others
Total
% to export sales
FY15
19.1
1.6
0.6
0.2
0.3
2.8
14.5
% to export
sales
100.0%
8.6%
3.4%
1.2%
1.3%
14.5%
FY16
(reported)
20.1
1.1
1.8
0.2
0.6
3.8
18.7
% to export
sales
100.0%
5.7%
9.0%
1.2%
2.8%
18.7%
FY16
% to export
(adjusted)
sales
18.3
100.0%
0.9
5.0%
0.4
2.3%
0.2
1.4%
0.3
1.9%
1.9
10.6%
10.6
Source: Company Annual Report, MOSL
R&D investment continues
R&D continues to invests in R&D, its R&D investments have increased from
INR2b in FY15 to INR2.8b in FY16.
Net R&D expenditure
2.4%
2.6%
As a % of revenue
Exhibit 3: R&D investments continue (INR b)
2.8%
1.5%
1.5%
3.6
FY12
3.0
FY13
2.6
FY14
2.0
FY15
2.8
FY16
Source: Company Annual Report, MOSL
Capitalization of foreign exchange difference supports earnings
The company follows amended AS11 and has capitalized the exchange
difference of INR1.0b (FY15: INR0.8b) to the value of assets and reserves
(FCMITDA), constituting 6.0% of PBT (FY15: 33.0%).
FY15
0.7
0.0
0.1
0.8
33.0%
FY16
0.9
(0.1)
0.1
1.0
6.0%
Exhibit 4: INR1b exchange difference gets capitalized (INR b)
Particulars
Tangible Assets
Intangible Assets
Reserves
Exchange difference capitalized
% of PBT
Exchange loss of INR1.0b
has been capitalized
Source: Company Annual Report, MOSL
Provision for warranties rises
Provision for warranties in consolidated operations went up 80% to INR2.9b
(FY15: INR1.6b), while revenue growth was 34%.
FY15
0.6
1.0
1.6
5%
34%
FY16
1.2
1.7
2.9
80%
35%
Exhibit 5: Provision for warranties rises significantly in consolidated operations (INR b)
Particulars
Provision for Product warranties
Product warranties
Total
Growth in provision for warranties
Growth in Revenue
Source: Company Annual Report, MOSL
28 July 2016
4

ART|
Ashok Leyland FY16
Hinduja Leyland Finance continues to grow well…
Hinduja Leyland Finance (a 57.4% subsidiary) continued to perform well, with
PAT increasing 34% to INR1.5b (FY15: INR1.1b). Its loan book grew 54% to
INR534b (FY15: INR346.4b).
Exhibit 6: Hinduja Leyland Finance performance improves (INR b)
Particulars
Revenue from operations
Profit after tax
Loan Book
FY15
8.1
1.1
346.4
FY16
11.5
1.5
534.0
Growth
41%
34%
54%
Source: Company Annual Report, MOSL
…but remaining subsidiaries and JVs drag
Albonair GmbH, Germany and
Albonair (India) might adversely
impact earnings in FY17
The performance of other subsidiaries remained muted. Ashok Leyland Nissan
Vehicles reported a loss of INR0.6b while Optare PLC reported a loss of INR0.9b,
dragging consolidated earnings.
JVs too continued to make losses. Nissan Ashok Leyland Technologies was an
exception and reported a PAT of INR0.1b (after a loss of INR0.1b in FY15).
Albonair GmbH, Germany and Albonair (India) were reclassified from ‘held for
sale investments’ to subsidiaries and were considered for consolidation
(effective 31 March 2016). While AL’s balance sheet includes these companies,
they would feature in the earnings statement only from FY17. These companies
are loss making and might adversely impact reported earnings.
Exhibit 7: Muted performance of significant subsidiaries (INR b)
Name of the subsidiary
Ashok Leyland Nissan Vehicles Limited
Optare PLC and its subsidiaries
Ashok Leyland (UAE) LLC
Albonair GmbH, Germany
FY15
Turnover
10.3
5.8
-
1.8
PAT
(7.9)
(0.3)
-
0.4
Turnover
10.9
3.8
8.9
3.0
FY16
PAT
(0.6)
(0.9)
(0.2)
(0.2)
Source: Company Annual Report, MOSL
Exhibit 8: JV performance disappoints (INR b)
Ashok Leyland John
Deere Construction
FY15
FY16
0.5
0.2
0.2
0.0
(0.3)
(0.8)
Nissan Ashok Leyland
Technologies
FY15
FY16
(0.7)
(0.6)
0.4
0.4
(0.1)
0.1
Nissan Ashok
Leyland Powertrain
FY15
FY16
0.6
0.6
0.1
1.2
(0.0)
0.0
Ashley Alteams
India
FY15
FY16
0.1
0.0
0.7
0.8
(0.1)
(0.0)
Particulars
Net worth
Turnover (net)
PAT
Source: Company Annual Report, MOSL
Subsidiaries’ weak performance leads to impairment in value of
investments
INR5.8b of investments
impaired in FY16
Continued losses in subsidiaries and JVs resulted in INR5.8b provisioning for
diminution in the value of investments in standalone books (FY15: INR2.2b).
In consolidated books, the provision for impairment in value of goodwill was
INR2.2b (FY15: Nil). Moreover, AL has goodwill-on-consolidation of INR6.4b
(FY15: INR6.6b). The management has highlighted that, of the balance goodwill
INR5.6b pertains to HLF.
5
28 July 2016

ART|
Ashok Leyland FY16
Exhibit 9: Provision for diminution in value of investments (INR b)
Particulars
Ashok Leyland Wind Energy Limited
Ashok Leyland Nissan Vehicles Limited
Ashok Leyland John Deere Construction
Equipment Company Private Limited
Optare PLC
Nissan Ashok Leyland Powertrain Limited
Nissan Ashok Leyland Technologies Ltd.
Albonair (India) Private Limited
Albonair GmbH
Ashley Alteams Limited
Automotive Infotronics Limited (under
liquidation)
Total
FY13
-
-
-
-
-
-
-
-
(0.3)
(0.1)
(0.4)
FY14
-
-
-
-
-
-
-
-
NM
NM
NM
FY15
(0.1)
(2.1)
-
-
-
-
-
-
-
-
(2.2)
FY16
-
(2.0)
(0.3)
(1.5)
(0.7)
(0.3)
(0.1)
(1.1)
-
-
(5.8)
Source: Company Annual Report, MOSL
Fund infusion continues in loss-making entities
During FY16, the standalone
entity infused INR1.8b
subsidiaries
AL continues to fund in losses of its subsidiaries, JVs and associates. During FY16,
the standalone entity infused INR1.8b (FY15: INR0.9b) in these entities, while it
continues to write-off investments in these entities
Exhibit 10: Infusion of funds in ailing companies continues (INR b)
Particulars
Investment in equity shares
Ashok Leyland Nissan Vehicles Limited
Albonair GmbH
Ashok Leyland John Deere Construction
Equipment Company Private Limited
Hinduja Tech Limited
Gulf Ashley Motor Limited
Ashley Holdings Limited
Ashley Investments Limited
Defiance Testing & Engineering Services
Inc., USA
Advance given for share capital
Ashok Leyland (Chile) SA
Ashley Services Limited *
Ashok Leyland Nissan Vehicles Limited
Loans / Advance extended
Hinduja Tech Limited
Optare PLC
Albonair GmbH
Defi ance Technologies Limited
Avia Ashok Leyland Motors s.r.o, Czech
Republic
Optare plc
Ashok Leyland (UAE) LLC
Investment in preference shares
Ashok Leyland Defence Systems Limited
Hinduja Tech Limited
Ashley Avia on Limited
Total
FY13
0.5
-
0.5
-
-
1.0
1.0
-
-
-
0.3
-
-
0.6
(0.4)
-
0.3
(0.4)
-
-
-
3.4
FY14
1.1
1.5
0.4
-
-
-
-
(1.0)
-
2.4
-
-
-
(0.6)
(0.2)
0.3
0.3
-
-
-
0.0
4.2
FY15
0.4
0.3
0.3
0.4
0.0
-
-
-
-
-
-
(0.3)
-
-
-
(0.4)
-
-
-
0.2
-
0.9
FY16
-
0.4
0.5
-
0.1
-
-
-
0.0
-
-
-
0.8
-
-
-
-
-
0.1
-
-
1.8
Source: Company Annual Report, MOSL
28 July 2016
6

ART|
Ashok Leyland FY16
Investee company Hinduja Foundries continues to make losses
AL continued to have investments of INR3.5b (~8% of adjusted net worth) in
Hinduja Foundries (an unrelated entity). For FY16, Hinduja Foundries’ losses
were INR3.5b (FY15: INR2.6b).
Exhibit 11: Investments in Hinduja Foundries (INR b)
Particulars
Investments in equity shares
Investments in preference shares
Total
FY15
0.2
3.2
3.5
FY16
0.2
3.2
3.5
Source: Company Annual Report, MOSL
Exhibit 12: Continued losses in Hinduja Foundries (INR b)
Particulars
Revenue
PAT
Sept'14
(18 months)
10.0
(2.6)
March'16
(18 months)
8.5
(3.9)
Source: Company Annual Report, MOSL
Operating cash flows decline due to higher tax outgo
Standalone operating cash flows declined to INR16.8b (FY15: INR17.8b) on
account of high tax payments and INR1.2b increase in working capital.
The cash conversion cycle has remained flat at -20 days (FY15: -20 days).
Free cash flows however improved to INR12.4b (FY15: INR11.6b). However, free
cash flows (ex-financing business) declined to INR10.6b (FY15:11.3b).
Exhibit 13: Higher tax outgo weighs on operating cash flows (INR b)
Particulars
PBT
Add/Less: Non-operating expenses/(Income)
Add/Less: Non-cash adjustments
Less: Direct Taxes Paid
Operating Profit Before Working Capital
Changes
Inventories
Trade Receivables
Loans and Advances
Other Current Assets
Current Liabilities and Provisions
Cash Generated from Operations after Tax
Less: Financial Cost
Free Cash Flow from Operations post Interest
Less: Capital Expenditure
Free Cash Flows post Capex & Interest
Standalone
4.4
0.4
6.4
(0.5)
10.7
(2.1)
0.4
(1.8)
(0.3)
10.8
17.8
(4.1)
13.7
(2.1)
11.6
FY15
Ex-Financing
business
(2.1)
7.0
9.3
(0.5)
13.7
(0.3)
0.3
(1.9)
1.2
8.8
21.8
(8.2)
13.6
(2.3)
11.3
Consolidated
(0.4)
7.9
9.7
(1.1)
16.1
(1.1)
0.3
(21.4)
1.2
9.8
5.0
(8.2)
(3.2)
(2.3)
(5.6)
Standalone
11.7
0.4
10.4
(4.4)
18.0
(3.3)
(0.1)
0.4
(0.0)
1.8
16.8
(3.0)
13.8
(1.4)
12.4
FY16
Ex-Financing
Consolidated
business
14.0
(2.3)
8.8
(4.5)
16.0
(1.7)
0.6
0.3
(0.2)
0.7
15.7
(3.2)
12.5
(1.9)
10.6
16.3
(1.3)
9.3
(5.4)
18.9
(2.8)
0.6
(27.5)
(0.2)
1.6
(9.5)
(3.2)
(12.7)
(2.1)
(14.7)
Source: Company Annual Report, MOSL
28 July 2016
7

ART|
Ashok Leyland FY16
Exhibit 14: Cash conversion cycle remains flat (Days)
Particulars
Inventory
Receivable
Advance from Customers
Other Payables
Material Advance
Payable
Cash conversion cycle
Note: on Standalone basis
FY13
83
39
3
12
5
105
7
FY14
74
50
4
11
7
113
3
FY15
47
34
6
9
6
92
-20
FY16
43
24
6
10
3
74
-20
Source: Company Annual Report, MOSL
Cash tax remains high despite significant MAT credit
During FY16, the standalone company made a cash tax payment of INR4.4b
(FY15: INR0.5b). We further highlight that MAT credit stood at INR3.9b (FY15:
INR4.3b).
Exhibit 15: Cash tax paid increased significantly (INR b)
Particulars
MAT credit entitlement
Cash Tax paid
FY15
4.3
0.5
FY16
3.9
4.4
Source: Company Annual Report, MOSL
Receivables outstanding for over six months remain significantly high
Receivables outstanding > 6
months at 23% of total
receivables
On a consolidated basis, receivables outstanding for more than six months have
been rising consistently and stood at INR3.5b (23% of total receivables) v/s
INR2.5b (19% of total receivables) in FY15.
Management has highlighted that these receivables primarily pertains to out-
standings from STUs, and defence undertakings.
Exhibit 16: Receivables >6 months on a rise (INR b)
Particulars
Outstanding for more than six months
Others
Total
Receivables >6 months as % of total
receivables
Standalone
FY15
FY16
2.4
2.7
10.0
9.8
12.4
12.5
19%
22%
Consolidated
FY16
FY15
2.5
3.5
10.9
11.7
13.4
15.2
19%
23%
Source: Company Annual Report, MOSL
Sale of investments and internal accruals supports debt reduction (ex HLF)
Consolidated debt (excluding Hinduja Leyland Finance) reduced to INR38.8b
(FY15: INR42.4b), aided by sale of shares in IndusInd Bank for INR4.6b and
internal accruals.
Debt reduced by INR3.6b for the consolidated business (Ex-financing business)
to INR 38.8b (FY15: INR 42.4b).
28 July 2016
8

ART|
Ashok Leyland FY16
Exhibit 17: Sale of IndusInd shares helps reduce debt (INR b)
Particulars
Long term borrowings
Short term borrowings
Current maturities of long term debts
Total
Pertaining to HLF
Total debt (ex-financing business)
Standalone
FY15
FY16
25.7
19.8
0.3
-
7.6
6.7
33.5
26.6
-
-
33.5
26.6
Consolidated
FY15
FY16
62.2
76.0
8.3
10.9
20.2
25.4
90.7
112.3
48.3
73.5
42.4
38.8
Source: Company Annual Report, MOSL
Exhibit 18: Sale of non-core investments continues (INR b)
Particulars
FY12
IndusInd Bank
-
Hinduja Leyland Finance
2.5
Defiance Technologies
0.2
Defiance Testing and Engineering Services Inc. USA
-
ICICI Bank
-
Ashok Leyland Wind Energy Limited
-
Sale of immovable properties (Incl windmill business)
-
Avia Ashok Leyland Motors s.r.o.
-
Others
-
Total
2.8
FY13
3.1
1.1
-
-
0.0
-
-
-
-
4.1
FY14
3.6
-
-
1.0
-
-
2.0
-
0.5
7.1
FY15
-
-
-
-
-
0.2
4.0
0.0
-
4.2
FY16
4.6
-
-
-
-
-
-
-
-
4.6
Source: Company Annual Report, MOSL
Investments in debentures and PTCs remain high
Investments by financing arm in debentures and pass through securities
primarily of micro finance institutions though have reduced, yet remain
significantly high at INR3.8b (FY15: INR4.3b).
Exhibit 19: High investments by HLF in debentures and PTCs (INR b)
Particulars
Investment in Debentures :
- Current
- Non current
Sub Total (A)
Investment in pass through securities :
- Current
- Non current
Sub Total (B)
Total (A+B)
FY15
1.7
1.1
2.8
FY16
1.8
0.7
2.5
1.2
0.4
1.5
4.3
0.8
0.4
1.3
3.8
Source: Company Annual Report, MOSL
Intangibles constitute 27% of net worth
Goodwill on consolidation
equals 16% of net-worth
AL has goodwill-on-consolidation of INR6.4b (16% of net worth). Other
intangible assets are high at INR4.5b – 11% of adjusted net worth. These
comprise of computer software of INR1.2b (INR0.8b self-developed) and
knowhow of INR3.2b (INR2b self-developed).
28 July 2016
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ART|
Ashok Leyland FY16
Exhibit 20: High intangible assets (INR b)
Particulars
FY15
FY16
Computer software
- Developed
- Acquired
Technical knowhow
- Developed
- Acquired
Goodwill on consolidation
Total
% of Adjusted Net worth
0.9
0.2
0.8
0.4
2.0
1.4
6.9
11.4
32.7%
2.0
1.2
6.4
10.8
27.3%
Source: Company Annual Report, MOSL
ICDs of INR5b extended and squared-off during the year
During FY16, AL extended inter-corporate deposits (ICDs) of INR5b, which it
received back during the year. Further details on this have not been disclosed.
However the management has highlighted that the maximum outstanding
balance during the year stood at INR2b.
Unhedged forex exposure increases significantly
Unhedged foreign currency exposure increased significantly to INR11.6b (FY15:
INR2.9b), primarily on account of ~53% increase in foreign currency receivables
to INR30.5b (FY15: INR20b).Management has highlighted that the increase is on
account of export orders on hand and INR depreciation.
Exhibit 21: Un-hedged forex exposure rises due to high receivables (INR b)
Particulars
Amount Receivable
Sub-Total
Amount Payable
USD
EUR
KES
Currency
USD
GBP
FY15
19.5
0.6
20.0
22.5
0.3
0.1
23.0
(2.9)
FY16
30.5
0.0
30.5
18.3
0.5
0.0
18.8
11.6
Sub-Total
Total Unhedged Forex
Source: Company Annual Report, MOSL
New ESOP scheme proposed
AL has formulated an ESOP scheme (AL ESOP scheme 2016), which it will put up
for shareholder approval in the AGM. It did not grant any ESOPs in FY16.
Under the new scheme proposed, 4.3m options are granted at an exercise price
to be decided by a committee (subject to minimum of face value).
Contingent liability rises to 6.5% of net worth
Contingent liability increased to INR3.3b (FY15: INR2.6b), primarily on account
of rise in excise duty, service tax and customs duty claims.
28 July 2016
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ART|
Ashok Leyland FY16
Exhibit 22: Rise in indirect tax demands leads to increase in contingent liability (INR b)
Particulars
a) Claims against the Group and the jointly controlled
entities not acknowledged as debts (net)
i) Sales tax/VAT
ii) Excise duty, Service tax, Customs duty and Others
b) Corporate Guarantees given to others
Total
% of Net worth
FY15
FY16
2.2
0.4
0.0
2.6
5.8%
2.2
1.0
0.1
3.3
6.5%
Source: Company Annual Report, MOSL
Ind AS Impact
Fair valuation of financial investments to impact Net-worth and return ratios:
Ind-AS requires recognition of financial investments (excluding subsidiaries,
associates and JVs) at fair value. Presently, current investments are valued at
the lower of cost or market price and long-term investments are carried at cost
less permanent diminution in value. Fair valuation of investments is likely to
impact net worth and return ratios. AL has investments in Hinduja Foundries
and Hinduja Energy, which are required to be fairly valued.
Consolidation of JVs using equity method to boost EBITDA:
Ind-AS requires
joint ventures to be consolidated using the equity method (as currently done for
associates) as against proportionate consolidation currently prescribed by the
IGAAPs. This will lead to a decline in revenues and however, EBITDA will improve
since on an aggregate level JVs made losses. However, earnings will be
unaffected since AL has 4 JVs.
Losses on foreign currency loans to be charged through income statement:
Ind-AS will require MTM losses on new loans availed post April 1, 2016 (if any)
to be charged through the income statement.
28 July 2016
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ART|
Ashok Leyland FY16
ART #2
GOVERNANCE MATTERS
Qualified opinion by statutory auditor
The statutory auditors have issued a qualified opinion for consolidation of three
JVs, the accounts of which were un-audited and awaited board approval when
considered for consolidation.
Managerial remuneration
Managerial remuneration
rises
Managerial remuneration for the year increased to INR211.1b, 1.4% of PBT
(FY15: INR52.3m, 1.5% of PBT).
Exhibit 23: Managerial remuneration increases (INR m)
Particulars
Remuneration to Directors
Remuneration to KMP's
Total Managerial remuneration
% to PBT
FY15
98.5
24.3
122.8
3.6%
FY16
170.6
40.5
211.1
1.4%
Source: Company Annual Report, MOSL
All directors regular in attending board meetings
The board comprises of 12 members, of which eight are independent directors.
AL is regular in calling board meetings. In FY16, six board meetings were held. All
directors have been regular in attending board meetings.
Exhibit 24:
All directors regular in attending board meetings
Names of Director
Mr Dheeraj G Hinduja
Mr R Seshasayee
Dr Andreas H Biagosch
Dr Andrew C Palmer #
Mr D J Balaji Rao
Mr A K Das
Mr Jean Brunol
Ms Manisha Girotra
Mr F Sahami *
Mr Sanjay K Asher
Mr Shardul S Shroff
Mr Sudhindar K Khanna
Mr Vinod K Dasari
Category
Promoter, Non-Independent Non-
Executive
Non-Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Non-Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Non-Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Independent Non-Executive
Non-Independent Executive
No. of Meetings
Held
Attended
6
6
6
3
6
6
6
6
3
6
6
6
6
6
6
6
3
6
6
5
4
2
5
3
6
6
*: Retired during the year. #: Appointed for part of the year. Source: Company Annual Report, MOSL
Auditor rotation mandatory as per Companies Act
Statutory auditors to be
mandatorily changed post
FY17 in accordance with the
new Companies Act rules
MS Krishnaswami & Rajan and Deloitte Haskins & Sells LLP have been AL’s joint
statutory auditors for more than 10 years. The Companies Act (2013) mandates
rotation of auditors for listed entities after 10 consecutive years. The Act further
provides a period of three years from 1 April 2014 to comply with this
requirement.
28 July 2016
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ART/THEMATIC GALLERY
ART
ART
THEMATIC

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Ashok Leyland FY16
ART|
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