Import of semi-knocked down trucks under special approval helps Lanka Ashok Leyland to stay afloat

Lanka Ashok Leyland PLC managed to escape the prevailing ban on vehicle imports, as it had received a special approval from the government to bring down trucks in semi-knocked down status, which could power its local assembly plant, helping the company to increase its top and bottom lines manyfold in the financial year ended in March 2022. 

“Despite the continued import restrictions, the company managed to get special approvals to import trucks in semi-knocked-down condition for local assembly with enhanced local value addition,” said the company’s Chief Executive Officer Umesh Gautam in his annual letter to the shareholders.

This helped the company to generate revenues of Rs.6.86 billion in the year ended on March 31, 2022, up 131 percent, from Rs.2.73 billion in the previous financial year. New vehicle sales, which accounted for the lion’s share, generated revenues of Rs.6.33 billion, up from Rs.2.52 billion in the year before. 

The company reported post-tax profits of Rs.342.98 million, compared to just Rs.4.5 million in the previous year.   
Besides its primary business of assembling and selling of buses and trucks, it is also into importation and sales of spare parts and power generators and repairing and restoration of commercial vehicles. 

While it managed to make the most of the window of opportunity it received in the previous financial year, as seen from the financial performance, it is uncertain if the firm could still bring down these semi-knocked down trucks since April, as the country is scrambling to muster dollars, even to fund its essential imports such as fuel and food. 
Perhaps in a reflection that the company is no longer able to ride through with these imports under the current context, the company said it would rely on its substantial levels of inventory to meet the demand over the next year. 

By the end of the financial year in March 2022, the company had an inventory worth of Rs.2.95 billion, compared to Rs.4.39 billion a year ago. 

The company also said that it would rely on the other business verticals such as lease hiring, aftersales servicing and spare parts sales in the current financial year to blunt the impact coming from its core assembly business. 

While the restricted imports would remain the base case of the company, Gautam also remains hopeful that a potential International Monetary Fund (IMF) agreement would relax import restrictions as a precondition of a package with the IMF.  As at March 31, 2022, Lanka Leyland Limited had a 41.77 percent stake in Lanka Ashok Leyland PLC while India’s Ashok Leyland Limited had 27.85 percent in the company.