Ashok Leyland Finance: An equity research report; The ICFAI-SRC

Abstract

The company was incorporated as a public limited company on October 4, 1982 in the name of Ashok Leasing and Hire Purchasing Company Limited. The name was subsequently changed to Ashok Leasing and Hire Purchase Limited on February 29, 1984. The company was promoted with the primary objective of supporting Ashok Leyland vehicles through Hire Purchase. The company commenced operations in 1985 with a share capital of Rs 50 lakh subscribed to by Ashok Leyland and its dealers. It was promoted essentially on the suggestion of dealers in the eastern region to boost sales there. Starting literally from scratch, ALF built up stock on hire of Rs 20.68 cr by 1988 in the eastern region. But, troubled by overdue figures, ALF decided to branch out to the West and South. The company’s name was changed to “Ashok Leyland Finance Limited( ALF)” on November 11, 1988. Today, ALF has over 80 branches all over India. Apart from its geographical spread of activities, ALF with a view to broad base its risk, besides financing trucks, buses and light commercial vehicles has diversified into financing cars, mining equipment and industrial equipment. Today, commercial vehicles portfolio is only 60% of the total assets employed (from over 90% initially). As part of its continuous endeavor to diversify, ALF has also ventured into short term bill discounting (since 1989). Currently ALF disburses over Rs 3000 million per annum in this segment and is a dominant player in the bill discounting market. ALF has disbursed, since inception, Rs 8040 million with bad debt provision/loss on sale of repossessed assets of merely Rs 17 million representing 0.21%. This reflects excellence in risk evaluation/management.