Ashok Leyland has been working on seeking shareholder approval to lend Rs 4,000-5,000 crore or stand guarantor for its EV subsidiary, Switch Mobility Automotive.
The Hinduja group flagship firm intends to fund the loan from internal accruals.
The company’s cash and bank balances stood at Rs 501 crore at the end of March, 2023.
“We would also like to clarify that the resolution you are referring to is only an enabling resolution and the amounts indicated of Rs 4,000-5,000 crore is not the absolute equity infusion but a broad indicative range of the aggregate of transactions with Switch,” Gopal Mahadevan, whole-time director and chief financial officer, Ashok Leyland, said.
After the $18 million investment by UK-based Dana Incorporated in July 2021, Ashok Leyland has been unable to get investors on board for Switch Mobility, in which it holds a 90% stake. During a recent analyst call, Dheeraj Hinduja, executive chairman Ashok Leyland said the electric vehicle business housed in Switch is crucial for future-proofing Ashok Leyland. “While we continue to look at external investors, Ashok Leyland plans to invest in Switch directly,” Hinduja said.
“The investment may be to the tune of Rs 1,200 crore progressively. Ashok Leyland’s balance sheet is strong enough to support this initiative,” Hinduja added.
The said investment will most likely take place in FY24 itself.
Senior officials say FY24 will be a ‘very high capex year’ for Switch.
Funds will be needed for new products such as electric variants of the Dost and Bada Dost, a low floor 12-meter bus and the low floor 9-meter bus for the local market and a low-floor 12-meter E1 bus for Europe.
Switch Mobility claims to have confirmed orders for the supply of 2,500 electric buses.
“We expect that the aggregate value of transactions between the company (Ashok Leyland) and Switch during FY24 will be in excess of Rs 1,000 crore and is estimated to be in the range of Rs 4,000-5,000 crore. Hence, approval of the members of the company is sought by way of an ordinary resolution for the transactions with Switch for FY24,” Ashok Leyland stated in its proposal. The fund-based support will cover capital expenditure, operating expenditure, general corporate purposes and working capital requirements.
The non-fund-based support will be extended to cover the lenders/banking facilities and counter guarantees to be given as a parent to end customers. In FY23, Ashok Leyland extended Rs 200 crore to Switch, which had fallen due.