Ashok Leyland’s trio at the top are shaping the company to grow market share and leveraging global markets.

Seldom do three dynamic personalities come together at a point in time to shape the destiny of a large corporation. The task becomes complex when the three have different dispositions. More so, when the company is at the threshold of myriad transitions — from an inward-looking entity to a global major, from a commercial vehicle manufacturer to a transport solutions provider and, more importantly, from a strong yet staid 55-year-old organisation to a nimble-footed, vibrant enterprise.

The trio in question — R. Seshasayee, Dheeraj G. Hinduja and Vinod K. Dasari — are doing precisely that at Ashok Leyland, India’s No. 2 commercial vehicles maker and the flagship company of the $15-billion Hinduja Group.

No one knows Leyland better than Seshasayee. Joining in 1976 as manager (internal audit), he rightfully earned the position of managing director in April 1998. Self-efficacious, he made sure his vision trickled down to the last employee. Under his stewardship, Leyland is visibly doing well. In 1998-2000, when the industry was reeling under the auto recession, Leyland with Seshasayee’s financial acumen, made profits. Net sales have grown from Rs 1,875.14 crore (FY 1999) to Rs 5,329.81 crore (FY 2006) and net profit has increased from Rs 78.49 crore to Rs 327.32 crore. Market capitalisation has soared from less than Rs 500 crore (1999) to over Rs 5,000 crore. He has been the steady hand, in tumult and in calm.

Thirty-six-year-old Hinduja, the third-generation industry scion of the Hinduja Group, was brought in as the vice-chairman of Leyland in 2003. Meanwhile, through the holding company, the Hindujas increased their stake in Leyland to 51 per cent by buying out Iveco’s (Fiat group) 30 per cent stake in Land Rover Leyland International Holdings in 2006. Working closely with Seshasayee, Hinduja thinks big. His firm commitment is to “morph the company into a global entity”. He wants to increase production capacity through joint ventures, acquisitions and strategic alliances — both local and global. Specifically, he has crafted a plan for big bang buyouts globally and is willing to spend $2 billion with a promise to bring in more, if required. More actively involved in the company than the previous generation, he along with Seshasayee is redefining the promoter-management equation at Leyland.

Dasari, 38, is the emblematic younger face of Leyland. For the first time in 56 years, Leyland has created the post of a COO and roped in Dasari (former deputy managing director with Cummins India). He exudes a sense of urgency. “Leyland’s strengths are in its solid products, outstanding ethics and a sense of belonging among its people. But, we are complacent,” he says. “We are not a Titanic looking at an iceberg. We are an oil tanker that needs to make a U-turn. The rudder must hold to the turbulence,” he adds.

On board just two years ago and taking Seshasayee’s mission forward, Dasari has effected several process improvements and introduced fresh marketing initiatives. For instance, he has helped increase the capacity of one of the units from 50,000 to 60,000 with very little investment. “Vinod’s strengths are his manufacturing competence and product development expertise,” says Seshasayee. He dons the marketing hat, too.

Undoubtedly, strong winds of change are sweeping through the company. Be it the new look on its ‘ready-to-launch’ Newgen series to its ‘not-so-different’ yet new logo and to the ‘under construction’ snazzy new premises for its Chennai headquarters, an air of freshness prevails. From the top echelons, down to the shop floor worker, almost all of Leyland’s 12,500 employees have some sense of the many changes happening around them.

More glaringly, the Hindujas are on an overdrive in Leyland. And that’s a recent phenomenon. “Two years ago, we wondered as shareholders of Leyland, why we are shying away from being ambitious,” says Hinduja.

At about the same time, Leyland’s production hit global scales. Till the turn of the century, it was manufacturing a mere 30,000 trucks despite being in business for five decades and not quite younger than competitor Tata Motors. But this fiscal, it could sell close to 90,000 vehicles and going forward next year, to about 100,000 vehicles. “We are at the inflection point and our numbers now give us global scale,” he says.

Now, Hinduja is scanning the globe for technology to facilitate inorganic growth. Six months ago, the Hindujas brought in Prabal Banerji as president (finance) and CFO of the group. The Mumbai industry corridors have it that Banerji had financially masterminded some of the Mahindra Group’s big deals like Mahindra-Renault as group vice-president (finance). “We are prepared to invest about $2 billion in acquisitions within the next 12-18 months in the automotive sector,” says Banerji. These acquisitions could garner additional revenues of about $2 billion and also improve operating profit margins.

“Leyland has a healthy debt:equity ratio of around 0.2. We can leverage its capital gearing and also get a tax shield to finance future capex and acquisitions,” says Banerji, adding that they would consider a special purpose vehicle and leveraged buyout route for acquisitions.

Hinduja and Seshasayee have sensed the need for global acquisitions. After all, Leyland missed an opportunity when big brother Tata Motors swung the $102-million deal to buy Daewoo’s truck business in 2004.

Leyland’s first global buy happened in October last when it bought Czech firm Avia for, reportedly, $35 million. The acquisition brings Leyland an additional annual production capacity of 20,000 vehicles and access to a state-of-the-art paint shop and research and design facilities. Hinduja believes that western European products such as Avia’s (it is strong in the six- and nine-tonne segments) can be engineered to Indian cost structures. “We, then, have a winning edge and can take on companies like DaimlerChrysler and Iveco”.

Leyland also signed up with the Ras Al Khaima group in Dubai to set up a bus assembly unit, which will cater to the Middle East and neighbouring areas. It fits into the broad game plan of expanding market share in the second hemisphere through acquisitions and joint ventures. “Globally, we will emerge as a range player in the region, riding on our core strength in medium and heavy duty (M&HDV) and niche play,” adds Seshasayee.

His winning formula among other things is de-risking by being a formidable player in niche areas like defence and logistic vehicles, tractor-trailers and multi-axle vehicles. In passenger buses, Leyland has a strong 47 per cent market share.

Examine this competence on a global plane. Leyland plans to cooperate with global players to fill its product gap in niche areas and manufacture under its brand name — a trend emerging strongly in the auto segment among world majors who are attempting to consolidate market share. For example: if there is a first world commercial vehicle manufacturer who has a product gap in the M& HDV vehicles (where Leyland is strong) for the second hemisphere, the two can then collaborate. “We are looking at areas like military vehicles, buses and logistics vehicles for such opportunities,” explains Seshasayee. Of course, exports will be stepped up too — from current 8 to around 20 per cent of sales in five years.

Acquisitions apart, Hinduja is also open to alliances. Soon after Iveco pulled out (it has since signed up with the Tatas), there was speculation that European truck majors Volvo and Scania may align with Leyland. Here the Hinduja vision for Leyland shines through. “We do not want to see it as a subsidiary of a global auto company. However, if a global company wants to step into Iveco’s shoes, we are open to it; but we will not dilute our majority holding,” quips Hinduja. His dream is to make Leyland a trans-global entity.

To achieve this Hinduja will not hesitate to buy technology. Given that, AL also has a strong technology development team. Hinduja says Iveco hardly provided any technology to Leyland. That made it go in for in-house product development skills. The engine technology centre set up in 1998 in Hosur demonstrated that with formidable competition like Cummins — the Leyland “H” engine platform is consistent in terms of delivery and fuel efficiency.

Even as Hinduja scans the world, Dasari has his eyes fixed firmly on Leyland’s domestic operations. Firing on all cylinders and building momentum into the management game plan, he is making dealers, employees and suppliers “nimble-footed”. His impatience on deliverables, though, has made some uneasy. But it has had the desired effect. “Response time to customer needs has improved. For example, the 10-tonne 1611 four cylinder truck (more fuel efficient than its peers) was launched in Hyderabad within a few months, where Leyland would earlier take 12-18 months,” says Rajiv Sanghvi, executive director, AMPL, one of the largest dealers for most commercial vehicle (CV) companies.

There is a reason for Dasari’s impatience. He sees new competition from global CV manufacturers threatening to enter India. “Five years ago, we were two strong players (Tata and Leyland), five years ahead, I see 10,” says Dasari. It has a 28 per cent market share and its status as a distant second to Tata Motors makes Leyland vulnerable. After all, who’s not looking at India? Global truck giants like MAN, DaimlerChrysler, Volvo and others, have spotted the potential. Tough times calls for tough people — that explains the subtle difference between Dasari’s and Seshsayee’s “democratic” style of management, even as the two dream a common vision.

Already, Dasari is making radical changes. He is forcing the marketing team to think solutions, not products. He states that customers must not be sold products like a rigid truck or multi-axle vehicle or a tipper. They should be offered a solution. “We must be able to state how the trucker can run his business and improve it — be it transporting cement or petrol or bags of wheat and rice profitably,” he says. “Offering fully built solutions means the owner starts making money from the day he buys the truck,” explains Seshasayee. If this works, there are 27 models with 50 variants in the pipeline for next year.

Dasari is obsessed with the three Cs — customer, channel and the company. “If these three are profitable, then we can kill the fourth C, that is competition.” This is in sync with Leyland’s umbrella project called ‘30-51’. Leyland’s products’s top-of-the mind recall (51 per cent among prospective customers) will inch up market share. He also has a fetish for mapping prospective dealer centres. All dealers will be connected real time by March.

It would not be incorrect to say that Seshasayee has unleashed Dasari onto Leyland. Over the years, Seshasayee has built Leyland with determination. Now he wants to leave a lasting legacy. He has also roped in experts like Prof. Clayton Christensen of “Disruptive Innovations” theory fame to fuel innovation and free flow of ideas from the shop floor. V. Sumantran, former executive director, Tata Motors, too, is helping shape the entire automotive synergies built into Leyland.

Undoubtedly, Seshasayee is the fulcrum that holds the trio together. “Product work and acquisitions are sexy. Getting technology efficiencies right is not sexy work. Aggression in the kitchen is not known to you unless it comes out onto the dining table,” he says. “An organisation must earn its right to grow; develop internal efficiencies before it competes globally. We are at that threshold now. Ten years on, I know Leyland can ride on its technology”.

But Seshasayee may not be in active management that long. His term was extended in 2006 for three years. It will perhaps be up to Dasari and Hinduja to complete the mission.