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India - Chennai & Hyderabad: Falling demand

Hinduja Foundries Limited, an arm of Hinduja group and one of the major supplier to Ashok Leyland Limited has recently announced production holidays at its plants in Chennai and Hyderabad. The company has announced production holidays for five days at its Chennai plant and five-days a week at its Hyderabad plant due to sharp decline in offtake of castings by commerical vehicle manufacturers. Since Ashok Leyland happens to be one of the major customer (which reported close to 40% decline in its sales), Hinduja Foundries may go for further production cut if the situation not improves in the months to come.

Similarly, a senior official of the leading auto component company in Chennai which supplies to Ashok Leyland, said that the company has already downsized its investment plans owing to poor demand and liquidity crunch. While he refused to get into details, he, however said, “The situation does not augur well for the company and we have to slog it over at least for a few months more. Unless the situation improves on the commercial vehicles front, it is difficult for us to maintain the growth and make profits,” the official maintains.

According to sources, Nelcast Limited, one of the vendors to the commercial vehicles major, has said that due to low production of commercial vehicles and tractors, the demands for our castings have come down substantially. This has resulted in increase of inventories at our end. Hence, we have reduced our production at both Gudur and Ponneri plants. This will continue for some time until the demand picks up for commercial vehicles and that looks difficult in the current economic scenario for sure. With high interest rates and limited financing options, the future looks gloomy for the sector.

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