Mumbai: Commercial vehicles manufacturer Ashok Leyland is reported to be looking at divesting part of its stake in a joint venture with auto major Nissan to its shareholders.

Speaking to the media on the sidelines of a conference, Ashok Leyland chief financial officer K Sridharan said that the company was looking at options to give incentives to its own shareholders, which could give them some sort of entitlement in the joint venture, for which the modalities are still being worked out. Usually, this takes the form of a right issue that seeks to reward existing shareholders.

Ashok Leyland is the major partner in the joint venture, owning 51 per cent. The joint venture will make light trucks in the 2.5 ton to eight ton gross vehicle categories, under the Ashok Leyland and Nissan brands. One of the vehicles will be jointly developed by the two partners, and will be made for the Indian market, while the other will be from the Nissan stable that is already under production and sells in markets outside of India.

The Ashok Leyland branded vehicle will address the lower spectrum of the market while Nissan vehicles will aim at the top end. The vehicles would be manufactured in India by 2010, and will be marketed and distributed through Ashok Leyland dealerships.

The proposed investment in the joint venture is Rs2,400 crore, of which Ashok Leyland would contribute around Rs600 crore. The total capital expenditure for the next three years is estimated at Rs3,000 crore, having a debt component of Rs1,750 crore and equity component of Rs1,250 crore. Ashok Leyland is reported to be in negotiations with the Japanese auto major to leverage some kind of incentives for its shareholders. Reports indicate that this could take the form of a rights issue, debentures or any such instruments.

The Indian truck maker is seeking to de-risk its business model, which is facing "many uncertainties in global scenario", specially in relation to the price of oil. According to Ashok Leyland managing director Seshasayee, the company is bracing for a worst case scenario in which an economic slowdown could be precipitated by global slowdown, which in turn is triggered by soaring oil prices.

68 per cent of Ashok Leyland's business comes from trucks, while the remaining comes from buses, engines, logistic vehicles for defence, and genset applications. In 2007, the company sold 84,000 vehicles, and is looking to sell 1.84 lakh units by 2010, on the back of a robust demand from the defence sector.

The non-cyclical business model of the company, which is made up of businesses other than trucks, presently brings in 32 per cent of its revenues, and the company is aiming to take that number up to 45 per cent over the next two years,  according to Sridharan.

Amongst projects in the pipline is the company's Ennore facility, that will manufacture engines and gear boxes of arould 50,000 units a year, and is due to be commissioned in September 2008. Additionally, Ashok Leyland is setting up an integrated chassis and bus assembly plant in the UAE with a capacity of 2,000 units per annum that is also expected to come online this year-end. A third manufacturing facility is coming up in Uttarakhand, which will have a capacity of 50,000 units per annum, and is expected to be commissioned sometime around October 2009.

New markets on Ashok Leyland's map include Indonesia, Syria, Vietnam, Thailand, Honduras, Venezuela and Russia.