The Hindu Business Line : Leyland hopes to earn Rs 5 cr on rate arbitrage

The company raised $100 million in April through an issue of foreign currency convertible bonds. The bonds carry an interest rate of 0.5 per cent. The money was for financing the company's expansion project.

Since the money will be brought into India as and when required, only about $10 million has been drawn so far. The remaining $90 million has been kept as deposits with banks abroad, mostly with foreign branches of Indian banks.

The interest rate arbitrage comes to about 2.5 per cent, Mr K. Sridharan, Executive Director - Finance, Ashok Leyland, told Business Line on Saturday. He said the money would remain abroad for at least half a year. Back of envelope calculations show an income of Rs 5 crore for the current year.

In the first half of the current financial year, Ashok Leyland's interest expenses were Rs 2 crore, compared to Rs 18 crore in the corresponding period of last year. In the second quarter of the current year, the company actually earned an net interest of Rs 91 lakh compared to an interest cost of Rs 9.5 crore in the second quarter last year.

The income arising out of the arbitrage will come in handy to offset the loss of profits on account of the two-month strike at the company's Hosur-I plant.

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