Ashok Leyland will set up a plant in Telangana at an investment of Rs 500 crore, said state Industries Minister K. T. Rama Rao on Monday.

The company has entered into a MoU with the state government for setting up the unit.

The minister said Rs 500 crore will be invested in a phased manner. The plant is expected to provide direct employment to over 1,000 people.

Elaborating on the company's Telangana plans, a senior official in Ashok Leyland told IANS in Chennai: "We will be setting up an assembly plant. The plant will assemble buses and trucks. It is a strategic market for the company."

The official, who did not want to be identified, added: "Land has to be allocated. We hope to start construction of the assembly plant by the end of this fiscal."

According to him, the investment will be scaled up in phases.

Rama Rao said Ashok Leyland's decision would further strengthen auto industry in Telangana. He said the industries department would continue its efforts to build the supplier ecosystem.

The MoU was signed within three days after the industries met Ashok Leyland Managing Director Vinod Dasari in Delhi and requested him to invest in the state.