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Mint
26-05-2025
- Automotive
- Mint
Ashok Leyland to face speed-breakers of rising commodity price, muted volume
Ashok Leyland Ltd did well in the March quarter (Q4FY25), but the moot question is whether it has reached its peak financial performance from a near-term perspective. There are twin challenges. One is on the sales front: April volume data (including exports) was disappointing, dropping 6% year-on-year—not an ideal start to FY26. The other is the cost increase, mainly due to the safeguard duty imposed on imports of steel, a key raw material. Since the safeguard duty has been imposed for 200 days starting from April, the impact of higher steel prices could last for about two quarters. In Q4, standalone sales rose 5.7% year-on-year to ₹11,857 crore, led by volume growth of 5%. Average selling price rose marginally, with some part of the increase coming from sales mix tilting slightly more in favour of medium and heavy commercial vehicles (MHCV) from light commercial vehicles (LCV). MHCV sales increased by 7%, while LCV sales were almost flat. Gross margin per vehicle grew 5% to ₹5.84 lakh as material cost per vehicle fell by ₹18,000. Also read: With over ₹4,000 crore in cash, Ashok Leyland has eyes on acquisitions, new markets The material cost is likely to move up in tandem with higher steel prices. In the earnings call, the management highlighted that rubber prices have softened. But would the benefit from rubber price be enough to offset higher steel price? This is unlikely as the share of rubber in total raw material cost is much lower than steel. Ebitda margin expanded by 90 basis points year-on-year to 15%, another high at least in the past eight quarters. Though Ebitda growth was 12%, net profit growth was much higher at 30% as the benefit of operating leverage played out with depreciation cost remaining steady. Also read: Ashok Leyland bonus share issue: Board meet slated on May 23; stock rises 3% Ashok Leyland has become a net cash company. Cash balance at FY25-end stood at ₹4,000 crore versus a net debt of ₹88 crore a year earlier, even after incurring a capital expenditure (capex) of nearly ₹950 crore. The big favourable swing can be explained by a reduction in debtors and inventories on the asset side and higher trade payable on the liability side, with both sides contributing around ₹1,000 crore each. This is a remarkable improvement in working capital management. Capex in FY26 is likely to be at the FY25 level. As far as subsidiaries are concerned, Switch India became Ebitda positive in FY25 in-line with the earlier guidance. It achieved a double-digit Ebitda margin in Q4. The next target is to make it profitable at the net profit level so that it is able to meet its own funding requirement of capex ahead, which would avoid the drain on standalone Ashok Leyland's cash. Switch UK is on track to cut its production cost by shifting the manufacturing operations out of the UK. Switch UK is incurring a monthly loss of about GBP 2-3 million, which should reduce with the restructuring of the company's operations. Though there was an injection of capital by Ashok in its lending subsidiary Hinduja Leyland Finance (HLF) in the past, it was to take care of capital adequacy requirements by the Reserve Bank of India in view of its rapid growth. Going forward, it may not have any big capital requirement from Ashok. The work on listing HLF is in the final stages as most of the regulatory requirements have been complied with. Also read: Likely UK plant closure a positive for Ashok Leyland. High promoter pledge isn't Ashok Leyland stock trades at a price-to-earnings and EV/Ebitda multiple of 21x and 13x, respectively, as per Bloomberg consensus FY26 estimates. There are downside risks to earnings if sales volume ends up being lower than expected and material cost is higher than expected. If these play out and earnings estimates are indeed cut, then valuations could look pricier.
Mint
23-05-2025
- Automotive
- Mint
With over ₹4,000 crore in cash, Ashok Leyland has eyes on acquisitions, new markets
Ashok Leyland Ltd, the Hinduja Group flagship company that makes trucks and buses, will look to enter new markets with new products this financial year, and possibly at acquisitions as well, after ending 2024-25 with surplus cash. India's third-largest manufacturer of commercial vehicles ended FY25 with net cash of ₹ 4,242 crore, with ₹ 3,284 crore of it generated in the fourth quarter. It had ended FY24 with net debt of ₹ 89 crore. While the company will explore acquisitions and new markets, it plans to maintain its capital expenditure at about ₹ 1,000 crore, similar to that in FY24, Dheeraj Hinduja, executive chairman of Ashok Leyland, told Mint. 'This industry is already quite consolidated. New acquisitions should give us access to new technologies and new geographies which align with our core business,' Hinduja said. 'Even if we don't go ahead with new acquisitions, we will continue to venture into new markets with new products.' Ashok Leyland was able to save more than ₹ 700 crore in FY25, in part because of lower raw material prices and improved operational efficiency, according to the company. However, Ashok Leyland's market and product expansion efforts hit a snag recently with its step-down e-bus subsidiary Switch Mobility Ltd in the UK. In March, the Chennai-based company announced that Switch UK could potentially shut manufacturing and assembly activities at its Sherburn facility due to sluggish demand and outlook for e-buses in the UK. 'Consultations with (Switch UK's) employees are still ongoing, which could lead to shuttering of the operations,' Ashok Leyland's chief financial officer K.M. Balaji told Mint. 'We will look to source vehicles for the UK market from nearby locations.' Hinduja added that India 'remains one of the most exciting electric vehicle markets right now. The government's push is also helping in aiding growth'. "Staggered investments are always better in a market which is growing at a tepid pace. This could explain (Ashok Leyland's) stable capex outlay," Saji John, senior research analyst at Geojit Financial Services. "Ashok Leyland is well-placed from a cash position. Its investments into Switch Mobility will be something to watch as the order book is growing." Ashok Leyland reported a mere 1% growth in FY25 standalone revenue to ₹ 38,753 crore as sales of commercial vehicles remained muted. However, the margin on its earnings before interest, taxes, depreciation, and amortisation (ebitda) increased by 90 basis points to 15% on the back of lower commodity prices and the company's efforts to cut costs. As a result, FY25 profit after tax surged 26% to ₹ 3,303 crore. In the fourth quarter of FY25, Ashok Leyland's revenue improved 6% to ₹ 11,907 crore while profit after tax jumped 38% to ₹ 1,246 crore. The company's management expects revenue growth to improve in FY26 as it sees India's commercial vehicle market growing in mid single-digits during the year. Volume growth will be driven by macroeconomic growth and better monsoons during the year, which should boost demand for commercial vehicles in the second half of this financial year, said Hinduja. 'This fiscal is likely to see growth compared to the flattish fiscal 2025 for our revenues. Our efforts to improve profitability of the company will continue, which will see improvement in margins,' Hinduja said.
Mint
23-05-2025
- Automotive
- Mint
With over ₹4,000 crore in cash, Ashok Leyland has eyes on acquisitions, new markets
Ashok Leyland Ltd, the Hinduja Group flagship company that makes trucks and buses, will look to enter new markets with new products this financial year, and possibly at acquisitions as well, after ending 2024-25 with surplus cash. India's third-largest manufacturer of commercial vehicles ended FY25 with net cash of ₹ 4,242 crore, with ₹ 3,284 crore of it generated in the fourth quarter. It had ended FY24 with net debt of ₹ 89 crore. While the company will explore acquisitions and new markets, it plans to maintain its capital expenditure at about ₹ 1,000 crore, similar to that in FY24, Dheeraj Hinduja, executive chairman of Ashok Leyland, told Mint. 'This industry is already quite consolidated. New acquisitions should give us access to new technologies and new geographies which align with our core business,' Hinduja said. 'Even if we don't go ahead with new acquisitions, we will continue to venture into new markets with new products.' Ashok Leyland was able to save more than ₹ 700 crore in FY25, in part because of lower raw material prices and improved operational efficiency, according to the company. However, Ashok Leyland's market and product expansion efforts hit a snag recently with its step-down e-bus subsidiary Switch Mobility Ltd in the UK. In March, the Chennai-based company announced that Switch UK could potentially shut manufacturing and assembly activities at its Sherburn facility due to sluggish demand and outlook for e-buses in the UK. 'Consultations with (Switch UK's) employees are still ongoing, which could lead to shuttering of the operations,' Ashok Leyland's chief financial officer K.M. Balaji told Mint. 'We will look to source vehicles for the UK market from nearby locations.' Hinduja added that India 'remains one of the most exciting electric vehicle markets right now. The government's push is also helping in aiding growth'. "Staggered investments are always better in a market which is growing at a tepid pace. This could explain (Ashok Leyland's) stable capex outlay," Saji John, senior research analyst at Geojit Financial Services. "Ashok Leyland is well-placed from a cash position. Its investments into Switch Mobility will be something to watch as the order book is growing." Ashok Leyland reported a mere 1% growth in FY25 standalone revenue to ₹ 38,753 crore as sales of commercial vehicles remained muted. However, the margin on its earnings before interest, taxes, depreciation, and amortisation (ebitda) increased by 90 basis points to 15% on the back of lower commodity prices and the company's efforts to cut costs. As a result, FY25 profit after tax surged 26% to ₹ 3,303 crore. In the fourth quarter of FY25, Ashok Leyland's revenue improved 6% to ₹ 11,907 crore while profit after tax jumped 38% to ₹ 1,246 crore. The company's management expects revenue growth to improve in FY26 as it sees India's commercial vehicle market growing in mid single-digits during the year. Volume growth will be driven by macroeconomic growth and better monsoons during the year, which should boost demand for commercial vehicles in the second half of this financial year, said Hinduja. 'This fiscal is likely to see growth compared to the flattish fiscal 2025 for our revenues. Our efforts to improve profitability of the company will continue, which will see improvement in margins,' Hinduja said. Ashok Leyland's commercial vehicle sales in FY25 improved 0.2% from the year before to 195,093 units. Exports, though, improved 29% to 15,255 units in FY25.
Reuters
26-03-2025
- Automotive
- Reuters
India's Ashok Leyland says may shut loss-making e-bus plant in UK
March 26 (Reuters) - Indian heavy vehicles maker Ashok Leyland ( opens new tab said on Wednesday that its electric bus unit Switch Mobility could shutter one of its British plants, which would swing the unit's UK operations to profitability "soon". The company said it would review the feasibility of the plant in Sherburn, North Yorkshire in a consultation process with employees, which could lead to the plant being closed, amid continued uncertainty in the sector. The plant accounted for 0.60% of Ashok Leyland's total sales in the fiscal year ended March 2023, the company said. Ashok Leyland said it does not plan to pump in more money into Switch UK, which also comprises two other plants and posted a loss of around 20 million pounds to 21 million pounds ($26 million to $27 million) this year. "Switch UK losses should go away soon if the Sherburn facility ceases operations," a company executive said, adding around 240 employees in Switch UK might stay back after facility closure. The move comes as the UK's bus manufacturing sector faces ongoing challenges, including a drop in vehicle production. However, Switch has no plans to exit the UK market and will fulfill all orders and continue to provide aftermarket and service support through its plants in Rotherham, North Yorkshire and Thurrock, Essex, the company said. However, Switch plans to focus on the "high-growth India market". "The electric bus market in India is doing exceptionally well and is poised to grow multi-fold in the next few years," the company executive said. Switch India is expected to break even on an EBITDA (earnings before interest, taxes, depreciation, and amortisation) basis in the fiscal year ending on March 31 and break even on a net profit level next fiscal year, the executive said. ($1 = 0.7754 pounds)
Zawya
26-03-2025
- Automotive
- Zawya
India's Ashok Leyland says may shut loss-making e-bus plant in UK
Indian heavy vehicles maker Ashok Leyland said on Wednesday that its electric bus unit Switch Mobility could shutter one of its British plants, which would swing the unit's UK operations to profitability "soon". The company said it would review the feasibility of the plant in Sherburn, North Yorkshire in a consultation process with employees, which could lead to the plant being closed, amid continued uncertainty in the sector. The plant accounted for 0.60% of Ashok Leyland's total sales in the fiscal year ended March 2023, the company said. Ashok Leyland said it does not plan to pump in more money into Switch UK, which also comprises two other plants and posted a loss of around 20 million pounds to 21 million pounds ($26 million to $27 million) this year. "Switch UK losses should go away soon if the Sherburn facility ceases operations," a company executive said, adding around 240 employees in Switch UK might stay back after facility closure. The move comes as the UK's bus manufacturing sector faces ongoing challenges, including a drop in vehicle production. However, Switch has no plans to exit the UK market and will fulfill all orders and continue to provide aftermarket and service support through its plants in Rotherham, North Yorkshire and Thurrock, Essex, the company said. However, Switch plans to focus on the "high-growth India market". "The electric bus market in India is doing exceptionally well and is poised to grow multi-fold in the next few years," the company executive said. Switch India is expected to break even on an EBITDA (earnings before interest, taxes, depreciation, and amortisation) basis in the fiscal year ending on March 31 and break even on a net profit level next fiscal year, the executive said. ($1 = 0.7754 pounds) (Reporting by Ashna Teresa Britto in Bengaluru; Editing by Savio D'Souza)
