ASHOKLEY - Ashok Leyland Ltd. Share Price

Question: "Can you just share more insights on how should we think about the sustainable growth getting into fiscal '27? Is it that we're starting to see larger set of truck operators come back to the market after GST?"

Answer: Yes, when GST was announced, retail buyers led the growth. However, in January, we saw bulk buyers entering the market strongly, projecting demand for several quarters. The sentiment around freight demand is strong, with both demand and rates increasing. This may indicate the start of a new replacement cycle for the CV industry, addressing the aging fleet issue.

Question: "On the commodity side, can you share what was the headwind we saw in this quarter? How do we think about the metal inflation, and what was the quantifiable impact?"

Answer: In Q3, we faced commodity price increases, particularly in PGM, copper, and aluminum. This resulted in a 50 basis point drop in gross profit margins. We managed to increase prices by more than 60 basis points to recover these costs. While steel prices were stable, the mix shifted towards trucks, which contributed to the margin decline.

Question: "How should one think about the margins in this particular period while building in mid-single-digit growth for the industry?"

Answer: Margins are influenced by price, product mix, and commodity costs. We foresee better pricing ability due to increasing demand and freight rates. The unfavorable mix of higher ICV sales temporarily affected margins, but as volume shifts back to higher-margin segments, we expect an overall improvement.

Question: "What are your expectations about the fleet age and replacement demand in the coming years?"

Answer: The average fleet age is historically high at 10 years, which is unsustainable. Factors like GST and government policy on scrappage may trigger a replacement cycle. This could potentially reduce the average age to around 8 years in the future, ensuring demand for new vehicles remains strong.

Question: "How do you see the pricing action in light of the new regulations coming for trucks and buses?"

Answer: While regulations like ADAS may increase costs, they will also provide value, as safety becomes more important. The industry is willing to absorb costs associated with safety and comfort, similar to how it adapted to previous regulations. This shift enhances the long-term viability of the market for new technologies.

Question: "Can you tell us about your capacity in MHCVs and LCVs and if any capex is needed?"

Answer: Currently, we can meet demand without major capex. There might be isolated requirements for certain tooling or setup changes, but overall, we do not foresee significant new investments in capacity expansion in the next few years.

Question: "Can you discuss the performance of your subsidiaries and their financing needs?"

Answer: Most subsidiaries are performing well, with potential capital needs primarily for OHM, where we've earmarked INR600 crores. Funding for subsidiaries will be determined based on their performance and requirements, not due to financial distress.

Question: "How do you think your non-CV businesses will perform compared to the truck segment?"

Answer: Our non-CV businesses are growing significantly, with Power Solutions up 45% and defense up 84% year-on-year. While trucks are currently driving growth, our non-truck segments are strong and contributing positively to our overall performance and margins.