Ashok Leyland, the country’s second-largest medium and heavy vehicle maker is targeting a market share of 35% in the segment in the coming year, led by a strong market outperformance, claimed the company management to investors on Thursday.
In the intermediate commercial vehicle – it plans to grow its truck share from 25% to 35%, whereas for the intermediate bus segment – it wants to grow the share from 15% to 30%. In the medium-duty vehicle space, the company is looking to improve truck share to 40% from 35% and defend its 50% share in the medium-duty bus segment, as per the presentation shared by Shenu Agarwal, MD and CEO, to investors.
Over the last six quarters, the company has seen a steep growth in its market share – which has shot up from 22.5 to 32%. This rise in market share is expected through the expansion of its network and product portfolio. Going ahead, it plans to penetrate deeper into the markets of North India, grow its share in the central and western parts of India, and defend its turf in South India, wherein the company enjoys a 43% share, it said.
Agarwal defined six key goals for the future. The first is to be ready with the next gen products in the next 24 months, with all alternate fuels, and get investment in Switch and Ohm.
Second, increase the medium and heavy commercial vehicle market share from 30% to 35%.
Third – grow LCV and international operations, fourth – drive growth in the non-commercial vehicle business i.e. aftermarket, defence, power solution.
Fifth pursue superior returns – i.e. double digit EBIDTA in the near term and move to mid-teens by the medium term with cost leadership, and last of all, formulate a net zero target and keep governance at a high level.
The company has already defined its long-term vision of breaking into the top 10 global commercial vehicle makers.
Ashok Leyland is looking at opportunities to enhance its allied businesses of Gro, Switch, Ohm, Hinduja Finance, Hinduja Tech. As part of its ESG initiative, the company is looking at making its operations carbon-neutral by 2030.
Reviewing the year FY23, Shenu Agarwal, MD and CEO of Ashok Leyland told investors that it was a remarkable year for the company. Over the last six quarters, Ashok Leyland’s market share in the medium and heavy commercial vehicle segment has increased by 1000 basis points or 10 percentage points to 32%, and the EBIDTA margin has crossed a double digit by closing at 11% at the end of the last financial year. The quarterly EBIDTA had hit a peak of Rs 1,276 crore in Q4 of FY23. The part sales revenue has also increased by 31%.
Even in the light commercial vehicle space, Ashok Leyland posted its highest-ever annual volumes at 67,000 units with a higher margin despite a strong competitive intensity.
While the overall commercial vehicle exports for the industry dropped by over 30% due to the global recessionary trend, Ashok Leyland was able to grow its overseas volumes by 2%.
The power solution business – which is another pillar of its operation posted a 9% growth in volume with revenues rising by 26%.
During the year, the company posted its highest-ever revenue at Rs 36,144 crore, posting a 67% growth year on year. The EBIDTA (Earnings before Interest, depreciation, and taxes) grew three times to 2931 crore and the operating profit shot up 119 times to Rs 2,026 crore.
The strong margin was backed by the highest-ever material cost savings at the company.
At the end of the year, the company had zero debt on its books and is sitting on a 273 crore of cash surplus.
Agarwal said the growing GDP and increasing capital expenditure by the government of India on infrastructure and steady increase in budgetary outlay by the Ministry of Road Transport Highways offers a strong tailwind to the commercial vehicle market.
The plan to reduce logistic costs from 14% to 10% of GDP will also help the industry, he believes.
Agarwal says the average age of medium and heavy trucks has increased to 10 years which is the highest ever seen in the last decade, which is likely to create a strong replacement demand in the future.
Ashok Leyland is of the opinion that the truck market will grow four times in India by 2050 and the LCV market too is expected to grow three and half times to 1.35 million by 2042 – with 2-3.5 tonne segments that will expand its dominance.