Synopsis Ashok Leyland's focus is on profitability and getting back to its pre-Covid-19 peak EBITDA levels. The automaker aims to expand its reach, increase its market share, and expand its product portfolio. By working on alternative fuels, electric and hydrogen cars, Ashok Leyland aims to bring in new products for Indian and other overseas markets. Although electric vehicle sales depend on STU orders, the company aims to quickly finish those and launch electric Dost and Bada Dost models by late 2021 or early 2022.

FY23 has been a good year that way because we have not only been able to grow our market share at least in the M&HCV segment very significantly but we have also been able to increase our profitability quite significantly. Now profit is going to be a continued focus and we hope in the next couple of years, we will get to our peak EBITDA levels as well, says Shenu Agarwal, MD & CEO, Ashok Leyland

We understand that March sales were pretty good, there was an uptick due to pre-buying before the price hike, is that the case and can you talk to us about Q1 expectation in terms of volumes, how can the price hike impact the demand if any?

It is true that there has been a bit of pre-buying in February and March but we do not think that that would have a big impact on quarter one sales or quarter one industry. We have very strong tailwinds right now in the CV industry and I mean for us at least, our retail sales have been higher than the wholesales. So we have been able to create some cushion in the pipeline as well and we are quite optimistic about Q1 as well.

As far as the price rise is concerned, there have been pressures because of the OBD2 norms and also because of some element of inflation that we are seeing is creeping in and we are closely watching the situation. Some of our competitors have already indicated some price hikes. We are watching the situation on the ground and most probably we will also take a price hike very soon.

The company used to enjoy an EBITDA margin between around 12% pre-Covid levels. Now, since you are already on the recovery path given the growth, in how many years do you feel you will be back on those levels?

Profitability is a big focus area, not just for us but in the entire space because the CV space is suffering from lower profitability in the last few years. Ashok Leyland's peak profitability or EBITDA levels were close to 12% and probably not 14-15%, and that is our first objective for getting back to those levels.

FY23 has been a good year that way because we have not only been able to grow our market share at least in the M&HCV segment very significantly but we have also been able to increase our profitability quite significantly. Now profit is going to be a continued focus and we hope in the next couple of years, we will get to our peak EBITDA levels as well.

After your appointment, we have been speaking for the first time. Can you tell us the long-term focus areas that you have planned under the leadership?

Ashok Leyland has been on a path of turnaround for the last couple of years and the company's first focus is to continue with that momentum, and continue to expand our reach, continue to increase our market share, especially in the northern and the eastern markets where relatively or traditionally we are a little bit weaker.

We want to continue with that and we want to continue to further leverage the new products that we have launched in two to three years, especially the AVTR range of products on the M&HCV side and Bada Dost on the LCV side. We think there is a lot of potential in those products. Both on the product side as well as on the geographical expansion side, we want to continue with that momentum, that is one. The other is we want to continue to expand our product portfolio because Ashok Leyland has some gaps or some wide spaces in the product portfolio.

Also, competition is getting ready for hydrogen fuel cell technology. How do you see this technology growing and getting into mainstream transportation and by when? You are already working on it and have already collaborated with big names like Reliance and Adani?

The roadmap on alternative fuels is getting more and more clear. Although Ashok Leyland strategy is to work on all the different possibilities as far as alternative fuels are concerned, in terms of timing of the market and in terms of development of the ecosystem, there is still a lot to be seen. But we want to start on the electric side with the buses which we have already started doing through our arm which is called Switch.

We also want to bring in electrification in the LCV segment through Dost and Bada Dost electric vehicle launches later this year or early next year. Then we will continue to focus on both hydrogen, ICE as well as the fuel cells. Although we have made some initiatives with Reliance and also with Adani, I think it will still take the country about three to five years to make this technology commercially viable, not just on the vehicle side but also in the ecosystem.

We are focused on all different technologies; electric, hydrogen and even other fuels such as methanol, ethanol etc. We want to be technologically ready. As I said, our objective is to take a first mover advantage in these technologies. We are very focused on these.

Can FY24 be the year where you see a partner getting into Switch Mobility? How do you see the growth potential in India and what are the expansion plans?

As far as the funding is concerned, we are very positive that this would happen sooner than later. We have had some advanced level dialogues with a few entities. In hindsight, there has been a certain delay but that delay is to our advantage because the bus electrification specifically is getting more and more pace now and the business model is also getting more and more clearer. So, this is a good time to bring in an investor from outside and we hope we will give you some good news in a few weeks or few months to come.

As far as the business outlook is concerned, we are well positioned in the electric space as far as the buses are concerned. Most of the orders are from STUs, but we see more and more traction from the state governments to electrify their bus, their transport systems and Switch is very well positioned. We have already started supplying to a lot of state governments and there are a lot of orders that are in the pipeline as well.

Could you give us your EV sales target for FY24?

EV sales are dependent on the STU orders and we all know the numbers from the CESL phase one and phase two. Our focus right now is to quickly complete those orders, working closely with the various state governments. So, that is the focus and also develop some new products for both India and outside India markets.

Also, we are very seriously working on the launch of electric Dost and Bada Dost models as well, because we want to get into that electric LCV space and we are working around those and hopefully we will launch them during later part of the year or early next year.

You said that capex and investment book outlook remains at Rs 750 crore for FY24. Any changes to that number? What are the fundraising plans for Switch Mobility?

You are right. Ashok Leyland’s capex amounts to roughly Rs 500-700 crore annually. This includes the money that we are going to invest in alternative fuel technologies, including electric. Even in FY24, our capex outlay would be within that range of Rs 500-700 crore.

As far as Switch is concerned, we have been funding it ourselves so far and we will continue to do that. We have enough cash reserves to be able to do that in Ashok Leyland until we get the outside investment. So, Switch as well as Ashok Leyland’s product development and other capex plans are in place and we do not see any problem with that going forward.

Courtesy: ET