Leyland’s net-zero electric mobility subsidiary Switch Mobility has been looking to raise $200-250 million for the last several quarters, but its plans have run into several delays. Mint

SYNOPSIS
Continued government focus on capital expenditure in infrastructure sector to lend a helping hand

NEW DELHI : The ongoing upswing in commercial vehicle sales is likely to stretch beyond the usual three to four years, given the continued government focus on capital expenditure in the infrastructure sector, said Shenu Aggarwal, the newly appointed managing director and chief executive officer of Ashok Leyland Ltd.

While the next year will be one of growth for the medium and heavy commercial vehicle (M&HCV) industry, the positive sales momentum is likely to sustain into the next few quarters beyond FY24 as well, Aggarwal said in an interview. The focus on a green economy is also helping the company drive its electrification plans faster than it had expected, Aggarwal said.

Finance minister Nirmala Sitharaman in her latest budget speech proposed a capital investment outlay of ₹10 trillion for FY24, an increase of 33% year-on-year. According to equity research firm ICICI Direct Research, domestic commercial vehicle makers with a large market share in the M&HCV segment like Ashok Leyland and Tata Motors will be key beneficiaries of the move.

Ashok Leyland, one of India’s largest medium and heavy commercial vehicle (M&HCV) makers, on Wednesday reported a net profit of ₹361 crore in the quarter ended 31 December, rising multi-fold from ₹6 crore a year earlier. Revenues grew to ₹9,030 crore during the quarter, even as the maker of heavy-duty trucks and buses expanded its market share to nearly 33% of the domestic M&HCV market.

“There is usually a correlation of 1.5x GDP growth to our total industry volumes that we’ve seen in the past. When you see the road construction going on, you see the mining activity, there’s no reason why we would not be optimistic about a longer commercial vehicle upcycle," said Dheeraj Hinduja, executive chairman, Ashok Leyland.

“We typically see a four or four and a half year cycle, and now, it’s only been a year since we’ve come out of the last downturn. 2024 is also an election year, there is a stable government in position as well. And I think most governments today are looking at pro-growth policy. So, I don’t see any reason why we should not see the cycle to continue for the next few years," Hinduja said.

About Ashok Leyland’s own market share aspirations, Hinduja added, “We have grown very well in the last one year. We feel very positive and bullish that not only our products will continue to perform well, but our network expansion is giving us a lot of impetus for additional market share growth as well. We see this trend (of gaining market share) continuing".

Leyland’s net-zero electric mobility subsidiary Switch Mobility has been looking to raise $200-250 million for the last several quarters, but its plans have run into several delays.

“We have been delayed slightly in our fundraising activity, which I would openly say but in a very positive manner. Where I think it benefits Ashok Leyland and our shareholders is during the course of the last few months, the business activity of Switch has grown very well compared to compared to a lot of other start-ups and other electric vehicle companies, so we have a very robust business, a very strong order book, and a new product pipeline coming out in this financial year. All that has been done only improved our valuation further. And we want to make sure that whoever comes in as a potential investor is not only looking at the right value but is the right form of partner for us in building this business for the future because it has tremendous potential, not only in India, Middle East, and in the European market where we are, and I think one of the few differentiated commercial vehicle companies to be covering such a wide geography," Hinduja told Mint.

Courtesy: Mint