Ashok Leyland eyes record sales and double-digit margin in FY24

Ashok Leyland expects to witness the highest sales in 2023-2024 fiscal, primarily on the back of infrastructural demand as well as pent-up demand, the Indian auto major’s CFO and whole-time director Gopal Mahadevan said on Monday.

“There is enough steam left in the commercial vehicle industry to grow in FY24 as well. And if that does happen, we are not normally very aggressive with forward-looking but if you see a number of reports also say, the previous high of 3,94,000 units, possibly will get surpassed in FY23-FY24,” he told CNBC-TV18.

His remarks after the Hinduja group flagship Ashok Leyland, on Friday, reported a profit after tax of Rs 199 crore for the second quarter ended September 30, aided by robust sales across segments. Its revenues stood at Rs 8,266 crore compared to Rs 4,458 crore a year ago, the firm said in an exchange filing.

Ashok Leyland's domestic MHCV (medium and heavy commercial vehicles) volume rose to 25,475 units in the second quarter against 11,988 units in the year-ago period, it said. This helped the company achieve market share gains of 9.6 percent in the quarter, Ashok Leyland said.

The company stated that its light commercial vehicle sales volume increased by 28 percent YoY to 17,040 units while export volumes (MHCV & LCV) for the quarter surged 25 percent annually to 2,780 units.

In the current fiscal Ashok Leyland is eying 22-24 percent growth in the commercial vehicles sector given the pickup in Infrastructure spending.

With real estate demand and the commodity sector coming back to pre-COVID-19 levels and road building infrastructure going up, the direct outcome is the need for a lot of commercial vehicle support in this growth, Mahadevan explained, adding that the sector factor is the pent up demand itself.

Mahadevan, however, said it is tough to attain a double-digit margin this fiscal though it is possible over the next one to two years. According to him, this is possible if demand continues, the GDP continues to grow, there are no major shocks in the global economy, no major wars to shut down the world, India continues to grow and commodity prices come down.

One of the most important factors is the industry getting into value selling mode, which he explained means selling to a customer based on the features of the vehicle and the services offered by the company instead of discounting the product. This way, he said, the industry will not only move to a growth phase but a profitable growth phase, which is what Ashok Leyland is attempting.

Ashok Leyland CFO added that the automaker raised its prices in all three quarters of FY23 so far and is trying to ensure that hikes are in tandem with the cost of the product going up.

Reflecting on market share growth, Mahadevan said Ashok Leyland's share is more than 30 percent for the third quarter in a row. He explained that the growth has been pan India.