Ashok Leyland Q2FY18 Concall Summary

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Financial Highlights

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  • The overall revenue is 6,047 Crores which is 31% higher than last year
  • The company is not giving heavy discounts as they believe this will result in significant damage in themedium term.
  • With the increase in material price such as steel, margins have come down.
  • The margin for buses is under pressure because privet order is not coming as expected.
  • Net equity is stable at around 0.3 to1, and net debt is Rs. 2126 crores.
  • EBITDA margin is at 10.1% as opposed to 11.6% last year same quarter.
  • The company got good export order last year which result in 200 basis point improvement in margins.
  • Price of vehicles hasn't increased which result in heavy pressure on margin.
  • Export of BS-III engines at a lower margin.

Business updates

  • The overall industry has grown up by 20%
  • Ashok Leyland has grown up by 22% from last year
  • Market share at the end of Q2 FY18 was 33.6%.
  • Truck business accounts for 65% of total revenue
  • The company is facing growth issue because discounting given by competitors. The company believes that it is difficult to maintain double-digit growth.
  • The company will continue to grow at the pace of industry but not at the cost of insensible price.
  • The company believes the due to the implementation of GST movement of trucks and buses have eased over the border and due to this, there will be more investment in this sector.
  • The average discounting in trucks is about Rs. 350000although competitors give Rs. 1 Lakh more discount.Ashok Leyland will continue to maintain thediscount level at Rs. 3.5 Lakh.
  • There has not been any price hike in Q3 although there has been 1% hike in certain models of truck business.


  • The Capex will be about Rs. 500 crores to Rs. 600 crores every year.
  • There will be Capex requirement for building more capabilities and also for electric vehicles.
  • The company will invest in paint shop
  • The company is planning to debottleneck some LCV capacity and also resell it.


  • Export has grown at 29%
  • Export accounts for around 10% of total revenue.
  • Export is predominantly in UAE are profitable. Export in Sri Lanka and Bangladesh are not profitable.


  •  Defense revenue in Q1 was Rs. 270 crores and in Q2 it was Rs. 200 crores.
  • Most of the defense manufacturing happens at Hosur.

Spare parts

  • Revenue from spare parts are around Rs. 300 crores
  • Spare part business was most affected in GST.

Pantnagar Plant

  • Pre GST Pantnagar plant gets about 13% of excise duty benefit, post-GST it reduced to only 8.2%.
  • The impact of thereduction in excise duty was around Rs. 30 crores.
  • Manufacturing at Pantnagar is highly automated.

Hinduja Foundries Limited

  • The other expense goes up by Rs. 60 crores due to shiftingto GST.
  • In Q2, the EBITDA for HFL was 8%

LCV Business

  • LCV business is acombination of three subsidiaries together
  • PBT of LCV business is positive. EBITDA is around 8%
  • Ashok Leyland will invest more in LCV business.
  • There will be around 6 to 7 product introduction over next 12 months.


  • 85% of 90% times company use iEGR technology. The company provides SCR only when acustomerspecificdemands SCR.

• The EGR technology is less costly and more beneficial than SCR technology.