Ashok Leyland Limited — Q3 FY24
Ashok Leyland reported its best-ever Q3 with revenue of INR 9,273 crore (+3% YoY) and EBITDA margin of 12.0% (+320 bps YoY), driven by strict pricing discipline, cost optimizati...
bullish
high
✓ Verified against BSE filing
Claim Ledger
Did management answer the analysts?
Every material analyst question, graded on whether management actually answered it — with the verbatim exchange and quantitative claims checked against filed numbers.
54%Questions answered3Evaded / deflected12Questions audited
Partial answer
High priority
Key drivers for 130 bps QoQ gross margin expansion despite 5% volume decline.
Asked by Chandramouli Muthiah, Goldman Sachs
Management gave qualitative drivers but did not quantify the contribution of each factor.
no quantification of price vs cost vs commodity split
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Question
In spite of selling 5% fewer volumes of vehicles this quarter, it appears that gross margin has expanded almost 130 basis points, quarter-on-quarter. So just trying to understand what were some of the key drivers that helped you achieve that?
Shenu Agarwal (Managing Director and CEO) and Gopal Mahadevan (Director and CFO)
Our focus is on profitable growth. We are very, very strict on pricing discipline. We are focusing relentlessly on cost reduction, and I think the softening of the commodity prices also helped to some extent.
Partial answer
Medium priority
Impact of government e-bus schemes and payment security mechanism.
Asked by Chandramouli Muthiah, Goldman Sachs
Acknowledged discussions but gave no concrete details on the payment security mechanism.
no specifics on mechanismdeferred to future
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Question
Just trying to understand what you make of some of these comments and any negotiations or discussions you have with the government on the payment security mechanism and how robust it is likely to be going forward.
Shenu Agarwal (Managing Director and CEO)
We are under discussions with the government as to exactly how this will work. Those details are still being worked out, but we hope that within the next two or three months, something more specific, the government will be able to say on this.
Evasive
Medium priority
Net debt split between auto and financing businesses.
Asked by Chandramouli Muthiah, Goldman Sachs
Analyst asked for split but management only provided consolidated net debt.
refused to splitonly gave consolidated
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Question
Just want to understand what is the net debt balance for the auto business and the rest of the business, including financing? If you could just split that out.
Gopal Mahadevan (Director and CFO)
We just give the consolidated numbers. So our net debt is INR 1,747 crore. This is after infusing nearly about INR 950 crore, both in Switch and in OHM.
Answered
High priority
Reasons for sudden MHCV demand deceleration and market share strategy.
Asked by Pramod Kumar, UBS
Management explained demand deceleration with high base and election effects, and reiterated focus on profitable growth over market share.
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Question
What has led to this sudden demand deceleration, at the industry level? And within that, why are we not pursuing market share more aggressively?
Shenu Agarwal (Managing Director and CEO)
April, December industry has grown by roughly 9%. January, February, March, because of the high base effect and maybe April, May and June because of some elections, we might see some moderation in the growth. This is not fundamental.
Partial answer
Medium priority
Drivers of deflation in employee and other expenses sequentially.
Asked by Pramod Kumar, UBS
Management attributed to operating leverage but did not explain sequential decline or provide specific cost-saving measures.
no specific drivers givenvague on sustainability
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Question
On the cost side, what exactly is driving a deflation in our employee and other expenditures sequentially? And how sustainable is that?
Gopal Mahadevan (Director and CFO)
These are very marginal adjustments. The trend predominantly will continue to be. We have come down from very high percentage levels because of the operating leverage kicking in to about 5% to 5.5%-6%.
Evasive
High priority
Quantification of price hikes taken in nine months and commodity tailwind.
Asked by Gunjan Prithyani, Bank of America
Analyst asked for a specific number but management declined to provide it, offering only qualitative assurance.
no number givendeferred offline
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Question
Is it possible to just get a number on what has been the price hike taken in nine months, you know, overall, if not broken up into quarters?
Gopal Mahadevan (Director and CFO)
We don't have that number readily available. We'll take it offline, Gunjan, but rest assured that quarter-on-quarter, Q1, Q2, Q3, we have actually been raising prices.
Evasive
Medium priority
Revenue from other segments like spares, power solutions, defense.
Asked by Gunjan Prithyani, Bank of America
Management did not provide the requested revenue numbers during the Q&A, deferring to post-call.
no numbers givendeferred offline
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Question
Other segment, like spares, power solutions, defense, anything on the revenue to call out?
Gopal Mahadevan (Director and CFO)
I gave out the numbers in my opening remarks, so maybe after the call we can give you more specific numbers. We are actually very happy with all the non-auto businesses.
Partial answer
Medium priority
Operator economics and launch timeline for electric tractor-trailer.
Asked by Pramod Amthe, InCred Capital
Management gave TCO range but did not provide launch timeline or supply chain plans.
no specific launch dateno supply chain details
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Question
What are the operator economics? Why you selected this? How are you planning to develop the supply chain, and when we expect it to hit the market?
Shenu Agarwal (Managing Director and CEO)
Roughly at an industry level, the TCO equivalence of diesel is coming in roughly about five to seven years right now on the electric trucks. If we can bring it down below five years, then it will start making much more sense.
Answered
High priority
Whether demand slowdown is in new fleet expansion or replacement demand.
Asked by Mumuksh Mandlesha, Anand Rathi
Management clearly attributed the slowdown to both pent-up demand absorption and election-related project delays.
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Question
Is the demand more seem weaker in the new demand where the expansion of fleet has slowed down? Or is it the replacement demand where there's the slow growth we are seeing?
Shenu Agarwal (Managing Director and CEO)
It is a combination of both. Last year, there was a huge pent-up demand that was there. Some of that pent-up demand has also diffused now. And projects may slow down a little bit because of the code of conduct or other effects of the elections.
Answered
Medium priority
Impact of 20% truck price increase since pre-COVID on demand.
Asked by Jinesh Gandhi, Ambit Capital
Management directly stated that the price increase is historical and not currently impacting demand.
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Question
We have seen a quite substantial increase in cost of trucks, say, since pre-COVID versus now, almost 20% increase. Is that a factor which will also play part in on the demand side?
Shenu Agarwal (Managing Director and CEO)
That period is long past us. That was more than four years ago when we switched on to BS VI. Right now, we are not in a scenario where demand is getting affected through the prices.
Answered
High priority
Expected performance of MHCV categories: buses, tractor-trailers, ICVs.
Asked by Raghunandhan N.L., Nuvama Research
Management clearly identified the three best-performing segments and provided rationale.
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Question
How do you expect various categories within MHCVs to perform going ahead, buses, tractor-trailers, ICVs? Which category do you expect to do better?
Shenu Agarwal (Managing Director and CEO)
There is a lot of steam left in buses. Second would be the tractor-trailer segment. Third would be the tipper. Those are the three stars: the buses, tractor-trailers, and the tippers.
Partial answer
High priority
Volume forecast for next year and whether discounting has intensified.
Asked by Mihir Jhaveri, Axis Capital
Management declined to provide a volume forecast and gave only a qualitative assessment of discounting.
no volume forecast givenvague on discounting trend
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Question
What volume forecast for next year? And has discounting intensified given that Q4 we are seeing that moderation coming in?
Shenu Agarwal (Managing Director and CEO) and Gopal Mahadevan (Director and CFO)
We have not issued a formal forecast as of now. Discounting is there. It hasn't gone down or gone up substantially. Ashok Leyland is very focused on picking our own battles and focusing on profitable growth.