Some slowdown likely in elections, confident of growth: Ashok Leyland

The commercial vehicle manufacturer is getting investor interest in Switch and is open to multiple options in funding for the unit, says Dheeraj Hinduja

India’s commercial vehicle industry (CV) is “very strong” and will continue to grow even if there is “some slowdown” in an election year, says DHEERAJ HINDUJA, executive chairman of Ashok Leyland, which achieved a record volume in CV production in the first nine months of FY24. In a video interview with Shine Jacob, the businessman spoke about the company’s target of being among the top 10 CV makers in the world and external fundraising plans for Switch Mobility, its electric mobility subsidiary.

The commercial vehicle industry slowed down in FY22 and stayed so well into early FY23. With election season coming in, do you think FY25 will be difficult?

We feel that some slowdown may happen during the election time, but on the ground, it (the industry) is very strong. The economy is set to grow firmly as well. As a result, we see our segment, which is closely tied together, will continue to grow. We are actually quite confident of continued growth in the segment.
 

In terms of product launches, that is an ongoing thing. With AVTR (a truck model) we have the possibility of being a modular product to have one pre-configured with many new applications and the focus on alternate fuel as well. You saw two in the recent Bharat Mobility exhibition. We are looking at other areas as well.

Are you concerned about geopolitical tensions affecting your overseas business and exports?

Europe is not a large market for us. In the Middle East, of course, geopolitical issues are there, and fortunately, the markets we are in are continuing to grow. I am seeing tremendous growth potential in markets like Saudi Arabia and we have added a new distributor there to our existing one, to meet the market requirement. I feel that the GCC (Gulf Cooperation Council) countries will see growth.

We are moving into the Philippines, Malaysia, Indonesia, and a few other markets. After the elections are over in Bangladesh, we expect a good recovery in FY25. Overall, we were able to maintain a similar volume to what we delivered last year. When you put it in perspective, others have lost substantially – when you look at volumes.

Ashok Leyland has invested in Switch Mobility and may further extend it to Rs 1,200 crore. Are you considering funding from external sources?

Ashok Leyland’s board has committed Rs 1,200 crore and the balance will also be given to Switch, based on which they can pay the additional debt. We have continued interest from investors, who are looking into investments in Switch as well. From that perspective, the company is open to different options.

We are not in a rush as Ashok Leyland is supporting capital requirements. Those discussions are ongoing. Many new products are being launched and I think it will bring a lot of confidence to any investor. It will help the valuation of the company as well. We are comfortable and confident that Switch is moving in the right direction. Thankfully, the Ashok Leyland board has given full support.
 

The business plans of Switch are continuously developing; there are a lot of changes that are happening in the market. In the past, we were looking at $200 million (investment in Switch). Since Ashok Leyland has infused some capital, within the next six to eight weeks we are preparing the budget for the next financial year. I think that will give us more clarity on the additional funds that they require.

Your target is to be among the top 10 global commercial vehicle (CV) manufacturers and become net zero by 2048. How are you going to achieve this?

Our roadmap is very clear. We had also said that being top ten is not a very easy task as we are up against global majors. One thing that we are looking at is growth in the Indian market itself. Also, all of our recent launches have been done with a view to sell them in international markets as well. We are increasingly opening up to new markets and geographies. If there are any appropriate acquisition opportunities that give us new technology or new geographical reach, we will keep our eyes and ears open to that as well. That is as far as the top ten entry is concerned.

With regards to net zero target, we are one of the few companies that have a core committee that is focused on ESG. Across the line, we are constantly looking at what new improvements can be done internally. We are having discussions with all our vendors as well. It is not only products that we are doing, but the whole network, distribution and vendors too. This is something across the board that we are working on.

What is the outlook for the upcoming financial year?

The key message from us is that we are focused on our bottom line, cost optimisation and we will not buy market share. We are looking to grow market share through new products, services, and our network. There is expansion that is going to happen in the North and East. We have taken the right moves. As far as next year is concerned, we want to ensure that we will continue our growth in market share and our performance overall.