Commercial vehicle space to grow by 15-20%: Ashok Leyland

India's commercial vehicle industry is likely to grow by 15-20 percent in FY17, Ashok Leyland CFO Gopal Mahadevan says. In an interview with CNBC-TV18, Mahadevan said the company is hopeful of growing at at least industry rate despite two months of declining growth."First quarter is too early to judge the company's performance," he added.He is also hopeful that the Euro-IV (will be implemented across the country on April 1, 2017) norms will lead to pre buying in fourth quarter of FY17.The company has already received orders for 3,600 buses and the execution is expected in FY17.The market share of the company in bus segment has risen to 36 percent from 33 percent.Below is the verbatim transcript of Gopal Mahadevan’s interview to Anuj Singhal & Sonia Shenoy on CNBC-TV18. Anuj: Investors worried about your slackening pace of growth for last two months. Do you think it is more of an aberration or are things looking a bit slow right now? A: What I would like to do is to set your question in perspective. Two years ago the total industry volume was just a shade over 200,000 units and then 2014-15 the industry volume went up to 230,000 registering a growth of 16 percent and then in 2015-16 there was a follow on growth of about 30 percent which made the industry volume grow to 300,000 units. Ashok Leyland at this point in time during this same period for industry growth of 16 percent had grown at 28 percent and last year it grew at a whopping 50 percent. So, we have huge growth that has happened over the last two years and even in the current quarter if you had to look at the volumes the industry has grown at 14.5 percent and Ashok Leyland has grown at about 18.5 percent. So, I would say this has been a pretty healthy growth given the base that we are sitting on. Sonia: We don't generally see Ashok Leyland growing in single digits in a particular month. In the month of June the growth has been only seven percent. I take your point that the base is high and the run rate is still more than 11,000 units for the month of June. But I just want to get a sense whether there is any hint of a slowdown either in the freight rates, in replacement demands, are you getting any signs of deceleration? A: Not at the moment. If you look at it at the beginning of the year we had shared with you that we expect the industry to grow at anywhere between 15-20 percent, we maintain that forecast and we had also shared with you that Ashok Leyland will grow at the same pace of the industry if not trying to beat it which is again what is happening. Typically the first quarter is not a quarter to judge your performance by and commercial vehicle (CV) industry is not something - or CV companies should not be judged on a month-on-month (M-o-M) performance because there is a lot to do with mix, government, non-government orders, regions, the break up is pretty complex. So, overall if you were to look at it as I mentioned while the industry grew at about 14.5 or nearly 15 percent we grew at about 19 percent and believe me for the first quarter volume of about 22,000 units, that is the highest volume that Ashok Leyland has ever recorded. Anuj: So, for example FY16 your revenue grew by 35 percent and you did a profit of Rs 1,070 crore. For FY16 as a whole or from two to three years Compound annual growth rate (CAGR) point of view what kind of numbers do you think you will be able to do? A: I normally don't give any forecast because the industry is just picking up and we also need to wait for the economy to pick up. At the moment all I can share is that we are not seeing any signs of slowdown. We will have to wait and watch. Of course the economy needs to grow. We are also betting that the second half growth will be significantly higher than the first half especially in the fourth quarter because we do expect that certain amount of pre-buying happening because of the Euro-IV implementation. But overall in the medium term one should look at 15 percent growth over the next 3-4 years - 15-20 percent growth, that is what one should expect if the economy were to grow well. Sonia: Can you explain little more about the Euro-IV implementations and the impact on demand as a whole. What could the pre-buying be in the first phase and how much could on an average volumes grow by for the industry? A: Euro-IV as per the government regulations is expected to be implemented all over India effective April 1, 2017. So, if that were to happen one would see a significant amount of buying happening in Q4 of the current fiscal because the implementation happens effective the first day of the next financial year. To give a forecast the volumes would be a little premature but I believe that the volumes would be pretty healthy in Q4. Sonia: I also wanted to ask you a little bit about the bus segment. Yesterday there was an announcement on the exchanges that you have got an order for 3,600 buses from various STUs. I understand that this order is for FY16 or FY17, first half, I didn't get the timeline, if you could share that with us and also what is the market share looking like in the bus segment, how much has that segment grown for you? A: These are orders which we received over nearly STUs and for about 3,600 buses. These are both fully built as well as chassis and we expect the execution to happen in the current financial year itself. So, this will actually add to our retaining a leadership in the bus segment. Our market share in the first quarter has actually gone up from 33 percent in Q1 last year to 36 percent in the current quarter. So, we have actually increased market share.