Ashok Leyland expects volume boost in H2 from GST cut, govt spend on infra

With regards to supplies to the defence sector, Ashok Leyland claimed to have a strong orderbook with the next 18-24 months its manufacturing capacities being fully booked.

The combined effects of GST rate reduction and boost in government spending on infrastructure projects will help see growth in sales of medium and heavy trucks surpass the initial estimate projected at the beginning of the year, said a senior executive of Ashok Leyland.

“In the beginning of the year, we were expecting that there would be a growth of 3-5% in the industry. Since September and October have been better, we think the growth (for the year) will be better,” Shenu Agarwal, managing director and CEO, Ashok Leyland responding to Moneycontrol.

When asked to quantify the growth for the year, Agarwal added, “It is too early to quantify, we will have to wait for 30-45 days. In the second half we see lots of infrastructure activities improvement with lots of capex from the government. We do think this will raise the prospects of the industry.”

The Chennai-based Hinduja Group flagship has ramped up its plant utilization rate. “We are at 70-80% capacity utilization now. In February and March, we hit the peak. By the end of this year or by Q1 of next year our bus capacity will reach more than 20,000 units a year,” Agarwal added.

Ashok Leyland through its electric bus-making subsidiary Switch Mobility is participating in the 10,900-bus supply tender floated by the state-owned Convergence Energy Services (CESL) for which the last date of bid submission is November 14.

The company further highlighted that Switch has turned positive at the profit after tax level. “We had shared earlier that we were expecting Switch to hit PAT positive sometime this year and we are happy to note that it has achieved that in H1. This is a combination of various factors and not just the volume increase but also due to the cost elements and due to the synergy between Ashok Leyland and Switch,” Agarwal added.

Within the next two months, Ashok Leyland will start commercial production at its greenfield plant in Lucknow. It has already started pilot production there which includes testing of equipment. Besides electric buses the plant will also make CNG and diesel vehicles also.

With regards to supplies to the defence sector, Ashok Leyland claimed to have a strong orderbook with the next 18-24 months its manufacturing capacities being fully booked.

“So actually, right now, our challenge is execution and not receiving more orders, because we have sufficient orders available and in the pipeline that will keep our plants and factories busy until next 18 months or so,” Agarwal added.

Plans are also afoot to set up a battery pack and cell manufacturing plant. Ashok Leyland executives said that the process of evaluating the location for the factory is underway.

“We are in touch with several state governments and by December end of January first half we will take a call on this the location of the plant,” Agarwal added.

Phase 1 of this investment will be Rs 500 crore for pack assembly that will be ready in 12-18 months. Phase 2, which will involve cell manufacturing, will entail a larger investment which will push the overall investment figure to Rs 5,000-10,000 crore.