Growth in 2016 to be key driver for auto sector: Ashok Leyland

Better network reach and new products aided the growth in the third quarter of FY16, says Gopal Mahadevan, CFO, Ashok Leyland.The company reported a 21.6 percent jump in revenue to Rs 4,085 crore and operational efficiency (EBITDA) improvement of 78.8 percent to Rs 430 crore in the third quarter ended December 31. The focus was on improving pricing efficiency and margins of the company and hence, discounts were marginal in Q3, he says. Robust growth seen in commercial vehicle (CV) segment has been contrary to overall economy, he says adding that growth in January look encouraging for the sector. Mahadevan expects Q4 to positive for the CV segment. “Growth in economy will be one of the key drivers in 2016,” he says. Below is the verbatim transcript of Gopal Mahadevan's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Latha: What remains your volume guidance now in the industry for FY17? Will this 30 percent mark that you have given us, looks sustainable for FY17 as well?A: In Q3 our growth in volumes was at 38 percent as compared to the industry growth of 22 percent on a year-on-date (YTD) basis. We have grown at 54 percent as against robust growth by the industry at 30 percent. We have been outpacing the industry growth because of better network and reach and products that we have been introducing at very regular intervals. We hope to maintain this performance as we move forward into the New Year but at the moment it is little too early to give an industry volume guidance. Let Q4 be over and possibly we will give our feel of where the industry is going into FY17.Sonia: Are you confident that 25 percent plus growth for the industry will sustain in FY17?A: A lot of it is going to depend on the way the economy grows. If you look at it, the commercial vehicle industry has been one of the sectors that has been contrarian to the overall economy and has been posting very robust results consistently. The growth in Q3 of 22 percent is a good rate given that Q3 typically is a slow growth quarter because of the year end, so that would be rebadgingof vehicles and this time we must remember that there was a lot of demand on in the month of September because there was the government regulation that were coming in from October 1 but despite that we saw the industry growing at 22 percent and January has been encouraging so we believe that Q4 should also augur well for the industry.Having said that, as we move into the New Year, one of the key drivers would be the growth the economy is going to post. So if the economy does well, I am confident that the industry as well should do well.Sonia: How has the pricing environment been in the industry as a whole and has there been any reduction in the kind of discounts that you have had to offer?A: The discount level continues to be where they are, in fact there was a marginal increase in discount levels but Ashok Leyland pursues its policy of insuring that we continue to improve margin. While we would possibly restrain our discounting, we have also been having periodic price increases to ensure that as we are able to reach customers further and better and deeper with better products also, we are also able to improve the financial efficiency of the company. So while the discounting has been at the same level or marginally higher than Q2, we have also been able to improve the pricing efficiency as far as Ashok Leyland is concerned.