Given the significant improvement in net cash, why is interest plus other income line not showing meaningful improvement, and will that change next year?
Year-on-year other income is at around the same level, INR250 crores. Finance cost has come down by about 15%, reflective of the better working capital position. Shenu confirmed we will see further improvement going forward.
On defense - how is it shaping up, what is the product pipeline for the next couple of years, and what is the order book?
Order book is very strong and at an all-time high - we are above INR1,000 crores in defense top line and confident of doubling in 2-3 years based on order pipeline. We are also looking to expand defense beyond mobility into localization of defense equipment and supplies, but those are long-term given defense's long gestation period of around 5 years. In the near term, we are confident of growth from current vehicle portfolio.
On discounts - are absolute discounts per truck stable but rising indirectly via longer AMC tenures? How will AMC affect spare parts revenue growth?
We have stopped tracking discounts and are tracking net sales realization, which is moving favorably across quarters. On AMC, there is good possibility and good margins, but it is too early to comment - the market will need to mature.
On defense - hardware exposure versus the recent shift to electronics. Any medium-term thought on JVs or technology partners to capture incremental relationship benefit?
The shift to electronics and other equipment doesn't impact our mobility domain - sensor, radar or gun-based equipment all need to be moved. We are working on a strategic roadmap to expand beyond mobility, and once finalized we will share our defense beyond mobility ambition.
On the industry outlook, peers indicate single-digit volume growth in FY '26 for the CV industry. What magnitude of growth do you expect for MHCV, bus, and LCV segments, given AC cabin norms, steel safeguard duties and broader government capex uncertainty?
More or less, we agree with peer estimates that this could be a positive year for the CV industry. Government capex is back in shape, monsoon estimates are strong, core sector growth is positive, and there is pent-up demand from high fleet ageing in both trucks and buses. Q1 may not see much growth since last year's Q1 grew 10%, but Q2 should see substantial growth versus last year's negative 12% to 15%, and overall we are pretty optimistic on FY '26.
Can you give a pecking order across buses, trucks, LCVs in terms of where there is more growth momentum versus where it might be relatively low?
Buses should stand out, with pent-up demand from both STUs and private operators. The 55-ton tractor trailer segment should also continue to do well. Tippers, which underperformed last year, should pose positive surprises with core sector activity gaining momentum, especially mining and construction. LCV, ICV trucks and MAVs are not facing any visible headwinds either.
On steel safeguard duties and AC cabin norms coming in October, what is the rough cost inflation expected from each, and what does that mean for medium-term margin goals?
AC mandate impact on price could be 0.5% to 2% depending on model, and customers are accepting since drivers are demanding AC trucks. On steel, Q1 prices may rise INR3 to INR5 per kg with a little more inflation in Q2, but since the safeguard duty is for 200 days only, we expect 3 to 4 maybe max 5 months of impact. Other commodities like rubber are coming down, so the net impact wouldn't be very dramatic; Q1 is a challenge, Q2 stabilizes, and Q3 onwards it should be neutralized.
On the cost levers over the next 1 to 2 years - beyond realizations, what other areas can drive cost reduction or margin expansion over the next 2 to 3 years?
Three consistent levers - product premiumization to add value at variant, model and segment level so we can charge more; cost leadership where Ashok Leyland's per-vehicle cost is lower than peers and we have set ambitious FY '26 cost-savings targets starting Q1; and aftersales service excellence to reduce vehicle downtime, which is a revenue-generating product where 8 hours out of service equals 8 hours of customer revenue lost.
On capex and investments in FY '26 - what is the target, what areas, and on EV buses, why have orders not come through as hoped?
Capex in FY '26 will be around INR1,000 crores, similar to FY '25's INR950 crores, focused on alternate fuel and new technologies including critical EV components like battery and motor through the eV centres of excellence. On subsidiaries, Switch India may need INR100-200 crores, OHM may need INR300-400 crores, so total investment of INR500-750 crores. Hinduja Leyland Finance may also need support, which we will provide given our cash situation.
Could you elaborate on the EV bus landscape, given the order momentum hasn't matched earlier hopes?
The country has a very positive outlook with government planning to induct 14,000-15,000 electric buses. The aggregation channel for state STU demand and the payment security mechanism for GCC contracts is now in place, so we should see healthy growth in electric bus adoption starting with STUs and trickling to private over the next few years. Switch is very well positioned with best-in-class product and technology and is ready to take higher market share.
How is the current up-cycle different from previous up-cycles, performance over next 1-2 years, and the impact of Western DFC operationalising in second half on competition from railways?
India is on a different trajectory and even if a year goes down, the drop wouldn't be as dramatic as in the past. Ashok Leyland has reduced dependence on cyclical MHCV - EBITDA breakeven can be reached at very low MHCV volume per month because non-MHCV contribution margins cover most fixed costs. On DFC, it will impact but the underlying CV freight demand at 6-8% economy growth and fleet ageing of 9-10 years versus historical 7-7.5 means CV industry should continue to grow.
Would noncyclical revenues be roughly 50% of revenue, and on exports, which regions are expected to do well in FY '26?
Non-cyclical share is around 50%. Exports grew 29% with substantially better margins by acting local in each market - opening assembly, sourcing, hiring locally. Beyond GCC, SAARC and Africa, we want to open up ASEAN as a new home market - we have distribution partnerships in Malaysia and Philippines and are looking at Indonesia and Thailand. Engines, defense, aftermarket parts (15% growth) are all higher-margin businesses, and we are confident defense will double in 2-3 years.
On HLF - book size and growth, current network, and any timeline for the reverse merger and listing?
Consolidated AUM is INR61,700 crores (roughly INR62,000 crores), 25% YoY growth. Standalone AUM is INR48,000 crores and Hinduja Housing Finance is INR14,000 crores up 31%. Revenue from operations is INR6,281 crores from INR4,700 crores last year, a 35% increase. PAT up 21%, GNPA at 3.5%, NNPA at 2.1%, both lower than last year. Listing was earlier indicated for Q1 FY '26 but is delayed pending one or two important approvals; once received, it wouldn't take more than 1-2 quarters to list.
On margin expansion over the last 2 years - raw material per vehicle on absolute basis has come down. Are there specific measures or is it just mix?
When the industry shifted from BS IV to BS VI in 2020, the material cost base expanded heavily, which created opportunities to relook and reduce costs through engineering analysis of real-world load conditions. Specifically at Ashok Leyland we work closely with suppliers on alternatives, run tear-down analysis of competitor products, and look beyond material to other variable and fixed costs to remove waste. We have done slightly better than industry on cost savings.
On the sharp working capital reduction this year - is this a one-off or the new normal?
Finished goods inventory was sharply cut from earlier 8,000-9,000 vehicles year-end to below 7,000. Production inventory is also low. Credit to dealers has been brought down on the MHCV side, moving toward the original cash-and-carry route - now less than 1,000 vehicles on credit at month-end with money collected in the first week of the next month. Shenu added that financial discipline on the front-end and a new pull-based replenishment model will continue to reduce inventory; payables timing is partly Q4 effect.
Average vehicle age is 10 years - given steep price hikes in last 5 years, would 10 years be the new normal? What triggers pent-up demand?
It should normalize at around 8 to 8.5 years - higher than the historical 7.5 due to better technology and reliability, but still a gap from current 10 years. Other factors play a role and FY '26 factors are looking positive, so although we are projecting single-digit growth, there may be upside surprise.
On EV trucks - how has product performance been on key parameters, what is client feedback, and what improvements are planned for FY '26-27?
EV truck penetration is under 1% but Ashok Leyland has the highest volume in medium and heavy-duty EV trucks. We have the widest range with Boss EV (14-19 ton GVW), recently launched 55-ton tractor trailer EV, and India's first 100% EV port terminal tractor showcased at Auto Expo for commercial launch within 1 year. Our technology and product maturity is far better than emerging Chinese competition. LCV electric is doing well and projected to reach 20% penetration by 2030-2032. We have the largest fleet of hydrogen ICE trucks in the world and LNG launches are coming this year.