← Throughline · holding view Deep analysis ↗ Q4 FY26
ASHOKLEY Ashok Leyland Ltd · Auto OEM Q4 FY26 · concall
Pattern: fy27 demand outlook fuel

Record cycle peak (Q3FY26 EBITDA 13.3%, Q4FY26 14.6%) gave way to margin squeeze in Q1FY27 (10.1%) as steel/rubber costs surged.

1 deflection · 2 weak · 11 clean — pushback across 3 of 14 Q&A turns

Focused evidence 3 of 14

Kapil Singh · Nomuraweak

What are the demand signals you are observing given fuel price hikes? Any change? And what is the FY27 outlook for MHCV growth? Export outlook?

Since October, market has grown strongly on MHCV and LCV. GST rationalization reduced prices ~10% and triggered replacement of aged fleets. Q3, Q4 very strong; April positive. In May, no significant MHCV/LCV slowdown but diesel availability sentiment is affecting logistics in some areas. Resilience of demand based on GST and replacement factor is protecting the baseline. Most large fleet owners are sticking to expansion plans despite diesel price increases. Exports: demand is intact in GCC, Africa, SAARC even with oil price rises. However export volumes may be affected by logistics and the RAK factory had to drop production due to local challenges - but normalizing now.

Pramod Kumar · UBS Securitiesdeflection

What is the Q1 FY27 MHCV industry growth range? Given macro uncertainty, what is the bottom case growth scenario for the full year?

Cannot give a specific estimate - would be shooting in the dark. Two key observations: base level CV demand has been very resilient even after war, diesel price hikes; fleet owners are still sticking to expansion plans. Even until last week after diesel price hikes, customers have not changed plans. If there is a setback in Q1/Q2, demand will not go away permanently - it will convert into pent-up demand. Fleet aging at all-time high, GST-improved TCO fundamentals are strong. Even with a temporary dip in Q2, should come back in Q3/Q4. Q1 industry level CV performance should be better than last year Q1.

Pramod Kumar · UBS Securitiesweak

On margins near term - given commodity pressures, demand potential softness, and pricing limits, what is the margin outlook for next 2-3 quarters?

Two types of costs: controllable (value engineering, e-sourcing, commercial negotiations) and non-controllable (commodities). Can offset commodity costs through controllables only up to a certain extent. Cross-functional teams formed to go account-by-account on operating expenses. In Q4, more than recovered commodity increases through savings. For Q1, the gap seems somewhat manageable but need to wait and see. The combination of price increase taken (1%-1.5%) and cost control is what they are counting on. Shenu added: hoping to neutralize through price increases and cost controls - not willing to sacrifice programs that have future positive impact even if demand dips temporarily.

▸ Other Q&A (11)
Kapil Singh · Nomura

How much was the Q4 price hike? What was commodity cost pressure in Q4? What is the Q1 FY27 outlook on pricing and commodity?

Q4: price increase of about 1% effective January, recovered for the full quarter. Commodity costs increased but value engineering, e-sourcing, and commercial negotiations more than offset the commodity increases - that is how gross margin was managed. For Q1 FY27: price increase of about 1%-1.5% taken but will need to watch whether sustainable for the full quarter. Commodity cost - significant increase has happened predominantly in steel - will be a challenge in Q1. Too early to give a specific range.

Mumuksh Mandlesha · Anand Rathi Institutional Equities

Post GST, good demand from small transporters. How has that changed with vehicle price hikes, diesel disruption?

GST had most positive impact on LCVs, then ICVs, then heavy-duty trucks. Tipper demand strongest due to infrastructure. Fleet owners started surging from December onwards after calculating real impact of GST input tax credits. No price increase taken between October and March - April 1 price increase of 1%-1.5% is very manageable relative to the 10% GST benefit. Ground-level challenge is diesel availability in certain pockets (not nationwide) - government says no supply shortfall. Fleet operators met in Eastern zone still sticking to 12-18 month expansion plans.

Mumuksh Mandlesha · Anand Rathi Institutional Equities

Retail vs fleet institutional buyer mix, and FY27 capex/investment plans?

At industry level for heavy-duty trucks: retail is about 55-60%, rest is fleet. For ICV and LCV, retail proportion much higher. FY27 capex plan: INR750 crores to INR1,000 crores. Investment in subsidiaries will be need-based - HLF, HHF and OHM may require funds; Switch is now profitable (PAT INR100+ crores) and doesn't need capital. Optare GBP30M of GBP80M already repaid; balance to be paid based on requirement.

Binay Singh · Morgan Stanley

What is the net cash figure? And can you share FY26 numbers for spares, defense and exports?

Net cash at end of year: INR5,899 crores. Q3 to Q4 jump in cash is typical of CV industry - high Q4 demand means high raw material purchases, and payables of those are at peak level in April-May. Compare YoY: INR1,650 crores higher than end of last year. FY26 revenue: spares ~INR3,800 crores, Power Solutions ~INR1,400 crores, exports ~INR3,200 crores, defense INR800 crores standalone / INR1,200 crores including subsidiaries. Q4 alone: spares INR1,060 crores, engines INR425 crores, exports INR1,100 crores, defense INR275 crores.

Binay Singh · Morgan Stanley

How to look at subsidiary performance next year? And update on CALB battery partnership?

HLF and HHF growing 15-20% YoY but may need capital infusion due to Tier 1 capital requirements. Switch is growing well and profitable for the first time (PAT ~INR100+ crores, strong order book of 1,600 vehicles). OHM may require funds to buy vehicles for STU operations. Battery business housed within Ashok Leyland capex, not a separate subsidiary yet. Groundbreaking done at Pillaipakkam near Chennai - construction starts in 8-10 weeks, target start of production Q2 next year. Phased approach: pack first (captive + energy storage), then expand capacity for non-captive, then cell manufacturing. PLI thresholds being worked toward, update in 4-5 months.

Amyn Pirani · JP Morgan

In Q4, we did not see the normal operating leverage on staff and other costs - any one-offs to be aware of?

Observation is correct. Q4 had provisions towards performance-related bonuses for executives that were made only after reaching threshold limits. Also commodity cost increases (though contained) in Q4 did not exist in earlier 3 quarters of FY26. Quarter-on-quarter there was 80bps improvement in gross profit but this did not help operating leverage.

Amyn Pirani · JP Morgan

Beyond raw material, should we factor in inflation in other costs - employee, diesel, gas - for FY27?

Yes - transportation expense (chassis from plant to selling point) depends on fuel price and will go up. Conversion cost on raw material side will also increase. INR weakening (if it continues) will add to import costs. These are the identifiable other expense increases beyond commodity. Shenu added that pricing discipline in the industry should help: industry should take multiple price hikes during the year.

Raghunandhan NL · Nuvama Research

Within MHCV, which subcategories would outperform and underperform? And what is the LCV and defense outlook?

Heavy-duty mix: tipper and multi-axle segments should be the fastest-growing this year, followed by trip-trailers (used in mines). Infrastructure, construction, mining-related demand will be strong. ICV may moderate from Q4 levels (not vs last year - volumes will still be higher YoY). Tractor long haul (non-steel/cement/iron routes) may also moderate vs Q4 levels. Heavy-duty mix improvement is positive for margin since heavy-duty trucks are more margin-accretive. Defense: order pipeline at all-time high above INR1,500 crores; revenues grew INR1,200 crores including subsidiary in FY26. Confident of at least 20% growth in defense for next few years.

Vipul Agrawal · HSBC

New truck series launches - how do you see them helping recover/gain market share? Are there still white spaces in the portfolio?

MHCV market share has gained substantially over 4 years (FY22-FY26). Some market share loss in limited segments (higher horsepower tractor and tippers) was due to being delayed in coming to market - now that HIPPO and TAURUS are in the fold, these are the best in industry on power, torque, mileage. Impact will be visible from Q2 (Q1 dispatches limited by production ramp-up lead time). Tipper and tractor trailer segments should see clear positive impact. White spaces in LCV: currently participating in 50% of the LCV market - new products in pipeline to expand coverage.

Sridhar Kalyani · Antique Stock Broking Limited

Defense order book of INR1,500 crores - how much executes this year?

Different orders have different supply schedules - most Army/MOD orders cannot be fulfilled in 1 year alone (supply schedules range 1-3 years). The full order book won't all deliver this year. However, new orders will be received during the year which will also build the topline. At least 20% growth in defense is the trend they hope to continue.

Sridhar Kalyani · Antique Stock Broking Limited

How do you look at ICV and LCV space in coming quarters? And geographically, which regions expected to do well?

LCV demand was up 20-25% at industry level in Q4 - moderation vs Q4 is expected but volumes will still be higher YoY. Moderation in LCV/ICV from Q4 levels is actually positive for mix as heavy-duty is more margin-rich. Geography: mining-related states should be strongest (Maharashtra, Orissa, Chhattisgarh, Jharkhand, West Bengal) plus infrastructure and construction projects broadly.

▸ Prepared remarks (4 blocks)
Good afternoon, everyone, and thank you for your trust in Ashok Leyland, as always. I am pleased to report that FY '26 has been a truly milestone year for our company. We achieved all-time high CV volume, revenue, profit and cash surplus, marking the best annual performance in Ashok Leyland's history. Building on FY '25 record results, we have delivered another year of broad-based growth across all our core businesses, demonstrating the resilience of our operations and the trust that our customers place in us. Basis standout performance of FY '26, the Board of Directors have recommended a second interim dividend of INR2.50 per share. Q4 FY '26 provided a strong finish to the year with a solid performance that reflects the strength of demand in the CV industry and our disciplined execution. Domestic vehicles volume growth led by GST 2.0 rate rationalization gained further momentum during the quarter. Q4 domestic MHCV industry volume was higher <strong>21.5%</strong> Y-o-Y. And for full year, it was higher 12% Y-o-Y. Ashok Leyland domestic MHCV volume grew in line with industry with market share of a healthy 30.8% for the year. Ashok Leyland domestic MHCV trucks volume for FY '26 was 105,905 units with market share of 30.2% and MHCV bus volume was 20,840 units with a market share of 34.1%. Ashok Leyland continued its leadership position in MHCV buses. Ashok Leyland domestic LCV volume for Q4 was at 21,801 units, higher 23% Y-o-Y, growth better than that of industry. LCV VAHAN market share for Q4 was 12.8% with a gain of 90 basis points on Y-o-Y basis. For full year, LCV volume was 74,322 units, higher 12% Y-o-Y and full year LCV VAHAN market share stood at 12.7%, higher 80 basis points Y-o-Y. This is the highest ever annual volume recorded in LCV. Our export volumes for full year reached a historic high of 18,082 units, delivering a robust growth of 18.5% over the previous year's 15,255 units. For the quarter, volume at units, 5,322 units was marginally lower Y-o-Y, primarily due to international logistics issues faced in March. Overall, CV volumes scaled a new all-time high of 220,437 units, surpassing the previous peak of 197,366 units achieved in FY '19. This includes defense vehicles. Our non-CV businesses also demonstrated remarkable growth Domestic aftermarket revenue for the quarter was up 11.2% Y-o-Y and higher 9.5% for the full year. FY '26 revenue from Power Solutions business was higher by 16.4% Y-o-Y. Revenues from defense business, including revenue from our defense subsidiary, ALDS was higher 20% Y-o-Y. Defense order book and tender win pipeline remains ever strong. Coming to financial performance, Ashok Leyland achieved all-time high quarter 4 revenue, EBITDA and operating PBT. Revenue for Q4 was at INR14,161 crores, higher by 19% Y-o-Y. EBITDA was at INR2,066 crores, higher by 15.3% Y-o-Y. FY '26 revenue was at INR44,007 crores, higher by 13.6%. EBITDA for the quarter was at INR2,066 crores and EBITDA margin was at 14.6%. With full year EBITDA margin at 13%, we have now truly entered the teen bracket. This is an improvement of 30 basis points from last year. Q4 PBT before exceptional items was at INR1,909 crores, higher 14% Y-o-Y. PAT, excluding exceptional items, was at INR1,405 crores, higher 13% Y-o-Y. Full year PBT before exceptional items was INR5,163 crores, higher 22% Y-o-Y and PAT, excluding exceptional items, I repeat, excluding exceptional items, was at INR3,914 crores. May note that during Q3 of FY '26 on account of the new labor code, there was a onetime charge of INR308 crores. Material cost as a percentage of revenue for Q4 was 71.4%, higher by 80 basis points on Y-o-Y basis. For full year, the ratio was at 71.4% again, 10 basis points higher than last year. Despite commodity headwinds, we could maintain and even improve our gross margins. This was made possible through better price realizations, rigorous cost-saving efforts and continued focus on improving product and business mix. Capex for the quarter was at INR203 crores and cumulatively at INR1,050 crores for the year. Most of the capital expenditure has been deployed towards new products, including future technology development, alternate powertrain technologies and electric vehicles. Investments in subsidiaries in Q4 was INR371 crores, primarily towards repayment of loans in the off-tier books. Investments for full year was at INR387 crores.
Our cash position net of debt has got even stronger. We had net cash of INR<strong>5,899 crore</strong>s at the end of the year, an increase of more than INR1,650 crores Y-o-Y. We are resolutely pursuing the path of premiumization, working diligently on delighting our customers with superior products and services and maintaining operational discipline. The highlight of the year was our launch of HIPPO tractors and TAURUS tippers with industry's best power and torque delivering best-in-class TCO. In MAV category, we launched new trucks with improved powertrain of 280 HV. In LCV segment, we launched new 4.1 tone Bada Dost with industry best payload. We also launched our most advanced LCV product, Phoenix for the export markets. Our product pipeline remains strong with substantial portion of our capex being allocated in creating new product capabilities. For strengthening our service delivery, we added more than 100 touch points each in our MHCV and LCV businesses. More than 45% of our touch point additions have been in the North and the Northeast regions. At the end of FY '26, Ashok Leyland network has a total of 2,104 touch points, 1,159 for MHCV and 945 for LCV. In international markets, we expanded our network to 4 new countries in the previous year. A particularly noteworthy achievement in FY '26 was our progress in electric mobility and alternative propulsion vehicles, areas that are critical to our future growth. During Q4 FY '26, we announced groundbreaking for a greenfield battery pack manufacturing facility at Pillaipakkam near Chennai, intended to support our electric mobility programs. Our EV subsidiary, Switch Mobility India delivered a standout performance, attaining net profitability in FY '26, a major milestone in our electrification journey. During the year, Switch India achieved market leadership position in electric buses as well as in 2 to 4 ton electric LCV market. Switch significantly scaled up deliveries of electric buses and light vehicles during the year with 1,530 buses, higher 238% Y-o-Y and 1,600 electric LCVs, higher 56% Y-o-Y. Order book at the end of the year for Switch India stood at 1,600 units. OHM Mobility, our E-MaaS subsidiary, improved operational fleet to over 1,400 e-buses now. Hinduja Leyland Finance, our vehicle financing subsidiary delivered robust growth in FY '26 with its AUM expanding by 24 years year-on-year to approximately INR59,000 crores. HLF's strong performance not only contributed to our consolidated results, but also enabled vehicle sales through continued financing support to our customers. HLF's PAT at INR491 crores was higher 20% Y-o-Y. Hinduja Housing Finance, or HHF, similarly saw its AUM grow by 15% Y-o-Y to approximately INR16,000 crores on back of steady demand. HHF PAT at INR387 crores was higher 4% Y-o-Y. Both HLF and HHF maintained healthy asset quality with consolidated net NPAs at 1.4% approximately, delivering solid profitability alongside prudent risk management augurs well for the future growth of both the financial companies. Reverse merger of HLF with NBL Ventures is progressing as per plan and should get consummated within this or the next quarter. We remain focused on our ESG commitments. Our Road to School and Road to Livelihood program continues to grow, extending their reach to about 6.3 lakh students now. Our Dow Jones Sustainability Index ESG score has improved significantly, and we are now in global top 2% of the industrial engineering and electrical equipment companies. In our commitment towards RE100, we have achieved a 77% RE status against 69% in FY '25 with our Tamil Nadu plants now at 91% RE100. In summary, FY '26 was an outstanding year for Ashok Leyland as we executed our strategy effectively and delivered record results while planting seeds for future growth. Looking forward, we are entering the new fiscal year with cautious optimism. Demand drivers for commercial vehicles remain positive overall. However, we are mindful of the macroeconomic headwinds such as global economic uncertainties, commodity price volatility and diesel price increases. However, our foundations remain strong. We will keep innovating attuned to our customers' need with intense operational discipline and heightened focus on prudent fiscal management. Ashok Leyland is well positioned to navigate the road ahead and continue creating long-term value for our stakeholders.
Revenue for Q4 was at INR<strong>14,161 crore</strong>s, higher by 19% Y-o-Y. EBITDA was at INR2,066 crores, higher by 15.3% Y-o-Y. FY '26 revenue was at INR44,007 crores, higher by 13.6%. EBITDA for the quarter was at INR2,066 crores and EBITDA margin was at 14.6%. With full year EBITDA margin at 13%, we have now truly entered the teen bracket. This is an improvement of 30 basis points from last year. Q4 PBT before exceptional items was at INR1,909 crores, higher 14% Y-o-Y. PAT, excluding exceptional items, was at INR1,405 crores, higher 13% Y-o-Y. Full year PBT before exceptional items was INR5,163 crores, higher 22% Y-o-Y and PAT, excluding exceptional items, I repeat, excluding exceptional items, was at INR3,914 crores. Material cost as a percentage of revenue for Q4 was 71.4%, higher by 80 basis points on Y-o-Y basis.
For full year, the ratio was at <strong>71.4%</strong> again, 10 basis points higher than last year. Despite commodity headwinds, we could maintain and even improve our gross margins. Capex for the quarter was at INR203 crores and cumulatively at INR1,050 crores for the year. We had net cash of INR5,899 crores at the end of the year, an increase of more than INR1,650 crores Y-o-Y. On FY27 capex: next year also, the plan would be to incur about INR750 crores to INR1,000 crores on the capital expenditure side.
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