We are very focussed on profitable growth: Shenu Agarwal, Ashok Leyland

"Overall, we think the CV industry will grow at least 10% or more. The LCV industry may be a little bit sluggish, it will still show a growth momentum, but I think the growth could be limited to mid to high single digit," says Shenu Agarwal, MD & CEO, Ashok Leyland

It has been an exceptional quarter on the back of the buying factor due to the BS-VI transition. But how is the demand holding currently? What is the outlook for the full year?
Yes, we are very optimistic about FY24 in all the product segments, but we think because bus is coming from very low base after COVID, the bus demand will see the maximum growth and recent CRISIL report suggested roughly 30% growth in bus segment over FY23 which we also agree with.

As far as M&HCV trucks are concerned, the growth is expected to be 10% to 12% as per CRISIL.
Overall, we think the CV industry will grow at least 10% or more. The LCV industry may be a little bit sluggish, it will still show a growth momentum, but I think the growth could be limited to mid to high single digit.

After 2019 we are seeing your margins in double digits. How suitable is this double-digit margin number going forward for the fiscal?
Yes, we are very-very focussed at Ashok Leyland on margin expansion and I will give you the reason. The reason is that the CV industry is going to change in many-many ways in the future and that all needs lot of investments in the coming years and we have no other option but to generate enough cash from our operations to be able to invest in this change.

Quarter four has been very good. It has been a double digit EBITDA quarter and we hope that in FY24 we can maintain kind of a double digit EBITDA trajectory for the whole year, that is our focus.

Your cash generation that has been healthy in Q4, Rs 2200 odd crores of cash has been generated. What are the plans to utilise it and how are you looking to increase your capacity?
Yes, see, we normally spend about Rs 500 to Rs 600 crores of capex every year. I think FY24 also we have earmarked roughly around Rs 600 to Rs 750 crores of capex. Now, most of this capex would go into product development and most of that would be focussed on alternative fuels also.

In terms of capacity, we think we have enough capacity going into the next two to three years, but yes, some amount of capex we would spend on debottlenecking some of the capacity as our manufacturing footprint is quite wide, so some amount of capex would be spent in manufacturing, but largely the focus is on product development and within product development, the focus would be on alternative fuels and new tech.

How are the sales pick up in the CNG demand post price revision? What kind of launches are expected for FY24?
See, the CNG, of course, because of the recent change in the policy on CNG prices we are expecting some uptick in demand on the CNG side. But the gap between diesel and CNG is still not good enough and therefore, we do not think that with the current prices, the CNG demand would be as high as it used to be. But still I think the prices are moving in the right direction. But as you know, CNG prices are going to be determined every month now based on some index and therefore we have to wait and watch how this moves, but Ashok Leyland is fully prepared with all its CNG vehicles across the product segments.

And how much order book do you currently have for switch mobility and given that it has more than 2000 buses order book?
Yes, I think we already have about 500 to 600 buses out in the market plying on the roads. I think our order book also is more than 2000 buses and in the future whenever these opportunities will come, as I said, we will evaluate them both on a commercial and strategic basis and we will see where to participate.

Right now FY23 has seen a hike in prices of vehicles, but now that commodity prices have somewhat stabilised, what is the outlook in terms of your price hikes?
Like I said, I think there is a good enough realisation in the entire industry that industry cannot sustain EBITDA levels of the current nature. I mean, 7%, 8%, 9% EBITDA is not a good EBITDA for industry because this industry is going to change the future and therefore companies have to generate a good amount of cash every year through their operations to be able to invest in this new future.

So, I think all the companies are going to be focussed on better price realisations, better margins and also reduction of their cost. So, to that extent, I would say Ashok Leyland is also very-very focussed on profitable growth.