Ashok Leyland earmarks capex of Rs 750-800 crore for FY25

Ashok Leyland has announced a capital expenditure of approximately Rs 750 to 800 crore for the current fiscal year, focused on new product innovations. 

Ashok Leyland's MD and CEO Shenu Agarwal said during a post-results conference call, "This capex includes new products because right now, we are not expanding on our capacity. We have sufficient capacity for at least the next two to three years."

The recently concluded elections and Budget that focuses on infrastructure, is likely to spur demand for commercial vehicles. "The kind of allocation that has been given to road and transport, augurs very well for the overall truck and bus industry in India," Agarwal said, emphasising the linkage of economic development with that of the commercial vehicle industry.

Elaborating on the different segments that Ashok Leyland operates in, Agarwal noted that the increased investment in infrastructure is expected to drive higher sales of tippers. Tippers have already experienced rapid growth over the past few years, a trend that is likely to continue. Although the first quarter saw a slowdown in momentum due to the elections, with many projects on hold, the aforementioned factors are expected to accelerate the construction and mining sectors, the top executive added.

Further, the tractor segment of trucks has performed exceptionally well over the past two years. This robust performance is expected to persist going forward.

Additionally, the intermediate commercial vehicle (ICV) segment holds significant potential. The e-commerce sector is projected to grow at a compound annual growth rate (CAGR) of over 20% in the coming years, which should positively impact the ICV market.

Lastly, the bus segment has rebounded strongly post-COVID. The pandemic had severely impacted this segment, but there is now substantial pent-up demand. Furthermore, there has been a noticeable trend over the past couple of years for state transport organizations to replace their ageing fleets. This replacement cycle is expected to sustain growth in the bus segment, Agarwal continued.

The positive expectations from the top executive come amidst strong Q1FY25 results, which reported, Ashok Leyland’s domestic MHCV volume growing by 8% and market share at 30.7%. 

The bus market share was significantly up at 33.3%. The company’s domestic LCV volume in Q1 FY’25 was 15345 units, 4% higher than Q1 of last year (14821 units). The Company’s Export volume in Q1 FY’25 was 2324 units, 5% higher than Q1 of last year (2222 units).