The company’s management noted that their focus remains on profitability and has a target of improving EBITDA margins to mid-teens in the medium term.
24 May 2024 | 8018 Views | By Kiran Murali and Shahkar Abidi
With a focus on driving operating profit margins to the mid-teens over the next two to three years, commercial vehicle maker Ashok Leyland Ltd will abstain from discounting its products. The management said it would not give discounts for the sake of gaining market shares.
“Our focus on profitability ...
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With a focus on driving operating profit margins to the mid-teens over the next two to three years, commercial vehicle maker Ashok Leyland Ltd will abstain from discounting its products. The management said it would not give discounts for the sake of gaining market shares.
“Our focus on profitability remains. We are clear that we are not going to discount our products to win market share. We are confident that our market share wins will come on the back of our products and our expanding reach,” Ashok Leyland Chairman Dheeraj Hinduja told reporters in a post-earnings call today.
Hinduja’s comments come after the company reported its highest-ever profits and revenues in the financial year 2024. Its standalone net profit for the year jumped 90 percent to Rs 2,617.87 crore on the back of a strong improvement in profitability. Operating profit margin expanded to an all-time of 12 percent from 8.1 percent in the year-ago period.
Margins improved on pricing actions, lower input costs, particularly in steel prices, better mix, and cost savings. The company has already set a target of margins to be in the mid-teen range in the next 2-3 years. “Whether it is revenues, EBITDA margins, or profits, we have achieved all-time high numbers. This gives us even more strength to move towards our medium-term goal of mid-teen EBITDA,” Managing Director Shenu Agarwal said.
He added that many times on a month-on-month or quarter-on-quarter basis the company has to take a call on whether they have to discount against market pressures or whether we just focus on profitability. “To some extent, I would say during the last year also we had to take the call in favor of profitability, not in favor of market share,” Agarwal noted.
Ashok Leyland has a market share of around 31 percent in the medium and heavy commercial vehicle segment, while its share in the light commercial vehicle segment (2-3.5 tonnes) is over 20 percent. The company is now the market leader in the medium and heavy commercial vehicle bus segment while it is the second largest player in the 2-3.5 tonnes light commercial vehicle category.
The management said it is confident that the company’s product portfolio and strong future pipeline will help it improve its market share going forward. Ashok Leyland is also working to expand its reach across the country to gain more market.
“Our product portfolio is very robust, and our future pipeline is strong. We are confident that our product superiority and our expanding reach will help us to further improve our market share as well as our price realizations. Our team continues to relentlessly focus on cost management initiatives,” Agarwal said.
In the light commercial vehicle segment, the company plans to launch six new products in the current financial year with an eye on a 25 percent market share in the medium term. “Currently we address about half of the LCV market in India. We are looking to expand our product portfolio to cover at least 70-80 percent of the market in the next two years. LCV presents a huge potential for us to grow our CV volumes in the future,” Hinduja said.