Ashok Leyland sees growth in MHCV segment

Our Bureau. Chennai | Updated on November 09, 2020

Gopal Mahadevan, CFO, Ashok Leyland. - Bijoy Ghosh (file photo)

Commercial vehicle manufacturer Ashok Leyland on Monday said that its acyclical businesses such as aftermarket, light commercial vehicle (LCV), power solutions and defence have been growing significantly, contributing well to the company’s revenue and also to the overall scheme of profitability.

“Our MHCV (Medium and Heavy Commercial Vehicle) volumes have jumped 8.5 times to 6,994 units on a sequential basis from Q1 to Q2 during the current fiscal. Our acyclical revenues are significantly higher at 55 per cent in the current quarter, which has helped us improve our bottom line,” said Gopal Mahadevan, Whole-time Director & CFO, Ashok Leyland.

He was addressing a virtual press conference to discuss the company’s Q2FY21 performance.

₹147-cr net loss

The truck and bus maker has reported a net loss of ₹147 crore for the quarter ended September 30, 2020 as against a net profit of ₹39 crore in the year-ago quarter and a revenue of ₹2,837 crore in the latest quarter as against ₹3,929 crore in Q2FY20 due to a 28 per cent decline in vehicle sales.

He said that domestic MHCV roughly accounted for 45 per cent of the total revenues during the second quarter, down from 57 per cent for the same quarter last year while the share of non-MHCV business (including international) increased to 55 per cent during the second quarter.

“The mix is obviously in favour of domestic non-MHCV business predominantly because the MHCV taking-off happened only in Q2 and also to note that the non-MHCV businesses actually started performing much more than expected,” Mahadevan said.

“Aftermarket service revenues from May onwards have been consistently growing and almost on par with last year. Similarly, the Power solutions business as well as defence in Q2FY21,” he added.

He further added that the company is positive on the LCV segment, which will help it to improve volume and market share quite significantly by the end of the fiscal.

Mahadevan also pointed out that year-on-year vehicle sales volume is not strictly comparable since the pandemic has virtually brought all industries to a standstill in the first quarter, Mahadevan said that MHCV for the whole industry has actually jumped 4.5 times to 24,552 units in Q2 sequentially as compared to Q1 and it is almost at 50 per cent of volumes last year same quarter.

Similarly, he said, Ashok Leyland’s MHCV exports in the second quarter stood at 935 units as compared to 298 units in the preceding quarter.

Citing industry estimates, Mahadevan said the domestic MHCV industry is expected to degrow by 25-30 per cent for the full year. In the first two quarters, it has already witnessed 75 per cent de-growth so if the total dip in volumes this year would be in the range of 30 per cent only, it means that the industry will have to grow in the next two quarters.

Published on November 09, 2020

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