Ashok Leyland Expects Commercial Vehicle Demand To Improve After Diwali
The company is also seeing a pick-up in the replacement market, says CFO Gopal Mahadevan.
Ashok Leyland Ltd. expects demand for commercial vehicles, the worst-hit segment within the slowdown-battered automobile sector, to improve in the upcoming quarters as the impact of the Covid-19 pandemic has started to wane.
“Demand post Diwali should go up,” Gopal Mahadevan, whole-time director and chief financial officer at the Hinduja Group’s flagship company, told BloombergQuint in an interview. An increase in infrastructure investment by the government and improvement in core industries such as cement and steel should aid demand for commercial vehicles, he said.
The company, according to Mahadevan, is also seeing a pick-up in the replacement market. Also, the funding availability for large fleet operators has improved compared to first-time buyers. “Caution lending is getting reduced. As the industry starts to grow, we will see things improving,” he said.
Ashok Leyland echoed the optimism shared by peer Tata Motors Ltd. Like other categories, commercial vehicle makers, too, were reeling from a decline in volumes, hit by an economic slowdown and further aggravated by a revision in load-carrying norms. Then the lockdown to contain the Covid-19 pandemic led to a washout in the initial months. While other segments witnessed a gradual recovery as the nation eased the stay-at-home curbs, commercial vehicles remain under pressure.
The domestic commercial vehicle industry, according to ICRA, is expected to contract 25-28% in the financial year ending March 2021, taking volumes to the lowest in more than a decade.
Mahadevan said Ashok Leyland has lined up Rs 750 crore as part of its capital expenditure for the ongoing fiscal. It has spent Rs 290 crore till the quarter ended September. For any revision in capex spend, Mahadevan said will done after the company has greater visibility in the fourth quarter.
Ashok Leyland suffered a loss of Rs 147 crore in the July-September period against a profit of Rs 39 crore a year ago. Its revenue from operations stood at Rs 2,837 crore, down 28% over the year earlier.
Mahadevan also cautioned that the Covid impact is not 100% over, and the company will need to neutralise the impact on its productivity in case of another wave of infections in the country.
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