Ashok Leyland Share Price

Ashok Leyland Limited Fundamental Analysis

This article is an attempt to study Ashok Leyland Limited, its business model, and industry fundamentals thereby determining if it can be the best investment for you.

Ashok Leyland Limited

Ashok Leyland Limited is an Indian multinational automobile manufacturer. It is headquartered in Chennai, India. Ashok Motors was established in 1948 before partnering with British Leyland in 1955 to become Ashok Leyland. The firm is now owned by the Hinduja Group.

Ashok Leyland comes second among the largest commercial vehicle manufacturers in India, third among bus manufacturers globally, and tenth among manufacturers of trucks worldwide. It also operates nine plants and also makes spare parts and engines for industrial and marine applications.

The company has a product range from 1T GVW (Gross Vehicle Weight) to 55T GTW (Gross Trailer Weight) in trucks, 9 to 80-seater buses, vehicles for defense and special applications, as well as diesel engines for industrial use, genset and marine applications.

Is the Automobile Sector a Goldmine Investment?

The Automobile sector in India presents a promising investment opportunity. India is the world’s third-largest automobile market. The sector produced a total of 25.93 million vehicles, including passenger vehicles, commercial vehicles, 3-wheelers, 2-wheelers, and quadricycles from April 2022 to March 2023.

India holds a strong position in the international heavy vehicles arena as it is the largest tractor manufacturer, second-largest bus manufacturer, and third-largest heavy truck manufacturer globally. The EV market is expected to grow at a CAGR of 49% between 2022-2030, creating 5 million direct and indirect jobs by 2030. The Indian trucking market is expected to grow over 4x by 2050.

Looking at these considerations, it seems that Ashok Leyland Limited is a good investment choice being the second biggest commercial vehicle manufacturer in India and the third largest bus producer worldwide.

Its strong presence in heavy commercial vehicles and wide range of offerings make it well-placed to take advantage of expansion prospects in the Indian automotive industry.

Who are Ashok Leyland Limited competitors in the Automobile Sector?

Ashok Leyland Limited operates in a competitive environment in the Automobile Sector. Some of its key competitors include:

• Tata Motors Ltd.
• Mahindra & Mahindra Ltd.
• Maruti Suzuki India Ltd.
• Eicher Motors Ltd.
• Force Motors Ltd.
• TVS

History of Ashok Leyland Limited

Ashok Leyland Limited is one of India's leading commercial vehicle manufacturers. Here's a brief history of the company:

• Incorporation: Ashok Leyland Limited, an Indian multinational automotive manufacturer, was founded in 1948 as Ashok Motors. It became Ashok Leyland in 1955 after a collaboration with British Leyland.
• Product Range: Ashok Leyland offers a wide variety of products, including trucks, buses, defense, and specialized vehicles, as well as diesel engines used in industrial, generator, and marine applications. The company’s product range spans from 1T GVW (Gross Vehicle Weight) to 55T GTW (Gross Trailer Weight) in trucks, and 9 to 80-seater buses.
• Infrastructure: Ashok Leyland operates nine manufacturing plants, with seven in India and two overseas. Overseas, Ashok Leyland operates a bus manufacturing facility in Ras Al Khaimah, UAE, and another in Leeds, United Kingdom. Additionally, it has a joint venture with the Alteams Group, focusing on producing high-press die-casting extruded aluminum components for the automotive and telecommunications sectors.
• Certifications: Ashok Leyland has been recognized for its commitment to quality and received several certifications. In 1993, it became the first in India’s automobile industry to win the ISO 9002 certification. The more extensive ISO 9001 certification came in 1994. The company’s Engine Test Lab has also been accredited in accordance with the standard ISO/IEC 17025:2017.
• Awards and Recognition: Ashok Leyland has received numerous awards and recognition for its excellence in the automotive industry. The company’s Hosur plant was awarded the prestigious Deming Prize for its Total Quality Management (TQM) by the Japanese Union of Scientists and Engineers (JUSE) in 2017. The company was also awarded the Frost and Sullivan 2020 GCC Light Commercial Vehicle Customer Value Leadership Award for its LCV truck, the Partner.

Company Profile of Ashok Leyland Limited

Pros:

• Profit Growth: Ashok Leyland reported a 90% jump in profit in FY24, with a net profit of ₹2,696 crore, which is the highest ever in a single year. This growth indicates the company’s ability to generate sales.
• Significant Earnings Per Share (EPS) Increase: The EPS surged to ₹8.46 in 2024, compared to ₹4.23 in 2023. A higher EPS suggests improved profitability and shareholder value.
• Healthy Profit Margin: Ashok Leyland’s profit margin expanded from 3.0% in 2023 to 5.4% in 2024. This positive trend shows improved cost management and operational efficiency.
• Strong EBITDA: The EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased by 32.67% year-on-year, reaching ₹2,638.23 crore in March 2024. This reflects the company’s operational strength.

Cons:

• High Debt: Despite strong revenue growth, the company has a high debt of ₹40,802.17 Crore.
• Capital Expenditure: The company has proposed a capex of ₹500-700 crore in FY25, which could impact short-term liquidity.

The Finances

Here’s a summary of Ashok Leyland Limited’s financial information as of June 2024:

Shareholding pattern of Ashok Leyland Limited

Here’s a concise summary of Ashok Leyland Limited’s shareholding pattern as of June 2024 :

• Promoters: Hold 51.5%
• Foreign Institutional Investors (FII): 21.5%
• Domestic Institutional Investors (DII): 12.3%
• Public: 14.7%

Peer Multiple Comparison

Let us compare Ashok Leyland Limited with its peers that have full data available. See the table below: