Ashok Leyland Limited — Q1 FY26 earnings call

Call held 14 Aug 2025

Management summary

Ashok Leyland reported a strong Q1 FY26 with record revenue, EBITDA, and PAT, driven by improved margins and market share gains in both MHCV and LCV segments. The company achieved a net cash positive position and saw significant growth in exports and non-CV businesses. While the domestic MHCV industry saw a slight volume decline, management remains optimistic for H2 FY26, anticipating an uptrend in volumes and margins, and is focused on strategic product and capacity expansions.

Highlights

  • Revenue of ₹8,725 crores, up 1.5% YoY.

  • PAT of ₹594 crores, up 13% YoY.

  • EBITDA margin expanded 50bps to 11.1%.

  • Net cash positive position of ₹800 crores, a ₹2,000 crore swing from net debt of ₹1,200 crores last year.

  • Domestic MHCV market share (ex-defence & EVs) improved to 31.1% from 29.8% YoY.

  • Exports volume grew 29% YoY to 3,011 units.

  • Switch India achieved PBT breakeven in Q1 FY26 with an order book of 1,500+ buses.

Concerns

  • Domestic MHCV industry volume declined by 2% YoY, albeit on a high base.

  • Q1 Defence revenue declined significantly from ₹400 crores to roughly ₹150 crores YoY.

Key financials

  1. Revenue ₹8,725 Cr +1.5%YoY
  2. PAT ₹594 Cr +13%YoY
  3. EBITDA ₹970 Cr +6.4%YoY
  4. EBITDA Margin 11.1% +0.5%YoY
  5. Material Cost as % of Revenue 70.6% -1.6%YoY
  6. HLF Standalone AUM ₹50,430 Cr +25%YoY
  7. HHF AUM ₹14,265 Cr +25%YoY
  8. Finance Subsidiaries Total Income ₹1,855 Cr
  9. Finance Subsidiaries Book Value ₹7,222 Cr
  10. HLF Net NPA 1.6%
  11. HLF Capital Adequacy Ratio 18.2%
  12. HLF PAT ₹160 Cr

What they filed

Q1 FY27: revenue up 11.6%, net profit up 1.5% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue11,148 11,995 14,696 11,709 12,577 +13%14,830 +24%17,246 +17%13,070 +12%
EBITDA2,040 2,336 2,991 2,173 2,441 +20%2,822 +21%3,308 +11%2,410 +11%
Net profit767 820 1,246 658 820 +7%862 +5%1,381 +11%668 +2%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Order book

high confidence

Total value

₹1,000 Cr

as of 2025-06-30 quantified

Execution

at least next year, year and a half

Composition

Mix 2 products
  • Defence ₹1,000 Cr 40%
  • Switch India Buses 1,500 units 60%

Share of order book by product, derived from disclosed amounts

Pipeline

L1 awaiting loa

Defence tender pipeline

The defence order book and tender win pipeline are stronger than ever, supporting confidence in double-digit revenue growth for FY26. Switch India also has a healthy order book.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex Capex disclosed
    • OHM funding for buses and operations ₹300 Cr
    • New bus plant at Lucknow
    • Enhancing capacity at Alwar and Trichy bus plants
    • Ramping up new plant in Andhra Pradesh
    • Defence capacity tweaks
    Previously, we had invested Rs. 300 crores. Now, we are investing 300 more. And this will be sufficient to take care of OHM's buses, OHM's operations up to March of 26. ... Our newest and most modern bus plant at Lucknow which is under construction will be operational from Q3 FY'26. We are also looking at enhancing capacity at our bus plants at Alwar and Trichy. ... But defence also, it doesn't require a mammoth CAPEX. It just requires a little bit of a tweak here and there.
  • Debt Net cash ₹800 Cr
    Our cash position net of debt continues to be positive at end of Q1 at roughly Rs. 800 crores. At end of the same period last year, our net debt was Rs.1200 crores, reflecting a swing of approximately Rs. 2000 crore on YOY basis.
  • M&A NXT Digital Merger · Pending regulatory

    Paving the way for HLF's listing

    Very recently, HLF also received the final clearance from RBI to initiate a merger process with NXT Digital paving the way for its listing.
  • Liquidity Cash ₹800 Cr Company is net cash positive at quarter end.
    Our cash position net of debt continues to be positive at end of Q1 at roughly Rs. 800 crores.

Guidance & targets

Volume

  • OHM Buses in Operation Volume · within the next 12 months · High confidence 2,500 plus
    OHM added more than 200 buses to the operating fleet and is progressing well on its target of operating 2,500 plus buses within the next 12 months.

    — Shenu Agarwal

  • Domestic MHCV Volume Growth Volume · full year · Medium confidence mid-single digit
    Full year outlook remains the same, which is mid-single digit growth for MHCV and slightly higher than that for LCV, but still mid-single.

    — Shenu Agarwal

  • Domestic LCV Volume Growth Volume · full year · Medium confidence slightly higher than mid-single digit

    — Shenu Agarwal

Capacity

  • Lucknow Bus Plant Operation Capacity · Q3 FY'26 · High confidence operational
    Our newest and most modern bus plant at Lucknow which is under construction will be operational from Q3 FY'26.

    — Shenu Agarwal

  • Andhra Pradesh Plant Monthly Capacity Capacity · by end of the year · High confidence 200 units per month
    Our new plant in Andhra Pradesh inaugurated in Q4 of last fiscal is in the ramp-up stage and will reach a capacity of 200 units per month by end of the year.

    — Shenu Agarwal

Market Reach

  • Total Touchpoints Market Reach · by end of the year · Medium confidence 2,000
    By end of the year, we hope to cross 2,000 touchpoints for both the product segments combined.

    — Shenu Agarwal

Profitability

  • EBITDA Margin Profitability · full year · Medium confidence beat last year's margins (12.8%)

    From 12.8% today

    Our overall aspiration would be to beat the last year margins by a handsome margin.

    — K. M. Balaji

Market Mix

  • Heavy Duty Truck Performance Market Mix · after monsoon stop · Medium confidence do much better
    We definitely think the heavy duty truck will do much better after monsoon stop, because we are seeing a lot of offshoots in the heavy duty segment, whether it is in the mining sector or construction or even like car carriers or other things.

    — Shenu Agarwal

Market context

  • Defence Revenue Growth Revenue · FY26 · Medium confidence double-digit
    Our defence order book and tender win pipeline is stronger than ever, basis which we are confident to post a double-digit revenue growth in FY'26.

    — Shenu Agarwal

  • Switch India PAT Profitability · FY'26 · High confidence positive
    As indicated earlier, our goal is to achieve PAT positive status for Switch India in FY'26.

    — Shenu Agarwal

What to watch in Q2 FY26

HLF Merger Progress

next quarter
Current RBI clearance received, process initiated
Target Further steps in the 2-3 quarter process (e.g., valuers appointed, swap ratios fixed)

Why it matters

Significant corporate action leading to HLF listing, impacting group structure and valuation.

You have a long list of processes which needs to be complied with and it will take a minimum of 2, 3 quarters in my guess

Risks & concerns

  • Domestic MHCV Industry Volume Decline

    medium

    Domestic MHCV industry volume declined by 2% in Q1 FY26, following a 10% growth in Q1 FY25, though management is optimistic for H2.

    Management acknowledged

  • Commodity Price Volatility (Steel)

    low

    Material cost pressures from steel safeguard duty and tariff volatilities were managed, and steel prices are now showing signs of settling.

    Management acknowledged

  • Geopolitical Uncertainties

    low

    Exports are performing well despite geopolitical uncertainties, with strong growth in home markets outside India.

    Management acknowledged

  • CV Financing Asset Quality (Industry-wide)

    low

    Industry-wide concerns about CV financing asset quality were discussed, but HLF sees no red flags, attributing distress to normal Q1/Q2 monsoon phenomena.

    Analyst downplayed

Q&A highlights

7 direct
HLF Merger Timeline and Process Direct
You have a long list of processes which needs to be complied with and it will take a minimum of 2, 3 quarters in my guess, but I don't want to hazard a guess because whatever time it takes, it takes.

Provides a clear, albeit lengthy, timeline for a significant corporate restructuring event (HLF listing).

Asked by Gunjan Prithyani

CV Financing Landscape and Asset Quality Direct
we have been hearing in the news about some distress on the CV side, but upon deeper checking, we think this is normally the phenomena at end of Q1, beginning of Q2, as soon as the monsoon start appearing... HLF and they don't see any red flags right now.

Addresses a sector-wide concern about asset quality in CV financing and provides company-specific reassurance from HLF.

Asked by Gunjan Prithyani

MHCV Demand and Replacement Cycle Partial
I mean, this doesn't gel very well, especially given that macro factors, macroeconomic factors are quite okay. So, I mean, the only reason we can say what is holding it is that the CAPEX on the ground has to really be a little bit more higher... So, all the factors are pointing towards something better, some better demand. So, let's see when that happens.

Highlights the disconnect between positive macro factors and delayed replacement demand, indicating uncertainty in the timing of a market upturn.

Asked by Kapil Singh

OHM Funding and Capital Requirement Direct
we had invested Rs. 300 crores. Now, we are investing 300 more. And this will be sufficient to take care of OHM's buses, OHM's operations up to March of 26. And beyond that, we are very open at looking at some other options of fundraising also.

Clarifies the significant capital commitment to the e-MaaS subsidiary and future funding strategy.

Asked by Kapil Singh

Fully Built Bus Capacity Expansion Direct
we have capacity of about 950 buses per month right now and we want to go to 1650 buses a month, including Lucknow. So, we are putting those efforts in to increase that capacity.

Details a specific capacity expansion plan driven by a market shift towards fully built buses, indicating strategic adaptation.

Asked by Chandramouli Muthiah

Impact of Iveco Acquisition on Ashok Leyland Direct
No. It's true that we had a partnership with Iveco, but that was several decades ago... And right now, there is no relationship... So, this recent news would not impact us in that manner.

Dispels potential concerns about competitive or technological impact from a recent industry M&A event involving a former partner.

Asked by Chandramouli Muthiah

Defence Revenue Decline in Q1 Direct
Quite a bit, actually. I think from 400 to 150, roughly. Rs. 400 crores to roughly 150. We can give you the exact numbers later. But it will catch up.

Quantifies a significant YoY decline in a key segment, though management expects recovery.

Asked by Raghunandhan NL

Payment Security Mechanism for OHM's New Orders Direct
Not the existing, but everything that will come from this new PM E-DRIVE tender of 10,900 buses, that would be under the payment security mechanism.

Provides clarity on risk mitigation for future large orders in the e-MaaS business.

Asked by Raghunandhan NL

3 min read 7 chapters

Detailed narrative

Strong Q1 FY26 Performance with Record Metrics

Ashok Leyland delivered a robust Q1 FY26, achieving its highest-ever Q1 revenue, EBITDA, and PAT. Revenue stood at ₹8,725 crores, marking a 1.5% YoY increase, while PAT grew 13% YoY to ₹594 crores. The company's EBITDA reached ₹970 crores, up 6.4% YoY, with the EBITDA margin expanding by 50 basis points to 11.1%. Material cost as a percentage of revenue was maintained at 70.6%, 1.6% lower than Q1 last year.

Market Share Gains and Net Cash Position

The company significantly improved its market share, with domestic MHCV (excluding defence and EVs) rising to 31.1% from 29.8% YoY, and 0-7.5 LCV Vahan market share increasing by 120 basis points to 12.9%. Financially, Ashok Leyland achieved a net cash positive position of ₹800 crores at the end of Q1, representing a substantial ₹2,000 crore swing from a net debt of ₹1,200 crores in the prior year. This strong cash position reflects improved profitability and working capital management.

Strategic Product and Capacity Expansion

Ashok Leyland is preparing to launch a range of new products, including high-horsepower tippers, tractor trailers, multi-axle vehicles, and its first LNG segment offering later this year. Capacity expansion is underway with the new Andhra Pradesh plant targeting 200 units/month by year-end, and a new bus plant in Lucknow expected to be operational by Q3 FY26. Efforts are also being made to enhance capacity at Alwar and Trichy bus plants, aiming to increase fully built bus capacity from 950 to 1,650 units per month.

Growth in Non-CV and International Businesses

Exports volume surged by 29% YoY to 3,011 units, with strong performance in GCC markets (60% growth) despite geopolitical uncertainties. Non-CV businesses also contributed positively, with aftermarket revenues up 8% YoY and power solutions business revenue growing by 28.5%. The defence order book is robust with over ₹1,000 crores in hand and a pipeline of over ₹2,000 crores in tenders, supporting a double-digit revenue growth outlook for FY26.

Switch India and OHM Progress

Switch India achieved PBT breakeven in Q1 FY26 and aims for PAT positive status by FY26, backed by an order book of over 1,500 buses. OHM, the e-MaaS subsidiary, operates over 850 buses and plans to expand to 2,500+ buses within the next 12 months. This expansion is supported by an additional ₹300 crores investment this quarter, bringing total funding to ₹600 crores for OHM's operations up to March 2026. New PM E-DRIVE tenders for 10,900 buses will be covered by payment security mechanisms.

HLF Merger and ESG Initiatives

Hinduja Leyland Finance (HLF) and Hinduja Housing Finance (HHF) reported 25% YoY AUM growth, reaching ₹50,430 crores and ₹14,265 crores respectively, with HLF's Net NPA at a healthy 1.63% and PAT at ₹160 crores. HLF received final RBI clearance to initiate a merger process with NXT Digital for listing, a process expected to take 2-3 quarters. The company also advanced its ESG commitments, achieving 81% RE status, with Tamil Nadu plants operating at 95% RE.

Outlook and Margin Strategy

Despite a 2% decline in domestic MHCV industry volume in Q1 (on a high base), management is optimistic for volume and margin uptrend in H2 FY26, citing improving fleet utilization, freight rates, and government CAPEX. The strategy focuses on product premiumization, service excellence, and cost frugality to drive profitable and sustainable growth, with an aspiration to beat last year's full-year EBITDA margins of 12.8%. The company expects mid-single digit growth for MHCV and slightly higher for LCV for the full year.

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