Ashok Leyland Limited — Q2 FY26 earnings call

Call held 19 Nov 2025

Management summary

Ashok Leyland delivered a strong Q2 FY26, reporting robust revenue and EBITDA growth driven by market share gains in domestic MHCV, significant export volume increases, and successful new product launches. The company achieved a positive net cash position and saw its Switch India subsidiary turn profitable. Management expressed optimism for H2, citing new product launches and capacity expansions, while actively managing cost pressures and regulatory constraints.

Highlights

  • Q2 Revenue at ₹9,588 crores, up 9.3% YoY, indicating strong top-line growth.

  • Q2 EBITDA at ₹1,162 crores, up 14.2% YoY, with margin expanding 50 bps to 12.1%, reflecting improved profitability.

  • Domestic MHCV market share reached 31% in H1, gaining 50 bps YoY, demonstrating competitive strength.

  • Exports volume surged by 45% YoY in Q2 and 38% YoY in H1, driven by growth across key international markets.

  • Cash position net of debt turned positive at ₹1,000 crores, a significant ₹1,500 crores positive swing YoY, highlighting strong financial health.

  • Switch India subsidiary achieved both EBITDA and PAT positive status in H1 FY26, indicating successful turnaround and growth.

Concerns

  • Provision made for 'long pending litigations' impacting PAT, though specific amount not detailed.

  • Ongoing 'tariff volatilities' and AC mandate adoption pose challenges to material costs, requiring continuous cost savings efforts.

  • GVW limits are imposed by regulation, restricting the company's ability to offer higher tonnage vehicles beyond 48-55 tons.

Key financials

  1. Revenue ₹9,588 Cr +9.3%YoY
  2. EBITDA ₹1,162 Cr +14.2%YoY
  3. EBITDA Margin 12.1% +0.5%YoY
  4. PBT ₹1,043 Cr
  5. PAT ₹771 Cr
  6. Material Cost % of Revenue 71.2% 0%YoY

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.

Segment breakdown

  • Non-CV Businesses
    11% Aftermarket Revenue Growth14% Power Solutions Revenue Growth25% Defense Business Revenue Growth
  • Domestic MHCV
    21,647 units Truck Volume (Q2)4,660 units Bus Volume (Q2)31% Market Share (H1)
  • Domestic LCV
    17,697 units Volume (Q2)13.2% Vahan Market Share (H1)
  • Exports
    45% Volume Growth (Q2)38% Volume Growth (H1)7.5% Revenue Share (Q2)
  • Switch India (H1 FY26)
    600 units Buses Sold600 units e-LCVs SoldPositive status EBITDA StatusPositive status PAT Status
  • OHM
    1,100 units Electric Buses Operating250 units Buses Added (Q2)98% Fleet Availability
  • Hinduja Leyland Finance (Standalone)
    ₹52,635 Cr AUM
  • Hinduja Housing Finance
    ₹14,903 Cr AUM
  • Finance Subsidiaries (Total)
    ₹196 Cr PAT (Q2)₹7,418 Cr Book Value (Q2 end)1.6% NNPA

Order book

high confidence

Total value

1,650 units

as of 2025-09-30 quantified

Pipeline

qualified rfp

OHM is working diligently on the 10,000 plus PME drive tender

Defense order book and tender wind pipeline remains quite strong.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹417 Cr this quarter · ₹1,000 Cr (FY26) planned
    • Center of excellence
    • Higher horsepower engine nodes development
    • Purchasing land for corporate office building
    CAPEX for the quarter was Rs. 417 crores and cumulatively Rs. 658 crores for H1. There were no investments in subsidiaries in the first half of the year... You can expect around Rs. 1,000 crores of CAPEX which is getting incurred. This year... we are pursuing our CAPEX expenditure plan relating to the center of excellence which we have established as well as Shenu spoke about the higher horsepower engine nodes development. So we are incurring CAPEX towards all these things and one more thing which I should register here is that we have also gone ahead and purchased a piece of land which is next to our corporate office building.
  • Debt Net cash ₹1,000 Cr
    Our cash position net of debt continues to be positive at the end of Q2 at roughly Rs. 1,000 crores, reflecting a positive swing of roughly Rs. 1,500 crores on Y-o-Y basis... Last year, we were at about Rs. 500 crores of debt. Now, we are at Rs. 1,000 crores of cash.
  • Dividend ₹1/share (interim)
    the Board of Ashok Leyland has recommended an interim dividend of INR 1 per share.
  • M&A NXT Digital Merger · Pending regulatory

    Paving the way for listing of Hinduja Leyland Finance

    HLF has received the final clearance from RBI to initiate a merger process with NXT Digital, paving the way for its listing. The listing process is progressing as per plan.
  • Liquidity Cash ₹1,000 Cr Positive net cash position at Q2 end, reflecting a ₹1,500 crores positive swing YoY from a debt position.
    Our cash position net of debt continues to be positive at the end of Q2 at roughly Rs. 1,000 crores, reflecting a positive swing of roughly Rs. 1,500 crores on Y-o-Y basis.

Guidance & targets

Profitability

  • EBITDA Margin Profitability · mid-term · Medium confidence mid-teen
    We will continue to make our best efforts to progress on our strategic goal of delivering profitable growth and reach mid-teen EBITDA in the mid-term.

    — Shenu Agarwal

  • Margin Accretion from New Products Profitability · within the next 2-3 quarters · High confidence margin accretion
    within the next 2-3 quarters, we will see some margin accretion happening from these new products also.

    — Shenu Agarwal

Operating Fleet

  • OHM Operating Fleet Size Operating Fleet · within the next 12 months · High confidence 2,500 plus buses
    OHM... is progressing well on its target of operating 2,500 plus buses within the next 12 months.

    — Shenu Agarwal

Capacity

  • Bus Body-Building Capacity Capacity · High confidence 20,000 numbers-plus per year

    From 12,000 numbers today

    After complete ramp-up of our AP and Lucknow plants, we shall reach bus body-building capacity of 20,000 numbers-plus per year from that of roughly 12,000 numbers at present.

    — Shenu Agarwal

  • LCV Capacity Capacity · in a matter of 6-9 months · High confidence 110,000-120,000 units

    From 80,000 units today

    our current capacity is close to 80,000 units on the light commercial vehicles. But we have already laid out a plan to increase this capacity to 110,000-120,000 units without much of an investment... in a matter of 6-9 months.

    — Shenu Agarwal

Volume

  • Exports Volume Volume · mid-term · Medium confidence 25,000 units
    our mid-term target is going to be 25,000 units.

    — Shenu Agarwal

  • Exports Volume CAGR Volume · next 3 years · High confidence 20%
    our target is to achieve 20% CAGR for next 3 years

    — Basudeb Banerjee

  • Exports Volume (FY26) Volume · this year · High confidence 18,000 units
    this year, we are targeting about 18,000 units in the exports.

    — Shenu Agarwal

Market context

  • Switch India Free Cash Flow Free Cash Flow · FY '27 · High confidence positive
    Switch India is progressing well on its target of becoming free cash flow positive by FY '27.

    — Shenu Agarwal

  • Overall Company Free Cash Flow Free Cash Flow · FY '27 · High confidence positive
    the target, next level target is to make it free cash flow positive by FY '27.

    — Shenu Agarwal

What to watch in Q3 FY26

LCV Capacity Expansion

in a matter of 6-9 months
Current ~80,000 units
Target 110,000-120,000 units

Why it matters

Essential for meeting growing LCV demand and capitalizing on GST 2.0 benefits, contributing to overall volume growth.

our current capacity is close to 80,000 units on the light commercial vehicles. But we have already laid out a plan to increase this capacity to 110,000-120,000 units without much of an investment... in a matter of 6-9 months.

Risks & concerns

  • Tariff volatilities and AC mandate adoption impacting material costs

    medium

    Material cost as a percentage of revenue remained stable at 71.2% in Q2 despite tariff volatilities and AC mandate, managed through cost savings and price realizations.

    Management acknowledged

  • Regulatory limits on Gross Vehicle Weight (GVW)

    medium

    GVW is limited by regulation, with a maximum of 55 tons for tractor trailers and 48 tons for other segments, restricting the company's ability to offer higher tonnage vehicles.

    Analyst acknowledged

  • Input credit apprehension for organized large fleet operators post-GST 2.0

    low

    Some apprehension exists among large fleet operators regarding input credit, but management believes consumption boost and price cuts are larger positive factors.

    Analyst downplayed

Q&A highlights

7 direct
Outlook for MHCV/LCV growth and GST impact on demand Direct
We did believe that LCV will grow more than MHCV. But we remain optimistic about H2. I think we should wait for another month or so to really figure out how the whole year will pan out. But definitely, we will say H2 will be much better than H1 in terms of absolute industry volume and also in terms of the growth rates that we have seen.

Provides management's near-term outlook for key segments and the anticipated positive impact of GST 2.0 on demand, especially for H2.

Asked by Kapil Singh

Contribution of non-truck revenues to overall mix and margins Direct
Now, roughly 50% of the revenue comes from the non-truck businesses. With buses, about 13%; light commercial vehicles, about 12%; spares, about 10% and exports, about 7%-8%... The margins from these businesses are higher than the domestic truck margins.

Highlights the strategic shift towards higher-margin non-truck businesses, which now constitute a significant portion of revenue and contribute positively to overall profitability and reduced cyclicity.

Asked by Gunjan Prithyani

Performance of SAATHI product and potential for sub-2-ton LCVs Direct
As far as SAATHI is concerned, SAATHI, like I said, is really doing well. Actually, it is doing beyond our expectations... Our average LCV sales is roughly in the 2-4 ton category is roughly 6,000 units. And already about 22%-25% sales is Saathi now.

Provides specific sales data for a new product, SAATHI, indicating its successful market penetration and significant contribution to the LCV segment without major cannibalization.

Asked by Chandramouli

Pass-through of AC cabin cost hike and discounting trends post-GST Direct
In fact, your question on this AC cost hike, in fact, we have passed it on to the customers. That is why the margins are holding out, Chandru. We have passed it on to the customers. Otherwise, your margins will drop.

Confirms the company's ability to pass on cost increases to customers, which is crucial for protecting and maintaining margins in a competitive and evolving regulatory environment.

Asked by Pramod Kumar

ROCE, ROE, and cash levels for the first half of the year Direct
ROCE, Return on Capital Employed, we are at about 34% last year and return on equity is about 32.5%... We continue with Rs. 1,000 crores of favorable cash situation throughout the year.

Provides key profitability and efficiency ratios, along with confirmation of a strong net cash position, indicating robust financial health and effective working capital management.

Asked by Pramod Kumar

Update on promoter pledge shares Partial
We don't have the exact numbers right now. But what we can tell you is what we have been telling you, whenever we talk to the promoters, we find them fully committed to Ashok Leyland. So that should not be a concern at all. I think they are trying to reduce the pledge shares.

Addresses a common investor concern regarding promoter share pledges, with management indicating commitment to reduction, though specific figures are not disclosed.

Asked by Pramod Kumar

Working capital management and its impact on OCR Direct
working capital, we have been working on consistently... We have reduced about Rs. 500 crores on the receivables alone when you compare it to the same period last year... we are running several projects on better cash management, cost management.

Details the company's efforts and success in improving working capital efficiency, particularly in reducing receivables, which is critical for cash flow generation in a capital-intensive business.

Asked by Amit Hiranandani

Drivers for strong export growth and future targets Direct
GCC, we are present there for last 20 years as well as in SAARC... we are developing products specifically tuned to these markets more and more... our acute focus to grow exports.

Explains the strategic factors behind the strong export growth and reiterates ambitious future targets, highlighting a key area for sustained revenue and margin expansion.

Asked by Basudeb Banerjee

3 min read 6 chapters

Detailed narrative

Strong Q2 Performance Driven by Growth Across Segments

Ashok Leyland delivered a robust Q2 FY26, with revenue reaching ₹9,588 crores, marking a 9.3% year-on-year increase. EBITDA grew even faster by 14.2% to ₹1,162 crores, resulting in a 50 basis point expansion in EBITDA margin to 12.1%. This performance was supported by a 4% growth in the domestic MHCV industry and a 13% growth in the LCV 2-4 ton category, signaling positive industry trends. The company's non-CV businesses also contributed significantly, with aftermarket revenues up 11%, power solutions up 14%, and defense business up 25% YoY.

Market Share Gains and Robust Export Growth

The company demonstrated strong market penetration, achieving a 31% domestic MHCV market share in H1, a gain of 50 basis points over the previous year. Domestic MHCV truck volume for Q2 was 21,647 units, and bus volume was 4,660 units. LCV domestic volume increased by 6.4% year-on-year to 17,697 units in Q2, with H1 Vahan market share at 13.2%, up 0.9%. Exports were a significant growth driver, with volumes surging by 45% year-on-year in Q2 to 4,784 units, and 38% in H1, across GCC, Africa, and SAARC regions, with a mid-term target of 25,000 units and a 20% CAGR for the next 3 years.

Strategic Product Development and Capacity Expansion

Ashok Leyland is expanding its non-diesel portfolio with new electric trucks and buses, alongside ventures into CNG, LNG, and hydrogen technologies. The company plans to launch a new range of heavy-duty trucks (320-360 HP) in Q3/Q4, featuring modern 6-cylinder engines for improved performance and higher margins. Bus body-building capacity is targeted to increase from 12,000 to over 20,000 units per year, with the new Lucknow plant contributing. LCV capacity is also set to expand from 80,000 units to 110,000-120,000 units within 6-9 months through process changes and efficiency improvements.

Subsidiaries Show Positive Momentum and Strategic Progress

Switch India achieved both EBITDA and PAT positive status in H1 FY26, selling approximately 600 buses and 600 e-LCVs, with an order book of 1,650 buses. OHM, the eMaaS subsidiary, now operates over 1,100 electric buses with 98% fleet availability and aims for 2,500+ buses within the next 12 months, actively working on a 10,000+ PME drive tender. Hinduja Leyland Finance reported a 26% YoY AUM growth to ₹52,635 crores and has received RBI clearance to merge with NXT Digital, progressing towards listing in Q1 FY27. The finance subsidiaries collectively reported a PAT of ₹196 crores in Q2.

Improved Financial Health and Capital Efficiency

The company's cash position net of debt turned positive at ₹1,000 crores by the end of Q2, representing a significant ₹1,500 crores positive swing year-on-year from a debt position. This was achieved by keeping operating capital lean, reduced by almost 50% YoY, and a ₹500 crore reduction in receivables. The Board recommended an interim dividend of ₹1 per share, reflecting confidence in continued fiscal performance. CAPEX for H1 stood at ₹658 crores, with a full-year projection of around ₹1,000 crores for strategic initiatives like the center of excellence and new product development.

Optimistic Outlook for H2 and Focus on Premiumization

Management expressed optimism for a stronger H2 FY26, anticipating higher industry volumes and growth rates for both MHCV and LCV segments, partly driven by GST 2.0 rate rationalization and increased freight demand. The company is focused on a 'premiumization' strategy, introducing differentiated products with higher power and torque to command better prices and improve margins, targeting mid-teen EBITDA in the mid-term. Efforts to improve NSR through mix and reduced discounting will continue, with expectations for commodity costs to be better in Q3.

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