Ashok Leyland Limited — Q4 FY25 earnings call

Call held 28 May 2025

Management summary

Ashok Leyland delivered a strong Q4 FY25, achieving record EBITDA margins and significant profit growth, driven by product premiumization and cost leadership. The company transitioned to a cash-positive balance sheet and saw robust growth in exports and non-CV businesses. While facing temporary commodity headwinds and a slight dip in LCV market share, the outlook for FY26 across all CV segments remains positive, supported by strategic investments in EVs and subsidiaries.

Highlights

  • Q4 FY25 Net Profit jumped 38% YoY to INR1,246 crores, reflecting strong performance.

  • Q4 FY25 EBITDA margin hit a record 15%, demonstrating improved profitability.

  • Ashok Leyland achieved a cash-positive position of INR4,242 crores at FY25 end, a significant turnaround from net debt of INR89 crores in FY24.

  • Export volumes for FY25 increased by 29% to 15,255 units, indicating strong international demand.

  • Switch India became EBITDA positive for FY25, with Q4 showing a double-digit EBITDA of 12%, signaling progress in EV initiatives.

  • Material cost as a percentage of revenue was 70.6% in Q4, the lowest in 8 quarters, contributing to margin expansion.

Concerns

  • LCV domestic market share in the 2-4 ton segment declined to 18.6% in FY25 from 19.3% in the previous year.

  • Temporary upward pressure on steel costs is expected in Q1 FY26 (INR3-5 per kg) due to safeguard duties, though expected to neutralize in 3-5 months.

  • Switch UK is undergoing a consultation process for cessation of manufacturing and assembly facilities in Sherburn, UK, as part of restructuring.

Key financials

3 periods

Headline

  • Revenue
    ₹11,907 Cr
    YoY +6%
  • EBITDA
    ₹1,791 Cr
    YoY +13%
  • EBITDA Margin
    15%
  • Operating PBT
    ₹1,671 Cr
    YoY +14%
  • PAT
    ₹1,246 Cr
    YoY +38%

Q4

  • Material Cost % Revenue
    70.6%

FY25

  • Revenue
    ₹38,753 Cr
    YoY +1%
  • EBITDA
    ₹4,931 Cr
    YoY +7%
  • PAT
    ₹3,303 Cr
    YoY +26%
  • EBITDA Margin
    12.7%
  • Material Cost % Revenue
    71.3%

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

  • Domestic MHCV Volume
    36,053 Q4 FY25 Volume1,14,789 FY25 Volume
  • Domestic MHCV Truck Volume
    29,089 Q4 FY25 Volume93,540 FY25 Volume
  • Domestic MHCV Bus Volume
    6,964 Q4 FY25 Volume21,249 FY25 Volume
  • LCV Domestic Volume
    17,660 Q4 FY25 Volume65,049 FY25 Volume
  • Addressable 2-4 Ton LCV Market Share
    18.6% FY25 Share19.3% Previous Year Share
  • Export Volumes
    52% Q4 FY25 Growth15,255 FY25 Volume
  • Engine Volume
    9% Q4 FY25 Growth2% FY25 Growth
  • Domestic Spare Parts Revenue
    15% Q4 FY25 Growth14% FY25 Growth
  • Switch India
    287 Q4 FY25 Outright Sales (Buses)300 Q4 FY25 Outright Sales (eLCVs)12% Q4 FY25 EBITDA Margin— FY25 EBITDA
  • OHM
    650 Buses in Operation98% Fleet Availability

Order book

high confidence

Total value

1,800 numbers

as of 2025-03-31 quantified

Composition

  • Switch India (Buses) (product) 1,800 numbers

Pipeline

other

Defense order book is healthy for FY26 and above INR1,000 crores in top line.

Switch India has a healthy order book of 1,800 units, and the defense order book is very strong, exceeding INR1,000 crores for FY26.

Source: Prepared remarks

Capital allocation

high confidence
  • Capex ₹300 Cr this quarter · ₹1,000 Cr (FY26) planned
    • Developing new technologies, alternate fuel, and critical EV components
    Capex for Q4 FY '25 was INR300 crores and investments in group companies was approximately INR200 crores. Cumulatively, for the year, capex was INR954 crores and investments approximately INR200 crores. Capex and investments together was lower at INR1,149 crores vis-a-vis INR2,060 crores in FY '24. ...On the capital expenditure side, in FY '25 where we ended up with around INR950 crores, and we actually have plans to end at around the same level in the next financial year also. We'll be doing around INR1,000 crores. Essentially, these, the capital expenditure will be aimed towards developing the capability as well as towards getting into more on the new technologies. We'll be more focusing on the alternate fuel and newer technologies, all these things, including the critical components of this electric vehicle covering the battery, motor, etc.
  • Debt Net cash ₹4,242 Cr
    At the end of the quarter, we were cash positive at INR4,242 crores against a net debt of INR89 crores at the end of the previous year.
  • Liquidity Cash ₹4,242 Cr Company is cash positive, moving from a net debt position in the previous year.
    At the end of the quarter, we were cash positive at INR4,242 crores against a net debt of INR89 crores at the end of the previous year.

Guidance & targets

Market Share

  • Addressable 2-4 Ton LCV Market Share Market Share · short term · Medium confidence 20%
    Full benefits of the new product launches are sinking in, and we are further intensifying our product innovation to improve our market share to 20% in the short term and 25% in the medium term.

    — Dheeraj Hinduja

  • Addressable 2-4 Ton LCV Market Share Market Share · medium term · Medium confidence 25%

    — Dheeraj Hinduja

  • MHCV Market Share Market Share · medium-term · Medium confidence 35%
    We will continue to march steadfastly towards the medium-term goals shared with all of you achieve mid-teen EBITDA, achieve MHCV market share of 35%, substantial growth in our noncore, non-MHCV businesses, leadership in alternative fuel vehicles, value unlocking from subsidiaries and leadership in ESG.

    — Dheeraj Hinduja

Volume

  • OHM Buses Added to Fleet Volume · FY26 · High confidence 1,700 buses
    OHM is targeting to add 1,700 buses to operation fleet during FY '26.

    — Dheeraj Hinduja

Revenue

  • Defense Business Top Line Revenue · next 2 to 3 years · High confidence double
    We are extremely confident based on the order pipeline, that we would be doubling this in the next 2 to 3 years, the top line.

    — Shenu Agarwal

ESG

  • Students Added to Road to School/Livelihood Programs ESG · FY26 · High confidence 100,000 students
    Our Road to School and Road to Livelihood programs continue to grow, extending their reach to about 5 lakh students now, with 92,000 students added this year, and targeting to add another 100,000 students in FY '26.

    — Dheeraj Hinduja

Profitability

  • EBITDA Margin Profitability · medium-term · Medium confidence mid-teen
    We will continue to march steadfastly towards the medium-term goals shared with all of you achieve mid-teen EBITDA, achieve MHCV market share of 35%, substantial growth in our noncore, non-MHCV businesses, leadership in alternative fuel vehicles, value unlocking from subsidiaries and leadership in ESG.

    — Dheeraj Hinduja

Market context

  • Switch India PAT Profitability · future · High confidence positive
    Now we want to continue on this trajectory, and our next goal will be for Switch India to make PAT positive.

    — Shenu Agarwal

What to watch in Q1 FY26

Steel Price Stabilization

Q2 FY26 (within 3-5 months)
Current Expected increase of INR3-5/kg in Q1 FY26
Target Neutralization of steel price increases

Why it matters

Verifying the neutralization of steel price increases will confirm the temporary nature of commodity headwinds and their limited impact on margins.

Quarter 1, our expectation is that steel prices might go up by INR3 to INR5 per kg. Quarter 2 also, a little bit more inflation we can see in the steel. But since this measure is on a temporary basis, government had announced it to last only 200 days, so we are expecting that even before that 200 days are over, we will see the neutralization. So at best, we would say 3 to 4, maybe max, 5 months of impact because of this.

Risks & concerns

  • Temporary steel cost inflation due to safeguard duties

    medium

    Steel prices might increase by INR3-5 per kg in Q1 FY26, but this is a temporary measure (200 days) and expected to neutralize within 3-5 months.

    Management acknowledged

  • Decline in LCV market share in 2-4 ton segment

    medium

    LCV market share in the addressable 2-4 ton segment decreased to 18.6% in FY25 from 19.3% in the previous year, with plans for product innovation to regain share.

    Management acknowledged

  • Restructuring of Switch UK operations

    low

    The Board of Switch UK has approved a consultation process that could lead to the cessation of manufacturing and assembly in Sherburn, UK, as part of a move to more efficient locations, which previously incurred GBP 2-3 million monthly losses.

    Management acknowledged

Q&A highlights

8 direct
Industry Growth Outlook for FY26 across segments Direct
More or less, we are in agreement with the estimates given by the peers. We also believe that this year could be a positive year for the CV industry. ...Buses definitely will stand out. I think, closely, it will be followed by the tractor trailer segment. ...tipper segment should pose some positive surprise this year.

Management provided a clear pecking order for growth segments in FY26, indicating confidence in overall CV industry recovery and specific segment drivers.

Asked by Chandramouli Muthiah

Impact of steel safeguard duties and AC cabin norms on costs and margins Direct
Quarter 1, our expectation is that steel prices might go up by INR3 to INR5 per kg. Quarter 2 also, a little bit more inflation we can see in the steel. But since this measure is on a temporary basis... we will see the neutralization. So at best, we would say 3 to 4, maybe max, 5 months of impact because of this. ...The impact on the price could be anywhere between 0.5% to 2%, depending on the model. We don't think it will be a major problem in passing on these prices with immediate effect.

Management quantified the potential cost impact from steel duties and AC norms, providing a timeline for neutralization and confidence in passing on costs.

Asked by Chandramouli Muthiah

Cost reduction levers and margin drivers for the next 2-3 years Direct
Firstly, our aim is to add more and more value into our products. ...The second is you are aware that we are the cost leader... efforts on cost optimization... would continue to happen. ...And the third lever is on the aftersales side... to how to reduce that downtime of the product.

Management outlined a clear three-pronged strategy (premiumization, cost leadership, aftersales) for sustained margin improvement, linking it to past success.

Asked by Kapil Singh

Capex plans for FY26 and investments in subsidiaries Direct
On the capital expenditure side, in FY '25 where we ended up with around INR950 crores, and we actually have plans to end at around the same level in the next financial year also. We'll be doing around INR1,000 crores. ...Switch India may not have significant funding requirement as we understand at this given point of time. Their requirement would be anywhere about INR 100 crores to INR200 crores. OHM might require additional funding of INR300 crores to INR400 crores. So what we anticipate at this point of time would be that we would invest about INR500 crores to INR750 crores.

Specific capex and investment figures for FY26 were provided, detailing allocation towards new technologies and subsidiary growth, indicating capital allocation priorities.

Asked by Kapil Singh

EV bus market landscape and Switch India's path to PAT positive Direct
I mean every day, you hear announcements from the government that they want to introduce or induct 14,000, 15,000 buses into the fleet, electric buses. ...Switch is very well positioned. I believe we have the best-in-class product and technology. ...our next goal will be for Switch India to make PAT positive.

Management expressed strong confidence in the EV bus market's growth potential and Switch India's competitive position, outlining the next financial milestone for the subsidiary.

Asked by Kapil Singh

Contribution of non-cyclical revenues and export strategy Direct
Your number is quite right. It's in that range of 50% or so. ...We are very happy with the way our exports is going. Last year, we had a 29% growth in the volumes. ...we have taken an approach that wherever we will go, whichever market we will go, we will use that as our own home base.

Management confirmed the significant contribution of non-cyclical revenues (~50%) and detailed a strategic, localized approach to exports, highlighting its success.

Asked by Raghu Nandhan

Hinduja Leyland Finance (HLF) growth and listing timeline Direct
Regarding your question on this AUM, it has increased to INR61,700 crores. That's a consolidated number... 25% year-on-year growth. ...we are still waiting for some approvals. Some of them have come, but one or two important ones are still pending. But we are expecting these will come sooner than later. And once we have all the approvals, it wouldn't take more than 1 or 2 quarters to list the company.

Management provided updated financial metrics for HLF and a clearer, albeit still conditional, timeline for its listing, which is crucial for unlocking value.

Asked by Raghu Nandhan

Growth trajectory and order book for the defense business Direct
Order book is very strong. We wouldn't like to place a number there, but you can rest assured that the order pipeline is strong. ...We are already above INR1,000 crores in top line on the defense. ...we would be doubling this in the next 2 to 3 years, the top line.

Management confirmed a robust and growing defense order book, providing a specific target for doubling the top line in the near term, indicating a strong growth driver.

Asked by Vipul Agrawal

2 min read 6 chapters

Detailed narrative

Record Financial Performance in Q4 and FY25

Ashok Leyland delivered a strong Q4 FY25, achieving its highest-ever quarterly EBITDA margin of 15%, leading to a net profit jump of 38% year-on-year to INR1,246 crores. For the full fiscal year, revenue reached INR38,753 crores, with PAT increasing 26% to INR3,303 crores, and the EBITDA margin improving to 12.7% from 12% in FY24. This performance was attributed to product premiumization, cost leadership, and expanded service reach.

Robust Balance Sheet and Strategic Capital Allocation

The company significantly strengthened its financial position, becoming cash positive with INR4,242 crores at the end of FY25, a substantial improvement from a net debt of INR89 crores in the previous year. FY25 capital expenditure totaled INR954 crores, with an additional INR200 crores invested in group companies. For FY26, Ashok Leyland plans approximately INR1,000 crores in capex, primarily focused on new technologies and critical EV components, alongside INR500-750 crores for subsidiary investments.

Growth in Non-CV Businesses and Expanding Export Footprint

Non-CV segments demonstrated strong momentum, with engine volumes up 9% and domestic spare parts revenue up 15% in Q4. The defense business is expected to double its top line in the next 2-3 years from its current base of over INR1,000 crores. Exports were a key growth driver, with volumes increasing 52% in Q4 and 29% for the full FY25 to 15,255 units, supported by a 'act local' strategy and expansion into ASEAN markets.

Positive Outlook for FY26 Across Commercial Vehicle Segments

Management expressed optimism for FY26, anticipating growth across all commercial vehicle segments, including LCV, ICV, and MHCV goods and passenger. Buses and the tractor-trailer segment are projected to lead this growth, with tippers also expected to provide a positive surprise. This positive outlook is underpinned by favorable macroeconomic factors, strong monsoon predictions, and a significant pent-up demand due to an aging fleet (currently 9-10 years vs. historical 7-7.5 years).

Advancements in EV and Alternative Fuel Technologies

Ashok Leyland's EV subsidiary, Switch India, achieved EBITDA positive status for FY25, with a strong 12% double-digit EBITDA margin in Q4, and aims to become PAT positive. The company is actively launching new EV products, including the Boss EV truck (14-19 ton GVW) and a 55-ton tractor trailer EV, and plans to introduce LNG vehicles in FY26. OHM, the E-MaaS subsidiary, targets adding 1,700 buses to its operational fleet during FY26.

Hinduja Leyland Finance (HLF) Performance and Listing Update

Hinduja Leyland Finance (HLF) reported a consolidated AUM growth of 25% year-on-year to INR61,700 crores, with PAT increasing 21%. Its subsidiary, Hinduja Housing Finance, is now the fourth largest affordable housing finance company. While the listing of HLF is delayed due to pending regulatory approvals, management expects it to occur within 1-2 quarters once the necessary approvals are secured, aiming to unlock shareholder value.

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