What Saved Ashok Leyland From Posting A Loss Of Rs 242 Crore?
DSIJ Intelligence / 25 Jan 2013
FY13 has been subdued for the automobile industry. The effects of weak macroeconomic trends and low industrial output have showed up in the sales of Commercial Vehicles to the largest extent compared to the other segments, and more particularly in the sales of Medium and Heavy Commercial Vehicles (M&HCV). In contrast to this is the performance of Light Commercial Vehicles (LCV), whose sales have been robust due to higher acceptance of the products, increasing adaptation of the hub and spoke model and strong demand.
Ashok Leyland, a major player in the Indian CV space, obviously had to bear the brunt of this change in dynamics. The company’s volumes for Q3FY13 stood at 22661 against 23175 in Q3FY12, which marks a decline of 2.22% in sales volumes. To boost sales in the CV space, manufacturers have been offering hefty discounts and offers. This has resulted in a highly negative Q3FY13 result for Ashok Leyland.
Its revenues saw a YoY decline of 18% to Rs 2380.51 crore. The margins took a bigger hit, with the EBIT coming in at a mere Rs 9.21 crore. This figure stood at Rs 123.74 crore in Q2FY13.
Surprisingly though, the net profit increased by 10.82% to Rs 74.14 crore. This was mainly due to the inclusion of a gain of Rs 156.26 crore on part sale of investments. If it weren’t for this, Ashok Leyland would have posted a net loss of Rs 241.76 crore in this quarter.
The only regions where Ashok Leyland has seen strength is in the sales of its spares and its power solutions businesses, as well as its LCV ‘Dost’, which now has a market share of 18%. Engines saw robust sales, and in Dec 2012, the company notched up the highest ever sales in a particular month.
Overall, the result has been negative and has truly reflected the current situation in the Indian CV market. We expect this trend to continue till there are positive changes in the macroeconomic scenario. The result announcement caused the stock prices of Ashok Leyland to reach an intraday low of Rs 22.25 per share yesterday (Jan 24, 2013), a decline of 8.81%. But the stock has recovered from that level and is now trading near yesterday’s closing.
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