Can you please review Ashok Leyland’s performance in the past year and give guidance for the current fiscal?
Revival started post September. But one area during this whole timeframe that was doing very well was the ICV (intermediate commercial vehicles), especially with CNG because of the lower CNG prices compared to diesel. We did not have a product in this range, which we were only able to introduce in January. And once we did that, we saw a very strong market response and that helped us in regaining some of the market share. We also revived our network in the northern and eastern markets during the past year. During the pandemic, many of our dealers in these markets closed operations. So, the setting up of the new network has again helped us quite a bit. There has been some level of revival in the southern market as well. So, all this put together, we see that we have been able to get back our market share.
Commodity prices do remain a challenge, but the indications are possibly in another few months, they should start softening once again. And then we’re left with the issue of the semiconductor chips. We have managed well but I would say that our LCV (light commercial vehicles) sales in the last financial year would have been much higher if we had the availability of all the chips that we require. So, as we understand this might take another three or four months. So, all in all, looking ahead the year is looking a lot better and a lot stronger for us.
Safe to say that FY23 could be one of your best years in the last three to four years?
I would be little hesitant to make any guesses because there’s so many shocks that have come and hit us. But I would say that during this last downturn, we have tried to become a lot more resilient to withstand any of these external shocks that might come. What does give us a lot of confidence is the government initiatives that are happening, especially in infrastructure and road construction. We are starting from a lower base compared to where the industry was in 2018-19. So, there is a lot of headroom left for us. And this time around our product range is a lot fuller. From international operation side as well, we have extended our network. So we feel a lot more bullish. It’s looking to be a very strong year for us.
Where are you with regards to the appointment of a new CEO?
That’s a question that is on everyone’s mind. As I’ve always said, the organization and the team are very strong, and I think the results of the last few months really validate that statement. In today’s board meeting as well, this situation was reviewed. One thing that we want to ensure is that during this phase – the growth that the company is experiencing now – we want to make sure that there are no further disruptions of any manner. The search is on; I would not like to give you a specific timeframe when the CEO is coming. But I can tell you that this is an issue right at the forefront for the
(nomination and remuneration committee) of the company and for the independent board directors.
You have been shortlisted as part of the PLI scheme and that would require you to make certain investments. In which areas will these be?
The minimum criteria for the PLI scheme is around Rs 2,000 crore investment. For that our plans remain focussed not only on electric vehicles, but we are also working on hydrogen variants of our products. So with the combination of both of these, along with some facility development that we would require, we hope to fulfill this criteria of Rs 2,000 crore. We have made a very clear-cut plan for the products that we need to introduce. From diesel to CNG, LNG and hydrogen, we want to make sure that
is fully prepared for whatever the market would like.
Will you bid more aggressively for electric bus tenders through Switch or will you prefer profitability even if you get a smaller piece of the pie?
I wouldn’t say we want a smaller pie. I think we should move ahead very sensitively. We have won tenders in Bengaluru, Mumbai, etc. In certain STUs (state transport undertakings), depending on the routes the buses are going to ply on, we can take a much more aggressive route. I would say very clearly, we do not want to do this business at a loss. We will be aggressive only where we feel we can meet those cost structures. But if those price points are being done purely to gain market share, we will not be entertaining that.
Can you profitably match current lowest bids made by rivals for electric bus tenders?
I wouldn’t like to comment on the other OEMs. Having been the leader in the bus market in India, we understand the cost structures very well. We understand the routes well, and we know what the battery costs are. So all I would say is that when we bid, we look very carefully at the routes and we bid on the basis of retaining a margin as well. We will not pursue it only for market share purposes without the margin.
The valuation for last mile mobility providers have slipped significantly in recent months. What has gone wrong? Even you have not closed your round of fund raising yet.
In a way, things have moved in a very positive direction for us because when you see many of the new-age companies, they have had difficulty in meeting their capex programs, they are delayed in product introduction and the valuations have literally crashed. So when you look at that environment, and you look at someone like Switch who has a clear roadmap, clear plan, products already on the road, I think our credibility has only been enhanced over the last one year.
And from a valuation perspective, we could, if we wanted to, close funding very quickly as well. But we would much rather find someone who has really the right vision as we see it. Someone who is willing to come into this from a longer-term perspective and not looking at a two-three-year exit option through IPO. This sector is in its infancy. It needs long term capital. We are in very active discussions. I wouldn’t be surprise, when we have our next call, we may have closed the funding.
What is the rightful place in terms of market share for Ashok Leyland?
I think out of the last five years, for three years we were over 30%. We are quite confident that 30% is a very natural market share level for Ashok Leyland. In fact, we are looking to continue growing our market share but in a very profitable manner.
Your aspiration is being one of the top 10 commercial vehicle players in the world. Where do you stand now as per your assessment?
We are currently at the 24th or 25th position. So, there is a large head room for us to grow. What gives us the confidence of getting there is that the Indian markets will continue to grow faster than the others. Switch as a company, which is based out of Europe, is going to go to new markets where Ashok Leyland is not present. Apart from Africa, within the next 12 to 18 months we can also look at entering many of the ASEAN markets as well. So, looking ahead, it might seem a stretch to say that we will be amongst the top 10 globally, but I think that’s the vision that the whole management has gotten behind and the extension of our product range allow us to get there.