Ashok Leyland announced in November that it would invest ₹1,200 crore in Switch for capital expenditure, research and development, as well as operational requirements. It injected ₹662 crore in Switch in the December quarter, and will infuse the remainder in the last quarter. The fund infusion has bolstered Switch’s balance sheet, making it attractive to potential investors.
“We are in the process of finalizing the budget for the next fiscal year and the capital requirements of the company (Switch)… As the volumes in Switch and the product range are growing, the investor confidence in the company is also growing. We’re seeing a lot more interest as well. So from that perspective, maybe in 2024-25 (Switch will raise funds). We’re open to it but we’re not in a rush, purely because of the support of Ashok Leyland,” Hinduja said.
Switch is a global net-zero mobility company is readying to launch a new light commercial vehicle in the first half of 2025.
“In the bus segment, we want to make sure that Switch remains a leader, like Ashok Leyland is currently in diesel. So for that, there are many new products under development, and the same goes for the European markets as well as the UK. There is a lot of capex going into the development of these products. What’s comforting for Switch is that they have the full support of Ashok Leyland and the board has given its commitment to support growth plans for the company. We still continue to get requests from people who are interested to talk to us for potential investment into Switch. So those discussions are ongoing,” he added.
Going forward, the company may raise debt, as capital infusion by Leyland has helped Switch have ‘a good balance sheet’, Hinduja explained, or it may lean on Leyland for additional capital. “They have all the alternatives and options available to them”, Hinduja said.
Ashok Leyland, the country’s largest maker of buses and the second-biggest medium and heavy truck maker, clocked its highest-ever sales volumes at 138,416 units in the three quarters of 2023-24, surpassing its pre-covid peak volumes. It has also achieved record-high operating margin of 12%, and net profit of ₹580 crore for the December quarter, despite there being only a modest increase in total CV industry volumes, as it keeps a firm stance on pricing, cost savings and growing its non-core businesses. The company expects the ongoing quarter to see a further improvement in profitability, and also launch a light, sub-2-tonne truck.
However, according to Ashok Leyland’s managing director and chief executive Shenu Agarwal, at an industry level, surpassing pre-covid peaks for the medium and heavy-duty trucks sector is a ‘slim possibility’ this year, unlike what was envisioned at the beginning of the year, as the last quarter typically sees moderation in infrastructure activity, and therefore new CV buying would slow, particularly in the run-up to the national elections.
“In the first nine months of the year, the industry M&HCV has grown by about 9%. Our guidance at the beginning of the year was very close to that at 8-10% growth. In January, we have seen a slight dip because of the high base of the last quarter of last year, and now with elections also coming on, there will be moderation in volumes until about May or June, which will be temporary. Even if there is a small dip in the industry in Q4, it will recover after the new government is formed. But the chances of hitting the FY19 peak for M&HCV are slim right now. I don’t think we will do that, which is in fact a very positive thing also, because from one peak to another you have at least a 10%-15% jump. After four or five years, we still haven’t reached the previous 2019 peak, which means there is a lot of headroom in the industry to grow,” Agarwal said.
The medium and heavy commercial vehicles segment did surpass the pre-Covid-19 peak in the third quarter this fiscal, with sales of 91,000 units compared to 88,000 units in Q3FY19. However, a moderation in sales in January and a subdued outlook for the quarter means it will not surpass the full-year FY19 peak volumes of over 400,000 units.
According to credit rating firm ICRA, commercial vehicle volumes grew 3.5% year-on-year to 234,444 units in Q3FY24.
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Published: 06 Feb 2024, 11:40 PM IST