NSE Symbol: ASHOKLEY | BSE Code: 500477
Ashok Leyland Ltd is the second largest producer of commercial vehicles in India, the fourth largest manufacturer of buses globally and the twelfth largest manufacturer of trucks in the world. The company's products comprise of trucks, engines, buses, security, trucks, engines and special carriers. From eighteen seater to eighty-two seater double-decker buses, from 7.5 tonnes to 49 tonnes for haulage carriers, from various special application vehicles to diesel engines for industrial, marine and Genset, Ashok Leyland offers a wide range of products. This company is the flagship of the Hinduja Group. Ashok Leyland is headquartered in Chennai and its manufacturing trail flows across the globe with a total of nine plants including one in Great Britain and another in Ras Al Khaimah (UAE). The Joint ventures partnered by the company include Continental AG (Germany) for the high press die-casting extruded Aluminium parts for their automobile and telecommunications sector and John Deere (US) for Construction Equipment.
Ashok Leyland: History and Trends
The company was founded in 1948 and it was named as Ashok Motors. It was initially set in collaboration with Austin Motor Company for the assembly of Austin cars. In 1949, the production started at their facility in Ennore, which is located to the south of Chennai. The company rolled out the first indigenously convened A40 Austin car. In 1950, the company made an agreement with Leyland, the UK in which Ashok Motors got the sole rights to import, manufacture and assemble Leyland trucks for seven years. In 1954, the Government approved the progressive manufacture of Leyland Commercial Vehicles and a license was imparted for the manufacture of 1,000 Comets a year. In 1955, the company name was changed from Leyland to Ashok Leyland Ltd with equity participation from Leyland Motors Ltd. In 1967, the company launched the first Indian-made double-decker whose 50% of the components are indigenous, Titan. In 1970, the company produced a thousand 6x4 Hippo Tipper to the Indian Army whose design was based on their specific requirements. In 1972, the license was imparted to manufacture 10,000 vehicles a year. In 1976, the company launched the Viking which is the first ever bus with an alternator and a unique door that facilitated front entry. In 1978, they launched India's first rear-engine bus known as Cheetah. In 1980, the company inaugurated their second plant in Hosur.
The company received the ISO 9002 certification in the year 1993. The company received ISO 9001 Certification in 1995. Also, they had set-up a driver training facility at Namakkal. In 1996, Ashok Leyland set up its second plant at Hosur, Tamil Nadu. In 1997, they launched the Stallion, an all-terrain logistic automobile. Ashok Leyland was the first company to launch first CNG powered automobiles. In 2002, Ashok Leyland formed the country's first Hybrid Electric Vehicle and showcased it at Auto Expo 2002. In 2006, the company procured the truck business of Czech Republic-based company, AVIA. They entered into dealing with the Ras Al Khaimah Investment Authority for the building a bus assembly plant in UAE. In 2007, the company started a joint venture with Nissan Motor Company, Japan for manufacturing and marketing of Light Commercial Vehicles or LCVs. They started a joint venture with Continental AG, Germany for the development of automotive infrasonics. In the same year, they entered a joint venture with Alteams Group which is based in Finland for the production of high pressure die casting of extruded aluminum components. In 2008, the company started a joint venture with John Deere, USA for the manufacture of construction equipment products.
In March 2010, the company inaugurated a facility at Pantnagar, Uttarakhand. The Pantnagar plant is the company's modern, technologically advanced and largest plant with a capacity of 75,000 vehicles. The company bought 26% of the stakes in Optare plc that is a well-known bus maker in UK. To feed the emerging markets in India and China, Albonair (India) Pvt Ltd was consolidated in this year.
In the year 2010-11, the company gained a 26% in the equity share capital of Optare plc, U.K., which is a leading bus manufacturer in the UK. The reason behind acquiring the shares of a UK based company was to cater to the new markets and accelerate the level of technological development.
The company inaugurated a state-of-the-art facility in Ras Al Khaimah in December 2016. This facility caters to the needs of the African/Middle East markets and also aid the launching of AVIA range of trucks produced by Avia Ashok Leyland Motors. In 2011, the company registered into the LCV or Light Commercial Vehicle segment with the launch of Dost. In late 2011, the company entered into the markets of Tanzania by catching an order for 723 buses, trucks and special application vehicles. In October 2011, the company ventured into the construction equipment sector with the launch of a fresh brand, LEYLAND DEERE. The company received a contract for the supply of 700 batches of CNG in Delhi in 2011.
In 2012, the company launched Jan Bus. Jan Bus is the world's first front engine, single step entry and fully flat floor bus. They also began the production of U-3723 with a high payload of up to 27 tonnes. In January 2012, the company raised its stake in Optare plc (a UK based company) from 26% to 75.1%.
In 2013, Ashley Services Limited (ASL) was declared as a wholly owned subsidiary of the company. Ashok Leyland bagged a contract for 2310 buses from the Institute of Road Transport (IRT), Tamil Nadu which is a primary organization which manages and acquires the buses for all State Transport Corporations. The company opened three dealer outlets in a day to expand its presence in Gujarat. Ashok Leyland inaugurated the company's new Driver Training Institute (DTI) at Chhindwara, Madhya Pradesh. The company launched Luxura Magical India Bus, to show support for the Charter for Charity. In 2014, the company launched two new LCVs. In the same year, the company secured an order of 2,200 buses from the Government of Sri Lanka. The company also secured major projects from Africa worth 79.2 million dollars. The company signed a MoU with the Bank of Maharashtra for financing of vehicles.
In 2015, the company tied up with Lakshmi Vilas Bank to provide financial solutions to its commercial buyers. The company acquired an order for buses worth 82 million dollars in Senegal. The company also acquired contract for 3600 vehicles worth 200 million dollars from Cote DIvoire. The company initiated a new dealership M/s. Makroo Motor Company, in Srinagar, India. The company also opened a new dealership in Hosapete, Karnataka and Mangaluru, Karnataka. The company inaugurated a state-of-the-art workshop in Riyadh.
In 2016, the company sold 23,25,18,140 equity shares of 10 rupees held in Ashok Leyland John Decree Construction Equipment Company to Gulf Ashley Motor Limited as a part of the divestment plans which infused the company with modest capital contributions. Automotive Infotronics Limited which is a joint venture and Ashley Airways Limited which is an associate of the Company, were under liquidation in late 2016.
The company approved the draft scheme of amalgamation of Hinduja Foundries Limited (HFL) with the Company and their respective shareholders and creditors during the year under review 2016-2017. The appointed date for the amalgamation of these two companies was October 1, 2016. The intended amalgamation had been approved by the shareholders at the Court Convened Meeting held in January 2017. Consequent to the amalgamation, Ashok Leyland Wind Energy Limited became an associate company of Ashok Leyland on March 31, 2017.
In the same year, the Company, Ashok Leyland Nissan Vehicles Limited, which is a subsidiary of Ashok Leyland and Nissan Ashok Leyland Powertrain Limited, Nissan Ashok Leyland Technologies Limited, which are joint ventures of the company began the restructuring and settlement agreements with Nissan Motor Co. Ltd located in Japan. Following the restructuring and settlement agreement, Ashok Leyland procured the entire shareholdings from NML in the subsidiary, Nissan Vehicles Limited and joint venture companies like, Nissan Ashok Leyland Technologies Limited which resulted in a situation where all three companies were now considered the subsidiaries of Ashok Leyland.
In the financial year 2016-2017, HLFL became a material subsidiary of Ashok Leyland because the net worth of HLFL in the preceding accounting year exceeded 20% of the consolidated net worth of the Company and all its subsidiaries. In compliance with the SEBI Listing Regulations, Dr. Andreas H Biagosch who is the Independent Director of the Company has been appointed as the Independent Director in the Board of HLFL. The joint venture of Ashok Leyland, Automotive Infotronics Limited and Ashley Airways Limited which is an associate of the Company are under liquidation. The petition winding up of Automotive Infotronics Limited was filed with the Madras High Court in March 2017 and the winding up process was expected to be completed in the financial year 2017-18. In the same year, under review, Ashok Leyland (UK) Limited had initiated the process of voluntary winding up. The Board of Directors of HLFL, which is a subsidiary company of Ashok Leyland Limited, decided to reverse the Draft Red Herring Prospectus (DRHP) for the recommended initial public offering of equity shares of HLFL. So, accordingly, the DRHP was withdrawn from the Securities Exchange Board of India in June 2017.
In July 2017, the company decided to form a strategic alliance with the Sun Mobility. SUN Mobility and Ashok Leyland forged this alliance to produce world-class mobility solutions.
In August 2017, the company inaugurated the launch of a Digital Market Place, which gave digital solutions to its customers.
Ashok Leyland announced its entry into a Share Purchase and Shareholders Agreement with Everfin Holdings in November 2017.
The company was considered a shareholder of HLFL, for the acquisition of 2.04 crore shares of Rs.10/- which constituted of 4.68% in the form of paid-up capital of HLFL at a price of 110 rupees per share. After the transaction, Ashok Leylands shareholding in HLFL had increased from 57.22% to 61.90%.
On 24 November 2017, Ashok Leyland stated that consequent to the conversion of loans into equity, the company's shares in Optare plc will increase from 75.11% to 98.31%.
On 27 November 2017, Ashok Leyland proclaimed that it has entered into a Mutual Cooperation Agreement with Hino Motors Ltd. Japan where Ashok Leyland will utilize Hino's engine technology for Ashok Leyland EURO-VI development and it will aid in the development of Hino's engine parts that are purchased in India for global operation. Hino and Ashok Leyland had a cooperative agreement for engine production in India since 1986. By this mutual cooperation agreement, both companies had benefited and enhanced their positions in the global market. Ashok Leyland enhanced its competitiveness by developing engines for BS-VI compliance in India through the engine technology of Hino Motors. Hino Motors promoted the engine parts development in India by utilizing Ashok Leyland in India to strengthen their base globally.
In January 2018, Ashok Leyland declared that it took the next step to secure a long-term arrangement for its EV commercial vehicles by signing a Letter of Intent with Phinergy of Israel. The company and Phinergy will be working towards the adaptation of unique, sustainable and competitive solutions in the commercial vehicle space. Phinergy has developed cutting-edge technology solutions for the use of Aluminium Air Batteries for EV. With Ashok Leyland, Phinergy will be using its unique technology to meet the high-energy demand of commercial vehicles in the Indian market.
In March 2018, credit rating agency CARE Ratings upgraded the Long-term and Short-term bank facilities of Ashok Leyland to CARE AA+ and Stable/CARE A1+. CARE Ratings stated in a press release that the improvement in the long-term rating of Ashok Leyland factors in the continuous advancement in its financial position in the past three years, which ended December 2017 and it is supported by its strong operational and financial performance. Consequently, the capital structure of Ashok Leyland has witnessed significant improvement in FY 2017 and nine months ended December 2017.
Ashok Leyland announced that it had acquired a critical order from the Ministry of Defence for supplying High Mobility vehicles for carrying the Smerch Rockets in April 2018. This order is worth over Rs 100 crore for the MOD.
Should You Buy the Stocks of Ashok Leyland?
Before deciding whether you should buy Ashok Leyland stocks or not, you must take these points into consideration:
In the financial year 2017-18, the Y-O-Y revenue and net profit growth were noted to be 33% and 40% respectively and the revenue and net profit growth for the financial year 2017-18 was estimated to be 24% and 28% respectively.
The demand for the commercial vehicle with high tonnage was predicted to be high for the financial year 2018-19.
Ashok Leyland has shown a 21 percent jump in medium and heavy commercial vehicles sales during the month of September 2018
For the period April-September 2018, the total sales rose by 35%
Considering the developments in the company since last 2 years, we can say that, it is safe to invest in Ashok Leyland shares. The company’s margins are also expected to stay up because of higher capacity utilization and improvement in the operating leverage.