Ashok Leyland Sees Margin Improvement On Continued Growth
Ashok Leyland Ltd. expects its operating margin to improve further if the current growth trajectory continues.
The commercial vehicle maker Ashok Leyland Ltd. expects its operating margin to improve further if the current growth trajectory continues.
If the current growth trajectory continues, along with volumes, realizations, and revenues, the margins could improve further, Gopal Mahadevan, chief financial officer at the company, told BQ Prime.
However, the margin improvement will depend on the stability of commodity prices and the demand scenario, which seems to be strong after the first month of the ongoing quarter, he added.
In the quarter ended December, the Hinduja Group company's operating margin jumped to 8.8% from 4.0% in the same period last year.
Mahadevan said additional cost-cutting measures, the deployment of technology, and better operating leverage will also lead to higher operating profits.
The company also believes the new on-board diagnostics norms under the transition to phase-2 of BS-VI emission norms don't appear to be a major issue at the moment, and its price impact will be finalised at the end of the quarter. The new norms will kick in in April.
While phase-I of the emission norms had a significant impact on vehicle prices, the industry is largely in agreement that it won't have such an impact.
The company is also seeing improved demand scenarios across segments.
It cornered a market share of 33% in the medium and heavy commercial vehicle category during the third quarter, as opposed to 26% last year.
The demand for both electric and diesel buses is picking up as most of the offices, schools, and organisations have opened since Covid increased the need for transportation, Mahadevan said.