Ashok Leyland is an Indian multinational automotive manufacturer, which has their headquarters in Chennai. The company is a part of the Hinduja Group. The company was established in 1948 as Ashok Motors and later it was renamed as Ashok Leyland in the year 1955. Ashok Leyland is the 2nd major manufacturer of commercial vehicles in India (having a market share of 32.1% as in 2016), and the 3rd major manufacturer of buses in the world, and the 10th major manufacturer of trucks.
The company has a strong brand and well-diversified distribution and service network across the country and has a presence in 50 countries, they are one of the highest fully integrated manufacturing companies. They manage driver training institutes across India and have trained over 8,00,000 drivers since inception.
Appointment of a new head
The commercial vehicles sector is in a strong upcycle and Ashok Leyland wants the most out of this strong momentum in the sector. Hence the company has announced the appointment of Shenu Aggarwal as its new managing director and chief executive officer (CEO). The appointment might raise the confidence of investors considering the company has encountered some senior-level executives abandoning their posts in the last few years and shows coherence after a yearlong period when the previous head Vipin Sondhi suddenly stepped down.
Growth in sector
Leyland’s divide and conquer strategy of increasing sales volumes and reducing costs, aimed for growth and enhancing profitability has been able to pull in significant results. The company’s double-digit revenue expansion in the second quarter of the current fiscal year is supported mainly by robust sales growth in its heavy commercial vehicles (HCV) segment. Strong marketing efforts has led to the expansion of its market share by 10 percentage points year-on-year to 32 per cent. Normally, the HCV segment demand is prone to cyclic performance. The company has proactively grabbed the opportunity for a high demand in LCVs because e-commerce enables last-mile delivery.
Hence the company has given out a strong growth across CV segments and have raised Leyland’s overall market share to 16 per cent (as of November) which was at 13 per cent a year ago.
Rising Difficulties
Ashok Leyland faces a stiff battle with Tata Motors and Mahindra. Hence there are risks due to heavy competition and the demand might moderate due to transition to BS6 Stage II. The rising interest rates have made the environment gloomy with the fear of economic slowdown and demand moderation in truck sales.
Group announcements
Hinduja group has announced the fundraising and dilution of Ashok Leyland’s stake in Switch Mobility which is the electric vehicles firm of the group. Hinduja group has also announced the listing of its finance firm named Hinduja Leyland Finance.
Technical Analysis
Ashok Leyland stock price made a double top pattern with a lifetime high of Rs 169.45 in September 2022. The stock price is taking support at the 23.6% retracement level. A break over the level of 169 will take the stock higher. MFI is at 47 points which is very close to being in the oversold zone. Operators might bring in bullishness to this stock, because the stock price has not risen in the past few weeks in spite of the bull run in majority of Nifty stocks.
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