“The worst is behind us” says Ashok Leyland Chairman.

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.2% lower. Bajaj Finance (+3.3%), Bharti Infratel (+3.3%) and Yes Bank (+3.2%) were the top NIFTY50 gainers. Zee (-3.7%), Indusind Bank (-2.3%) and Ultratech Cement (-2.2%) were the top NIFTY50 losers. Among the sectors, NIFTY FMCG (+0.3%) was the only sectoral index that closed positive. NIFTY MEDIA (-1.4%), NIFTY PHARMA (-1.1%), NIFTY METAL (-0.9%) were the worst-performing sectors.

 “The worst is behind us” says Ashok Leyland Chairman.

Excerpts from an interview with Mr. Dheeraj Hinduja, Chairman, Ashok Leyland broadcasted on CNBC on 5^th November 2019.

• Demand slowdown has been caused by multiple issues including issues faced by financing companies and the availability of liquidity in the market.

• Last financial quarter is traditionally a strong quarter for Commercial Vehicle (CV) OEMs. 4QFY20 will be a strong quarter followed by a slow 1QFY21 due to the technology transition from BS-IV to BS-VI.

• Management is looking forward to FY21. Historically, the year of transition is a strong year.

• The transition from BS-IV directly to BS-VI in a 3 year period is one of the shortest transition times globally. Other countries have taken 7-10 years in which period the cost absorption has been done in a phased manner. There will be a significant cost-push on account of the transition.

• Even post the cost-push due to BS-VI, management says Ashok Leyland will be cost-competitive as ever. The customers will see real value in products launched.

• Looking forward, there are some good signs such as many initiatives that the government is taking and the revival of financing. Most of the OEMs have now corrected the state of their inventories that had built up. The next few months look to be quite positive.

• The market is not going to recover overnight, but the worst is behind for Ashok Leyland.

•  It’s been a year since the previous CEO, Mr. Vinod Dasari quit.  Search for the CEO is on. FY20 is a year of important changes with respect to BS-VI, their new modular platform and the introduction of a whole line up of LCV products. The Board had taken a decision that they did not want a major disruption in the Management at this important juncture.  But a new CEO is required and the Board will be announcing a successor in the next few months.