Despite being an election-impacted quarter, you have registered record Q1 volumes. Can this be a record year for Ashok Leyland with industry-breaking records?
Shenu Agarwal: Yes, for Ashok Leyland, Q1 has been a record quarter in many different ways. Our CV volumes have been the highest ever. Our EBITDA has been the highest ever in Q1. Our PBT has been the highest ever. So, we are doing good on all fronts. Before the start of the quarter, there was widespread anxiety that the CV industry may go down because of the impact of elections. Some research agencies were estimating a 15% downside to the CV industry.
But Q1 has negated all that. Growing at 10% for M&HCV in Q1, a lot of positive momentum is building. We think Q2 also will be good. We are already seeing a lot of positive momentum on the ground, especially after the Budget, the sentiments are quite positive with the allocations made to infrastructure, roads, construction, and mining. We will have a very good year and I would not hesitate to say that FY25 might be a record year for the CV industry.
The overall margin contraction is fairly big sequentially versus what we saw last time around a trend of about 200 to 300 basis points between Q4 and Q1. Is there any one-off? What is the outlook on margins? Can we bounce back to the 12-13% range in the coming quarters?
Shenu Agarwal: We are all aware that the CV industry is very seasonal. It is best compared on a YoY basis rather than a sequential basis because Q4 and Q4, generally the industry is at its peak and Q1 starts at the lowest levels. If you compare EBITDA performance with respect to last year’s Q1, you will find that our margins have expanded quite a bit.
So, I think that trend will continue, quarter-on-quarter we will do better concerning the quarters of the previous year. As far as the commodity pricing is concerned, those are quite stable and are also helping us. Our cost-saving initiatives are at the peak. That rigor will bring in more cost savings in times to come. And as far as the industry continues to grow, which quarter one has been very-very positive, I think we should be able to expand our margins here on.
What are the growth prospects on the non-vehicular side?
Shenu Agarwal: We are very optimistic about our non-CV or non-vehicle business. Last year, we had a very good jump in defence business, a very good jump in our power solutions business, and also we did very well on the aftermarket business as well. That momentum will continue in this year. In the defence business, in Q1, we have grown by quite a bit. Aftermarket business is also doing well. This year, our non-vehicle business will continue to do very well and may outpace our vehicle business in terms of growth.Coming to your subsidiaries, where do you see a potential for a listing in the future?
Shenu Agarwal: We have three or four very substantial subsidiaries where a lot of value unlock is possible. First, I will talk about the Hinduja Leyland Finance. There have been plans to go public with Hinduja Leyland Finance and I think within the next few quarters you will see more traction around those plans. Then, we also have Hinduja Housing Finance, which is 100% owned subsidiary of Hinduja Leyland Finance, which is also doing very well and has a lot of value to be unlocked in the future.
Then, we also have Hinduja Technologies Limited, where some external investors have come in at a much better valuation. That also has a lot of potential in terms of value unlock. In the medium term, our electric vehicle companies, both Switch and our electric E-MaaS company, Ohm, have a lot of potential. So, in terms of value unlock, Ashok Leyland has surrounded itself with some really good businesses that can create a lot of value in the future.
Amongst these four subsidiaries, will it be good to assume that we can see at least two listings?
Shenu Agarwal: I cannot say about one or two, but yes, at least in one of the subsidiaries we may opt for a listing.