Ashok Leyland to set up green arms; stock rallies 7%, nears 52-week high

Shares of Ashok Leyland, on Thursday, surged 7 per cent to Rs 124.80 on the BSE after the commercial vehicles major said it has decided to form two new subsidiaries as part of its plans to strengthen green transport solutions.

The company, through its subsidiary Switch Mobility Ltd -- the UK-based electric vehicle producer of buses and vans, is creating two units, Ashok Leyland said in a statement. The first unit -- Switch Mobility Automotive Ltd -- is being formed to carry on the electric vehicle strategy in India and forms part of its global entity. The second subsidiary -- OHM Global Mobility Pvt Ltd -- will focus on providing mobility as a service offering, it said.

At 11:18 AM, the stock was trading 6.17 per cent higher at Rs 124 as compared to 0.7 per cent gain in the benchmark S&P BSE Sensex. Around 3.31 crore shares have changed hands on the BSE and NSE combined, so far. The stock was trading close to its 52-week high of Rs 138.85, hit on February 4, 2021.

"Switch Mobility Automotive Ltd will help us fulfil our aspiration of zero carbon emission transportation.

"With a strong presence and proven expertise in the commercial vehicle market in India and the experience of operating a large number of electric vehicles successfully in India and the UK, we see huge opportunities for growth through Switch's expansion in Indian and global markets," Ashok Leyland Chairman Dheeraj Hinduja said.

Ashok Leyland reported a ten-fold growth in M&HCV trucks sales to 8,784 units in March 2021 from 860 units in March 2020. Bus sales grew 91 per cent to 1,117 units from 585 units. Light Commercial vehicles sales grew by 1,928 per cent to 5,860 units in March 2020 from 289 units, a year ago. Total vehicles sales rose by 809 per cent to 15,761 units in March 2021 from 1,734 units, a year ago.

Analysts said commercial vehicles sales are increasing month on month, quarter and year on year, adding that increase in infrastructure spending, improved consumer sentiments, better freight rates are some of the key drivers of the superior show.

The company closed the fiscal ended March 2021 with 20 per cent drop to 92,714 units as compared to 1,16,280 units, a year ago.

In a note dated April 7, 2021, ICICI Securities said that Ashok Leyland is seen outperforming the OEM pack in Q$FY21 results, courtesy 32 per cent sequential growth in volume at 44,060 units (up 73 per cent YoY). 

"The product mix is further slated to improve with M&HCV: LCV ratio for Q4FY21 at around 60:40 vs. around 50:50 in Q3FY21. Total operating income is expected at Rs 6,876 crore (up 79 per cent YoY, 43 per cent QoQ). EBITDA is expected at Rs 407 crore with corresponding margins at 5.9 per cent, up 60 bps QoQ with high operating leverage benefits mitigating the impact of rise in commodity prices. Ensuing profit after tax (PAT) is expected at Rs 127 crore vs. loss of Rs 57 in Q4FY20," the brokerage said.