Ashok Leyland Q1: Record Sales, But Margins Hit an 8-Quarter Low

Ashok Leyland

delivered a record June quarter, but there is a catch: the sharp increase in volumes and revenue did not translate into higher operating profit. Key Numbers Commercial Vehicle Sales: 48,763 units, up 10.2% YoY Revenue from Operations: ₹9,634 crore, up 10.43% Operating EBITDA: ₹970 crore, broadly unchanged YoY Operating EBITDA Margin: 10.06% vs 11.11% Net Profit: ₹609 crore standalone Consolidated PAT: ₹668 crore vs ₹658 crore YoY LCV Volumes: 18,874 units, with domestic LCV volumes up 21% M&HCV Volumes: up 15%, excluding defence So, Where Did the Margin Go? The main pressure came from higher material costs. Material costs increased from 70.64% to 71.54% of revenue, while employee costs also increased from 7.02% to 7.19%. Together, these two cost increases explain almost the entire 105-basis-point decline in operating margin. Steel was a major factor behind the increase in material costs. Another interesting point: despite two price hikes, the company's approximate revenue per vehicle remained almost flat at ₹19.76 lakh, compared with ₹19.72 lakh a year ago. Faster growth in lower-priced LCVs appears to have diluted the benefit of higher pricing. Another Thing Investors Should Watch Ashok Leyland's financial-services business also grew revenue, but its segment profit declined. Impairment allowances and write-offs rose 47.8% to nearly ₹472 crore, significantly faster than revenue growth. The company's standalone net cash also declined sharply from ₹5,899 crore in March to ₹2,252 crore in June, partly due to dividend payments and higher inventory.