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Ashok Leyland Ltd.
BSE Code 500477
ISIN Demat INE208A01029
Book Value(Rs.) 25.58
Dividend Yield % 6.57
Market Cap(Rs. in millions) 138410.11
P/E 14.57
EPS 3.24
Face Value(Rs.) 1  
Year End: March 2016



Economy - India and the World

The Indian economy posted a robust 7.6% growth in the financial year 2015-16 (based on advance estimates as per the Finance Ministry’s Economic Survey 2016-17) as against 7.2% in the brvious financial year 2014-15. Industrial and Agricultural sectors have gained momentum with 7.3% over 5.9% and 1.1% over -0.2% respectively. In the Industrial Sector, manufacturing growth was significant at 9.5% as against 5.5% in the brvious financial year 2014-15. The recovery in manufacturing growth was contributed by robust growth in petroleum refining, automobiles, chemicals, electrical machinery etc. Other major segments, mining, quarrying and construction activities, are stable. Growth in agriculture has slackened due to two successive years of less than-normal monsoon rains, which reflected in lower GDP growth of -0.2% and 1.1% for the financial year 2014-15 and 2015-16 respectively.

The forecast of an above average monsoon coupled with overall improving economic health and specific measures taken by government in the financial year 2015-16, union budget on increasing farm income through Pradhan Mantri Krishi Sinchai Yojana and various irrigation projects are likely to provide the impetus for growth in agriculture during the financial year 2016-17. There is also expectation for a growth in construction, infrastructure and mining sectors, which will drive the overall economic growth for the financial year. The Indian economy is expected to grow between 7.0-7.75% in the financial year 2016-17.

The global economy grew by 3.1% in the calendar year 2015 (Source: International Monetary Fund). The growth was driven primarily by the developing economies, aided by a stable growth in the United States and moderate recovery in Japan and the European Union.

The global economy is projected to grow at 3.2% in the calendar year 2016 and 3.5% in 2017. Growth in advanced economies is projected to increase from 1.9% in 2015 to 2% in 2016 and hold steady in 2017. The Euro zone is witnessing modest recovery and Japan is also expected to be firm in 2016, on the back of fiscal support, lower oil prices, accommodative financial conditions, and rising incomes.

Growth in emerging economies is projected to increase from 4.0% in 2015 to 4.1% and 4.6% in 2016 and 2017, respectively. Growth in China is expected to slow to 6.5% in 2016 and 6.2% in 2017 over 6.9% in 2015, primarily reflecting weaker investment growth as the economy continues to rebalance. Sub-Saharan Africa, another focus market for Indian OEMs, will see a gradual pickup in growth at 4.0% in 2016 and 4.6% in 2017 over 3.5% in 2015, with lower commodity prices. The Middle East and North African region is also projected with higher growth from 2.5% in 2015 to 3.1% in 2016 and 3.7% in 2017.

Commercial vehicle industry

The domestic commercial vehicle (CV) industry, has shown significant growth in the financial year 2015-16. The Medium and Heavy Commercial vehicles (M&HCV) segment has witnessed a significant growth of 30% over the financial year 2014-15, over and above the 16.0% growth it witnessed in the brvious year. The Light Commercial Vehicle (LCV) segment has been flat, with a growth of 0.3% over the brvious year.

Exports of Commercial Vehicles in the financial year 2015-16 grew by 17% to reach 101,689 vehicles overall.

Given the expected growth in industrial, construction and mining sectors, M&HCV sales are likely to keep up the momentum and economic expert’s estimates for projected growth rates are 10-13% for M&HCVs and 8-10% for LCVs.


Aided by replacement demand, wider sales and service network and the appropriate product mix in the growth segments, your Company managed to increase its market share in the domestic market to a record high in the financial year 2015-16.

Your Company sold 98,809 M&HCVs in the domestic market, which included 19,586 M&HCV buses and 79,223 M&HCV Trucks.

The 49% growth in M&HCV volumes demonstrates the strength of the Company to take advantage of the upturn in the industry.

Your Company has been giving considerable emphasis on product development to meet evolving customer expectations and upcoming regulatory requirements. The challenge ahead is to develop BS-VI vehicles with right technology and competitive cost within the time stipulated. The transformation program from BS-IV to BS-VI and development in the electric vehicle space will require investments, changes in design requirements and training across all touch points. Your Company unveiled the future ready Intermediate Commercial Vehicle (ICV) and School Bus products at the SIAM Auto Expo in February 2016. These products are a welcome addition to our class-leading portfolio and will provide further fillip to our growth. GURU with highest payload capacity in its class, lower maintenance cost and longer service intervals and SUNSHINE school bus for the children with better safety, hygiene and comfort are planned for launch in financial year 2016-17.

Your Company also showcased the futuristic products in the form of India’s first, a 4940 tractor and a Euro 6 Hybrid Bus at the Auto Expo.

In the financial year 2015-16, your Company completed its fourth full year of participation in LCV segment with current products, DOST Strong and PARTNER four-tyre version have gained significant positive response across the country. Your Company added around 40 touch points to the existing LCV network bringing the total 390 touch points. With 3 consecutive years of slowing LCV demand, Dost has maintained its market share and sold more than 25,000 vehicles this year.

The Power Solutions Business witnessed a 11% growth over the brvious year. This was achieved despite a de-growth in Industrial segment, an un-seasonal monsoon resulting in a lower crop harvest and a shortened fishing season, and improved power availability across the grids, which all pulled down the overall demand for engines in the financial year 2015-16. Revenues from the Spare Parts were maintained at the same level as the financial year 2014-15. The Defence business gained momentum with respect to last year and sale of Kits improved over last year. Your Company also won additional tenders from the Indian Defence establishments for supply of advanced-technology products. Your Company is on the path of building capability to increase product lines, integrate sub-systems on vehicle platforms, and increase our contribution to the Indian Defence requirements.

In summary, your Company having used the challenging economic scenario to transform itself into an agile player is now appropriately positioned for sustainable growth and effectively exploiting the market upturns.


The Commercial Vehicle industry has grown substantially over the last two years, driven by improving viability for fleet operators due to reduction in operating cost, replacement-led demand and br-buying ahead of implementation of BS-IV emission norms and Anti-Lock Braking Systems (ABS). The improvement in cash flows of fleet operators has also started showing as improved collection efficiency for CV financiers.

The Union Budget for the financial year 2016-17 is positive for the automotive sector with significant growth focus in enhancing farm income, rural development initiatives and infrastructure development, which will enhance transportation and logistics. The auction of coal mines, opening up of mines in Karnataka and Goa and easing of movement of sand will enhance the construction and mining. These are likely to drive the growth momentum for M&HCVs.

Demand for LCVs is likely to pick-up in the financial year 2016-17 on back of a replacement-led demand (after the last 3 years of declining sales), br-buying ahead of the implementation of BS-IV norms and the Swachh Bharat urban initiatives. In contrast, to a decline in the financial year 2015-16, this segment is projected to witness a growth during the financial year 2016-17.

With an overall recovery and new orders placed by STUs (under the JnNURM programme), projection for overall bus segment is positive in the financial year 2016-17. Apart from existing orders, the domestic bus sales are also likely to benefit from the Government’s recent proposal for opening up the passenger transport sector to private players. In addition, the higher budgetary allocation towards urban development projects and other initiatives such as “Smart Cities” will also enhance the bus demand.


During the year, the Company continued to outperform the CV industry and has made significant gains in market share and sales volume by focusing on innovation, intensive marketing strategies and network expansion. Managing risks while strategising was key in the successful outcome of these initiatives. Enhancing service outlets and brand image, new product launches, targeting new domestic markets across the country, developing alternate international markets and focusing on cost control and debt reduction were some of the key risk mitigation actions executed during the year. These measures have enabled the Company to bring value product for its customers, strengthen dealer relationship and achieve substantial reduction in interest cost.

The Company continues to work on innovative and cost-effective technology solutions like development of powertrains and vehicles through strategic partnerships to meet the regulatory requirements pertaining to the upcoming emission norms.

The Company has an established and robust Enterprise Risk Management (ERM) framework encompassing all functions for identifying, evaluating, mitigating and monitoring risks related to the achievement of organisational objectives.

The ERM framework supports a sound risk culture along with pro-active identification of risks that would enable it to adapt to the changing scenario, gain competitive advantage and thus provides confidence to the stakeholders that the Company’s risks are known and managed. The process of risk management is initiated at the stage of strategy setting wherein risks inherent to the strategy are identified and the critical assumptions underlying the strategy are also considered. Such risks would be internal risks (like operational, financial, compliance and people) and external risks (like legal and regulatory, political, economic, competitive environment at domestic and international levels).

The ERM in the Company is overseen by the Board of Directors, through the Risk Management Committee (RMC) which is responsible to ensure that the Company has an appropriate and effective ERM framework. The RMC apprises the Board on a periodic basis on the effectiveness of the ERM framework, the enterprise risks faced by the Company and how these are managed. It also reviews the organisation’s Risk Appetite statement on an annual basis.

The Steering Committee, consisting of core business vertical heads, is responsible for the risk management process including risk identification, impact assessment, effective implementation of risk mitigation plan and risk reporting. The Steering Committee, chaired by CEO & MD, reviews on a quarterly basis the enterprise risks which are tabled at the RMC for its review.


Given the nature of business and the size of operations, your Company’s Internal Control System has been designed to provide for:

• Accurate recording of transactions with internal checks and prompt reporting;

• Adherence to applicable Accounting Standards and Policies;

• Compliance with applicable statutes, policies and procedures, guidelines and authorisations;

• Effective use of resources and safeguarding of assets.

Consequent to the implementation of Companies Act, 2013 (Act) your Company has complied with the specific requirements in terms of Section 134(5)(e) of the Act calling for establishment and implementation of an Internal Financial Control framework that supports compliance with requirements of the Act in relation to the Directors’ responsibility statement. The Internal Financial Control framework document that follows the COSO (the Committee of Sponsoring Organisations of the Treadway Commission) 2013 standards, supports the Company in evaluating the operating effectiveness of the controls in a consistent manner.

Your Company, through its own Internal Audit Department, carries out periodic audits at all locations and functions based on the plan approved by the Audit Committee and brings out any deviation to Internal Control procedures. The observations arising out of the audits are periodically reviewed and compliance ensured.

The summary of the Internal Audit observations and status of implementation are submitted to the Audit Committee every quarter for its review and concerns, if any, are reported to the Board.


Ashok Leyland, among the first auto majors in India to be certified under BS7799 in 2005 (for its Data Center at Ennore), strategically decided to expand the scope in a modular manner to critical areas, particularly handling IPR and/or sensitive information. Your Company migrated to ISO 27001:2005 during 2006 and expanded the scope to Business Continuity and Disaster Recovery site in 2010. Subsequently, your Company expanded the scope of certification to cover the entire corporate office building at Chennai and one end-operation point (Regional Office at Bangalore). During the year, your Company has successfully migrated to ISO 27001:2013 standard.



Your Company’s revenues improved by 39% aided by 41% increase in M&HCV sale volumes, better growth in Haulage, Tractor and Multi Axle segments, stable discounts (at higher levels) as well as upward revision in prices.


Material Cost: Through various internal initiatives, your Company could manage to reduce material cost by 2.0% during the year. The Company had to concede around 0.6% towards commodity cost increases during the year which is offset by 0.4% saving through internal cost reduction measures.

Staff Costs: Employee expenses are up by 19% brdominantly reflecting the full year impact of increments, salary revision for executives as well as higher provisioning requirements for bonus and performance related compensation consequent to better performance this year.

Other expenses contained at 10.5% of revenue from operations in current year as against 10.2% last year primarily due to reckoning of export related expenses during the year.

Debrciation for the year is at Rs. 444 Crores which is higher than last year reflecting the increase in number of shifts at various manufacturing locations during the year.

Finance costs decreased to Rs. 274 Crores during the year from Rs. 394 Crores in the brvious year reflecting lower working capital levels as well as better cash flows during the year.

Capital Employed

Total capital employed by your Company increased by 0.6% from Rs. 13,311 Crores to Rs. 13,386 Crores reflecting the increase in activity levels.

Total shareholders’ funds as at March 31, 2016 after providing for dividend stood at Rs. 5,514.14 Crores which is an increase of Rs. 395.45 Crores over March 31, 2015 amount of Rs. 5,118.69 Crores. This increase reflects the current year profit.

Capital Expenditure and Investments

During the year, your Company incurred Rs. 121 Crores towards capital expenditure, brdominantly towards sustenance of existing capacity and product development activities. Further, an exchange difference of Rs. 85 Crores has been capitalised during the year.

This is on account of the weakening of the INR against US$ during the year.

Your Company has invested in cash Rs. 46 Crores in AL John Deere, Rs. 40 Crores in Albonair Germany, Rs. 6 Crores in Gulf Ashley Motor, Rs. 5 Crores in Ashok Leyland Defence Systems and Rs. 3 Crores in Ashley Alteams. Thus in all your Company had invested Rs. 100 Crores in cash in Joint Venture (JV)/Associates/Subsidiaries during the year.

Your Company, after studying its intrinsic value of investments in Joint Ventures (JV)/Associates/Subsidiaries has made an impairment provision of Rs. 107 Crores towards Albonair Germany, Rs. 150 Crores towards Optare Plc, UK and Rs. 5 Crores towards Albonair India. The Company and its Joint Venture (JV) partner (Nissan Motors Limited), are in discussions to resolve the uncertainty with respect to the continuity of the joint venture operations rebrsented by three companies viz., Ashok Leyland Nissan Vehicles Limited, Nissan Ashok Leyland Powertrain Limited and Nissan Ashok Leyland Technologies Limited. The financial statements of these companies have not been adopted by the Board of Directors of the respective companies. Under the circumstances, considering the significant uncertainty in continuity of the joint venture operations and the accumulated losses of the joint venture entities, the Company has provided for the carrying value of the investment in the said companies aggregating Rs. 296 Crores.

Thus in all, your Company has impaired Rs. 558 Crores during the year. Further, your Company has disposed off the shares in Ashok Leyland John Deere at a loss of Rs. 233 Crores.

Further, there has been sale of non-core investments comprising IBL shares Rs. 38 Crores and ICICI Bonds Rs. 2 Crores.

Current Assets as at March 31, 2016 were higher at Rs. 5,291 Crores compared with brvious year level of Rs. 4,693 Crores. This increase was brdominantly driven by significant increase in cash and bank balances as of March 31, 2016. Cash and bank balances as at March 31, 2016 was at Rs. 1,568 Crores higher than Rs. 751 Crores as on March 31, 2015. Short term loans and advances increased by Rs. 62 Crores. Inventories increased by Rs. 332 Crores to Rs. 1,731 Crores as at March 31, 2016 compared to Rs. 1,399 Crores as at March 31, 2015 mainly due to increase in finished vehicle inventory. Trade Receivables increased by Rs. 8 Crores to Rs. 1,251 Crores as at March 31, 2016 from Rs. 1,243 Crores as on March 31, 2015. Other current assets decreased by Rs. 213 Crores to end at Rs. 115 Crores as on March 31, 2016. Current Investments decreased by Rs. 408 Crores to end at Rs. NIL.


Your Company continued with the “Cash and Carry” system of sales during the year which has been effective since May 2009. This has enabled your Company to better manage the increased liquidity requirements. During the year, your Company has repaid long term loans of Rs. 758 Crores from internal generation.

Sale of non-core assets has also augmented the cash flow requirements. Your Company manages its liquidity through rigorous weekly monitoring of cash flows.


Your Company’s profitability improvement consequent to increased volumes continued in financial year 2015-16 also. The increased volumes were aided by replacement demand. Improvement in demand off take in Haulage, Tractor and Multi Axled vehicles has boosted volumes for your Company. This has also led to higher market share for your Company.

As such industrial activity (trend in Index of Industrial Production) continues to be sluggish. Tighter control on material costs and operating expenses have significantly contributed to profit improvement during the year.

Presently, your Company’s debts have been rated by ICRA. During May 2015, Your Company’s financial rating has been upgraded from (ICRA) A+ to (ICRA) AA- with stable outlook. Details are as follows:

Agency Long Term Loan Short Term Loan

ICRA AA- (stable outlook) A1+

During the year, your Company has serviced all its debt obligations on time.

Results of Operations

Your Company generated an after tax profits from operations of Rs. 1803 Crores in 2015-16 which was higher as compared to Rs. 1072 Crores generated last year. With marginal increase in working capital, your Company registered a net cash inflow of Rs. 1676 Crores from its operations which is marginally lower as compared to Rs. 1776 Crores generated last year.

Cash outflow for acquisition of assets and investing activities for 2015-16 was at Rs. 292 Crores as against outflow of Rs. 224 Crores in 2014-15. No fresh loans were raised during 2015-16 as against Rs. 125 Crores raised in 2014-15. Further, your Company has also disposed some of its non-core assets and investments during the year which has improved the cash flow. During 2015-16, your Company realised Rs. 680 Crores by way of sale of immovable properties and long term investments as against Rs. 326 Crores last year.

Profit before tax and exceptional items stood at Rs. 1559 Crores as against Rs. 341 Crores last year.

After reckoning a tax liability of Rs. 447 Crores, Profit after tax for the current year stood at Rs. 722 Crores. The earning per share has more than doubled from Rs. 1.20 in 2014-15 to Rs. 2.54 in the year under review.

Your Company has continued to publish consolidated accounts of its subsidiaries, associates and joint ventures in line with last year.


The Directors have recommended a dividend of Rs. 0.95 paise per Equity Share of Rs. 1/- each for the year 2015-16.

The Year Ahead

The domestic commercial vehicle industry has moved out of the down cycle. In March 2016, the industry reported a growth of 22% on YOY basis driven by strong growth both in the M&HCV Truck segment (34%) as well as pick up in the M&HCV bus segment (9%). Within the CV segment M&HCV reported a growth of 29% in unit sales while the LCV segment witnessed a growth of 16%. Replacement demand, gradual implementation of BS-IV norms by April 2017, improving viability of the fleet operators, expected pick up in infra and mining sectors will be the growth drivers for M&HCV truck demand. Orders from state transport undertakings, improvement in profitability of private carriers stable demand from school and staff carrier segment will drive the bus demand. Likewise, replacement demand, pick-up in demand for last mile transportation (e-commerce) would be the growth drivers for LCV trucks.

The industry’s view is that, the M&HCV Truck segment is likely to register a growth of 13-15% in FY 2016-17 over the medium term, the demand for the CVs will also be driven by gradual acceptance of advance trucking platforms, progression to BS VI emission norms (possibly by 2020 onwards) and introduction of technologies, may lead to advance purchases by fleet operators. LCV segment is expected to grow at around 13% in the financial year 2016-17 driven by replacement demand and conducive finance environment.

The product variants chosen by your Company for launch in domestic and select export markets in last two years across the segments has improved market share in domestic market as well as increase in export sales. Your Company’s focus on improving the network on cost effective basis particularly in North, Central and Eastern regions has started yielding results by way of improvement in market share in these regions. The transformational sales and marketing processes had enabled your Company to penetrate new markets and face fierce competition actions in the brvious year. Your Company will continue to focus on all key initiatives for driving down costs and profitability improvement. All these have already contributed in improving the performance in financial year 2015-16 and will give sustained savings in the years to come.


During the year under review, the total number of people on the rolls of the Company is 10,352.

Material developments in the Human Resource/Industrial relations front have been detailed under the head “Human Resource” in the Board’s Report.

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