Ashok Leyland Ltd Management Discussions

Industry sales of commercial vehicles declined marginally in FY25 (following modest growth in FY24), marking the second consecutive year of consolidation after strong growth in FY22 & FY23. Sales continued to be driven by governments focus on infrastructure and a rebound in economic activity after the election induced slowdown in the first half of FY25. Your Companys sale in M&HCV Trucks segment (excluding Defence vehicles) in India de-grew by 5.2% to 91,960 units in FY25, compared to 96,995 units in FY24. For the second consecutive year, TIV movement was observed from MAVs towards higher tonnage Tractors. Contribution of Haulage to TIV witnessed a growth while ICV Trucks & Tipper TIVs witnessed marginal drop. Key product launches in FY25 for MHCV-Trucks (Domestic) include ecomet Star 11T CNG, ecomet Star 1615 Tipper, 1916 FES Haulage, AVTR 1925 Tipper, AVTR 3522 & 2822 CNG, AVTR 4020 car carrier, AVTR 4825HD Tipper and AVTR 4825HD MAV. These products will help strengthen market position in their respective segments. Reaffirming its commitment to sustainable mobility, your Company launched BOSS Electric and AVTR 55T Electric in FY25 for which it secured significant orders and commenced delivery to BillionE Mobility.

Industry sales in the M&HCV Bus (excluding Defence vehicles) segment continued to witness strong double-digit growth over FY24, driven by replacement demand from STUs and post-COVID revival in inter-city & mofussil applications. Your Companys sale in M&HCV Bus segment (excluding Defence vehicles) in India grew by 18.3% to 21,253 units in FY25, compared to 17,956 units in FY24. Key product launches in FY25 for MHCV-Bus (Domestic) include Oyster Vi, Lynx Max chassis, Oyster Vmax, ULE non-AC Bus & Viking fully built AC Bus.

In FY25, your Company remains focused on the GCC region and pursuit of new KAM deals to diversify customer base as a counter to the political turmoil in key market of Bangladesh. Forex challenges in Nigeria & Ghana contributed to a decline in TIV. In South Africa, your Company partnered with Hall Mark Group and established 30 new touchpoints. With the launch of the Leo model in Bangladesh, your Company captured significant market share in the sub-2T segment. In Sri Lanka, the focus was on LCV sales through assembly to strengthen market presence. Despite these challenges and some project order delays , your Company sold 15,255 units in IO markets, a robust increase of 28.7% over last year outperforming industry growth of 23.0%. Notably, your Company achieved the milestone of becoming Indias No. 1 commercial vehicle exporter in Q3FY25.

In FY25, the Indian governments impetus on infrastructure expansion in rural & urban as well as transport sector created good traction in Industrial equipment demand. While CEV V emission norms for Industrial earth moving & construction equipment segment was implemented in Jan25, transition by equipment manufacturers has been smooth with six-month window for migration. Agricultural activities backed by good monsoon & irrigation incentivisation accelerated harvester combine requirements. Despite demand fluctuations, your Company managed supply chain effectively to fulfil the demand. Powergen segment remained subdued on account of CPCB4 emission shift since Jul24. Owing to significant cost increase of gensets, demand is yet to pickup with prices getting established. The significant drop in Powergen volumes has been negated by higher volume growth in Industrial & Agricultural segments. Overall, your Company sold 32,930 engines, an increase of 1.7% over last year.

Company managed efficient operations at warehouses, supplier partners, and Channel partners. To further strengthen the reach, 80 exclusive retail parts stores were added, taking the total to 734 stores at the end of FY25. Continued engagement with independent retailers and mechanics deepened market connections and participation. LEYKARTR, Ashok Leylands one-stop shop mobile app for Ashok Leyland Genuine Parts - LEYPARTSR and others, witnessed sustained growth in order fulfilment and user-participation for the sixth consecutive year with over 2.32 Lakh active users. Your Company remained committed to customer-centric service delivery in FY25 conducting 16 focused product campaigns and attended over 4 Lakh vehicles across India. Your Company inaugurated its Uptime Solution Centre, a future-ready facility equipped with advanced technology and exclusive diagnostics and prognostics analytics - marking a significant leap in transforming aftersales support and maximizing Customer uptime. The ALCare app continues to serve as a one-stop solution for all Customer service needs, with over 3.27 Lakh registered users. Your Company continues to be the only OEM with pan India presence of 17 state-of-the-art Driver Training Institutes where more than 25 Lakh drivers have been trained and more than 30,000 drivers have been placed. Additionally, the inauguration of the 13th Technical Training Centre (TTC) in Hosur further strengthened efforts to provide tailored programs for Channel partner executives, Customer personnel, and independent mechanics. Looking ahead, your Company is working on a focused program to achieve industry-leading Customer satisfaction. This initiative aims to enhance Customer engagement, upgrade Ashok Leylands authorized workshop capabilities through digitalization, and revamp service processes and policies to set new benchmarks in after-sales support.

Your Companys well-established Enterprise Risk Management (ERM) framework in line with COSO ERM principles and the ISO 31000:2018 standard has comprehensive risk categorization which continues to keep the organization in good state and future ready.

The risk management process encompassing Risk Identification, analysis, evaluation, prioritization, treatment, monitoring, and reporting remains robust. The significant risks identified are tabled to the Risk Management Committee (“RMC”) of the Board along with the mitigation plan.

Given the nature of business, size and complexity of operations, your Company has designed an adequate internal control system to ensure: a. Transactions recorded are accurate, complete, and authorised; b. Adherence to accounting standards, complying with applicable statutes and conforming to Company policies and procedures; c. Effective use of resources and safeguarding assets. Your Company has complied with the specific requirements laid out under Section 134(5)(e) of the Companies Act, 2013 which calls for establishment and implementation of an Internal Financial Control framework that supports compliance to the Act in relation to the Directors Responsibility Statement.

Your Company follows the COSO (Committee of Sponsoring Organizations of the Treadway Commission) Internal Control Framework, 2013 and The Institute of Chartered Accountants of Indias Guidance Note on Audit of Internal Financial Controls Over Financial Reporting that supports in evaluating the design and operating effectiveness of internal controls in a consistent manner. Further, your Company, through its well established, inhouse independent and multi-disciplinary Internal Audit function carries out risk based Internal audit reviews, based on the annual Internal Audit plan as approved by the Audit Committee of the Board. The Internal Audit function reviews compliance with established design of the Internal control, while ensuring the efficiency and effectiveness of operations.

The Companys whistle-blower policy / vigil mechanism facilitates all employees, vendors, dealers and other stakeholders to report fraud and wrongdoings without fear of consequences.

FY25 has been the third year in a row wherein your Company has reached greater heights in terms of business and financial performance. Your Company has recorded a revenue of 38,753 Crores the highest so far, which is 1% higher than previous year ( 38,367 Crores). Your Company also recorded the highest PAT of 3,303 Crores which is 26% higher than previous year ( 2,618 Crores) The EPS has grown by 26% to 11.25 per share (FY24 - 8.92 per share).

MHCV industry Bus has witnessed record high volumes in FY ‘25 at 63,987 nos (excluding EVs) which is 23% higher than last year (52,139 nos). Bus demand has been consistently increasing during the last couple of years and Your Company is well prepared to meet the challenge of increase in demand. In line with the industry growth, Your Companys bus volumes have also grew by 18%. AL Bus market share is consistent and continues to be at around 33-34% during the last couple of years. Though the volume growth is around 18%, due to better mix and price increases during the year, bus revenues have grown by ~ 32%.

MHCV industry truck volumes which were stable for two consecutive years at ~ 3,20,000 vehicles i.e., in FY 2022-23 and FY 2023-24. Truck volumes have declined by about 4% in FY 2024-25. Your Companys truck volumes have also declined in line with the industry trend. Market share continues to be ~ 30.5% in last 2 years. 3% shift in truck volume was witnessed from higher tonnage Multi axles vehicles to lower tonnage Haulage & Intermediate Commercial Vehicles (ICVs) during the year. This is also reflected by way of a reduction in revenue by ~ 8%.

Sale volume of Defence vehicles (completely built units) touched a record high of 1,584 vehicles in FY 25 which is 41.9% higher than previous year (1,116 nos). Defence kits sales and defence revenue were stable.

Your Companys LCV domestic volumes has been lower by ~2% i.e. 65,049 nos. in FY25 vs 66,633 nos. in FY 24. However consequent to the price increases during the year, revenue is stable at 4,368 Crores.

IO volumes have witnessed a huge surge in FY 25. IO recorded a sale of 15,255 nos. which is 28.7% higher than previous year (11,853 nos). Your Company volumes witnessed growth in all the markets covering SAARC, Middle east and Africa. In line with the volume growth, exports revenue also grew by about 24% during the year. Your Company recorded a sale of 1,95,097 CVs in FY 25 representing a growth of 0.3% over FY24 (1,94,553 nos.). This CV volume is also the second highest volumes in the Companys historical business performance (All time high being 1,97,366 nos. in FY19). Domestic spare parts revenue (including service products) grew by 11.7% from 3,132 Crores in FY 24 to 3,500 Crores in FY25 which is again a new all-time high.

Power solutions (engines) volumes grew to a new life time high of 32,930 units in FY 25 representing a growth of 2% over FY24 volumes (32,374 units).

Consequent to the overall CV volume increase by 0.3% as well as the price recoveries, Your Companys revenues grew by a 1% to 38,753 Crores over previous year ( 38,367 Crores).

Staff Costs: Staff costs went up by 7.7% during FY 25 primarily due to a) Increments and promotions to the executives during the year, b) higher variable pay provision c) Provision was also made towards the workers wage settlement which was due from second half of FY 25 at Hosur and Ennore units.

Total shareholders funds as at March 31, 2025 stood at 11,519 Crores reflecting an increase of 2,708 Crores primarily reflecting the profit for the year 3,303 Crores as reduced by dividend payout of 588 Crores (first interim dividend FY25), other reserves reduction 7 crores. Second interim dividend payment of 1,248 Crores will be reflected in FY 26 as payment is likely to happen in June 25.

Our export volumes were improving from the first quarter of the financial year and registered double-digit growths from second quarter. Various initiatives covering product cost reductions, value engineering, overhead cost reduction actions were initiated and carried out during the year. Performance of other businesses covering exports, defence, spare parts and power solutions (engines) was good and supported your Companys performance throughout the year. The contributions from these businesses have gone to mitigate the fixed costs significantly thereby reducing the pressure on MHCVs. All these augured well from the profitability point of view. All the above actions, enabled Your Company to post consistent improvement in operating profit (EBITDA) quarter on quarter. The operating profit went up from 10.6% of net sale revenue in Q1 to 11.6% in Q2, to 12.8% in Q3 to a historical high of 15.0% in Q4. (Full year 12.7%) The financial ratings of long term and short term facilities / commercial paper as given by rating agencies viz., CARE and ICRA in FY 25 are given below. During Sep 24 both the rating agencies have upgraded the rating from AA to AA+ and maintained the outlook as Stable.

Your Company generated an after-tax profit from operations of 4,079 Crores in FY 2024-25 which is 1.3% higher than 4,026 Crores in FY 2023-24. In FY 2024-25, demand for Medium and heavy commercial vehicles was steady in all the quarters and made significant upward movement in fourth quarter. Consequent to better demand situation in fourth quarter, working capital requirement was significantly lower at the end of the year. With our efforts in collection, the Trade receivables has been reduced by 654 Crores and inventory by 233 Crores and increase in trade payables by 1,003 Crores has helped substantial reduction in working capital. Reduction in other non-current and current financial assets and other non-current and current assets by 154 Crores, increase in non-current and current financial liabilities by 142 Crores, increase in contract liabilities by 36 Crores, increase in non-current and current provisions and other current liabilities by 78 Crores offset by Others 12 Crores. During FY25, we have remitted Interim dividend of FY24 for 1,453 Crores which was parked in designated bank account at the end of FY24, this all leads to decrease in working capital by 3,741 Crores.

Cash outflow of 3,024 Crores from finance activities primarily reflect the repayment of non-current borrowings (net) 442 Crores, current borrowings 334 Crores, interest & other payments of 208 Crores, dividend payment of 2,041 Crores (FY24 1,453 Crores & FY25 588 Crores), realization from sale of equity shares 2 Crores.

During the year, your Company has declared two interim dividends ie., first one at 2 per share per equity share of 1/- each in November and second one @ 4.25 per share in May 25 a week before the adoption of accounts for the financial year ended Mar 25. In all your Company has declared a total interim dividend of 6.25 per share per equity share of 1/- each representing 625% dividend. First interim dividend of 2/- per share has been paid during the financial year and the second interim dividend is expected to be paid in June 25.

While revenue grew by 1% YOY, net profit was higher by 26% at 3,303 Crores (FY 24 2,618 Crores). This corroborates our commitment of profitable and sustainable growth through the levers of product premiumization, cost leadership and expansion of service reach.

Your Company has cash surplus of 4,242 Crores at the end of FY 2024-25 giving the ability to invest in future growth. Market has also shown confidence in your Companys ability to grow in the future. Your Companys share price touched an all-time high of 264.65 per share. In FY 2024-25, Your Companys share delivered a return of 19.3% against -0.6% of NIFTY Auto.

We wish to remain cautiously optimistic for CV industry in FY 2025- 26, with growth in all segments Passenger, Tippers, Tractor Trailers and ICVs. Your Companys product portfolio is very robust and the future pipeline is strong. Your Company would further strengthen its mainstays of reliability and fuel economy. Your Company has launched initiatives targeting customer experience and transforming service operations and they have started to yield results with improved customer, dealer and sales satisfaction indices. Leveraging on these, your Company is confident of increasing its market share in both trucks and bus segment in MHCV. Its medium-term goal of achieving 35% market share remains intact.

Your Company launched multiple new LCV products in FY 2024- 25. With these launches, your Company expanded its product portfolio coverage - with SAATHI stretching the lower end of the tonnage spectrum and Bada Dost i5 the higher end. Your Company is confident of improving market shares from these new launches in FY 2025-26. Your Company remains committed to expanding its LCV product portfolio coverage to 70-80% in the next few years. LCV segment presents a huge potential and is our focus area to grow Companys volumes in future.

Your Companys market share in exports has improved significantly in the last couple of years. Many of the markets around the world, especially SAARC and some parts of Africa, have been subdued due to local and global economic conditions. Your Company delivered exports volume growth of 29% in FY 2024-25 with volume gains in all the geographies of presence. This reflects that its strategy for local market presence, focused product development for international markets and strong distribution relationships in key markets are working well. Your Company has identified ASEAN geography as the next engine of exports volume growth and commenced working on the same during FY 2024-25.

Your Companys focus on profitability remains. Your Company is not going to resort to discounting to improve market share. Your Company is confident that its product superiority and expanding reach will enable it to achieve 35% market share while expanding its margin at the same time.

Your Company has complete portfolio of products in all the alternate fuel technologies CNG, LNG, Fuel Cell, Battery Electric Vehicle (BeV), Bi-Fuel and H2ICE (Hydrogen Internal Combustion Engine). Your Company made significant progress on the centers of excellence focused on eVs. In FY 2024-25 your Company received an order of more than 180 electric trucks (19T ICV and 55T TT), delivered Fuel Cell buses to NTPC and showcased eV terminal tractor at Auto Expo. Customer trials continues with Reliance on H2ICE trucks. Switch and Ohm have made significant progress during FY 2024-25. The segment first e-LCV models launched during the year are doing extremely well. For the year ended March ‘25, with e-Bus sales of 452 numbers and e-LCV sales of 1,028 numbers, Switch India was EBITDA positive, achieving the targeted milestone of EBITDA breakeven in FY 2024-25. We are committed to PAT breakeven in near term. At the end of FY 2024-25, Switch India has an order book of 1,759 vehicles. In FY ‘25, Switch Mobility launched Switch E1 designed for Europe and GCC, and Switch EiV12 low-floor electric bus tailored for the Indian market. Switch mobility will continue to launch new products tailored to Indian and international markets. OHM, the E-MaaS subsidiary, is operating more than 650 buses with best-in-class fleet availability. OHM is targeting to add more than 1,700 buses to fleet during FY 2025-26. Part of these additions will be from the current order book of Switch India and remaining from the fresh win. OHM has all projects under execution at healthy double-digit IRR.

During the year under review, the total number of people on the rolls of the Company is 9,695. Material developments in the Human Resource / Industrial Relations front have been detailed under the head “Human Resource” in the Boards Report.

I have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Ashok Leyland Limited bearing CIN L34101TN1948PLC000105 (hereinafter called the Company). Secretarial Audit was conducted in a manner that provided me a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon. Based on my verification of the Companys books, papers, minute books, forms and returns filed and other records maintained by the Company and also the information provided by the Company, its officers, agents and authorised representatives during the conduct of secretarial audit, I hereby report that in my opinion, the Company has, during the audit period covering the financial year ended on March 31, 2025, complied with the statutory provisions listed hereunder and also that the Company has proper Board processes and compliance-mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

I have examined the books, papers, minute books, forms and returns filed and other records maintained by the Company for the financial year ended on March 31, 2025, according to the provisions of: (i) The Companies Act, 2013 (the Act) and the rules made there under; (ii) The Securities Contracts (Regulation) Act, 1956 (‘SCRA) and the rules made there under; (iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under; (iv) Foreign Exchange Management Act, 1999 and the rules and regulations made there under to the extent of Foreign Direct Investment, Overseas Direct Investment and External Commercial Borrowings; (v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act):- a. The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; b. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015; c. The Securities and Exchange Board of India (Listing obligations and Disclosure requirements) Regulations 2015; d. Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2021 e. The Securities and Exchange Board of India (Issue and Listing of Debt securities) Regulations 2018 (vi) I am informed that the Company, during the year, was not required to comply with the following regulations and consequently not required to maintain any books, papers, minute books or other records or file any forms/ returns under: a. The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 b. The Securities and Exchange Board of India (Buy back of Securities) Regulations, 2018; c. Securities and Exchange Board of India (Issue and Listing of Non- Convertible and Redeemable Preference Shares) Regulations, 2013 (vii) In addition to the compliance with Factory and Labour Laws as are applicable to a factory, based on the study of the systems and processes in place and a review of the reports of (1) the heads of the Departments; (2) Occupier/Manager of the factories located in Ennore, Sriperumbudur; Hosur (3 units), Bhandara, Alwar, Pantnagar, Vellivoyalchavadi and Vijayawada which manufacture Automobiles and Spare Parts; (3) the compliance reports made by the functional heads of various departments which are submitted to the Board of Directors of the Company; (4) a test check on the licences and returns made available on other applicable laws, I report that the Company has complied with the provisions of the following industry specific statutes and the rules made there under as well as other laws to the extent it is applicable to them: Motor Vehicles Act, 1988 The Motor Transport Workers Act, 1961 The Explosive Act, 1884 The Petroleum Act, 1934 The Environment (Protection) Act, 1986 The Water (Prevention and Control of Pollution) Act, 1974 The Air (Prevention and Control of Pollution) Act, 1981 I have also examined compliance with the applicable clauses of the following: (i) Secretarial Standards issued by The Institute of Company Secretaries of India.