Ashok Leyland Ltd.

General Overview
Ashok Leyland Ltd is an automobile manufacturing company. The company
manufactures commercial vehicles, engines, and spare parts and accessories,
with the vast majority of revenue derived from commercial vehicle sales.
Ashok Leyland organises its business into two segments: Commercial vehicle
and Financial Service. The company derives more than half of consolidated
revenue domestically.

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Shareholding Pattern

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Shareholding Pattern

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Management team

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 SWOT
Strength
• The leader in domestic market: Ashok Leyland had a strong market share (28.6%) in the
medium and heavy commercial vehicle segment in FY2015. It is the 2 nd largest manufacturer of
commercial vehicles in India, also it is the 4 th largest manufacturer of buses in the world. Thus,
the strong market position in different domains gives the company a better brand image and
wider customer base
• Strong product portfolio: Ashok Leyland has forayed into a various segment of heavy, medium
and light vehicles which includes buses, trucks, defence vehicles, etc. The company also offers
diesel engines for industrial, marine and generator applications. The strong product portfolio
expands the customer base and market share.
• Robust manufacturing capabilities: The strong manufacturing facilities of Ashok Leyland has
spread all over India. It also has facilities in the UK, Czech Republic, and the UAE. This helps
the company to maintain economies of scale.
 SWOT
Weakness
• Heavily dependent on the domestic market: In FY 2015, Ashok Leyland generated 87.3%
of its revenues from the domestic market. This makes it vulnerable to any economic and
political changes in the country. This gives an advantage to its prime competitor 
Tata Motors which operates through a wider revenue base geographically.
• Termination of JV with Nissan: In 2016, a Japanese company, Nissan Motor Company
terminated the 3 JVs signed with Ashok Leyland, ending 8-year-old business relationships.
There were also lawsuits filed against each other creating an unamicable atmosphere. Such
instances can make the company weak as it hurts the image of the company and also affects
the financial condition as well as operations.
 SWOT
Opportunity
• Growing global automotive industry: The Global automotive industry has shown constant
growth in the recent years and thus creates an opportunity for Ashok Leyland to grab upon. The
company should focus on tapping the opportunities created in the global market, especially in
the emerging countries to take advantage of the growth in the industry and with it expand its
footprint over the globe.
• Expanding Product portfolio: With its focus on research and development, Ashok Leyland
should look forward to expanding its product portfolio like it has done in the recent past by
introducing different heavy and medium commercial vehicles. This helps in expanding its
market and provides a competitive edge.
• Exports: Many of the competitors have become wary of Ashok Leyland as it as entered
exports of its products in a big way and a bright future is expected of Ashok Leyland.
 SWOT
Threat
• Intense competition: Ashok Leyland faces competition from companies like Tata Motors, 
Mahindra & Mahindra, Eicher Motors, Marcopolo, etc. The government has allowed 100%
foreign equity ownership in manufacturing vehicles industry which also leads intensifying
competition.
• Environmental Regulations: The industry is subjected to constant changes and up gradation
in the environmental regulatory requirements. The company has to comply with regulations
regarding emission levels, noise, safety and pollutant levels. Such regulations increase
compliance costs which could also affect the pricing strategy of the company.
• Volatility in supply affects profitability: Some of the important commodities used in
manufacturing automobiles, including steel, aluminium, copper, zinc have been extremely
susceptible to price changes in the recent years because of the supply-demand difference. This
affects the profitability of the company directly.
Competitive Analysis
Competitive Analysis
 Conclusion
Overall, Ashok Leyland Ltd seems a company that has been growing its business at a rate of 15-20%
year on year for the last 10 years (FY2010-2019). However, the business performance of the company
over this period has been cyclical. The company’s performance has alternated between good periods
and poor performance periods.
The dependence of the commercial vehicle industry on the general economic environment and govt.
expenditure along with intense competition between the domestic and multinational players has led to
cyclically fluctuating business performance of the company.
Despite intense competition, the company has been able to keep its capital expenditure and working
capital under control. As a result, it has seen its profits convert into cash flow from operations.
Moreover, the company has reported a free cash flow over the last 10 years.
At times, the capital expenditure and investment requirements of the company increased and it ended
up breaching the debt-related covenants put by its lenders. Then in FY2014, the company resorted to
raising equity via a QIP. However, since then, the debt level of the company has been under control.
 Conclusion
Ashok Leyland Ltd has been led by professionals where the promoter family-member has assumed the
role of non-executive chairman of the company. The company has been able to source talent in-house
as well as from outside to lead the company.
The management of Ashok Leyland Ltd has shown good project execution abilities, as they are able to
complete the frequent capacity expansion programs for the core medium & heavy commercial vehicles
as well as the light commercial vehicles. In addition, the management has been able to execute
multiple other plants like construction equipment plant, die-casting plant etc.
When an investor analyses the capital allocation decisions of the management of Ashok Leyland Ltd,
then she notices that at times, the company has shown sub-optimal capital allocation.
In multiple cases, the company kept on continuing with certain business initiatives, which seem to have
lost their appeal many years ago. These businesses are running into losses year on year and a few of
them have never made profits since their inception. However, the company has continued with them
and has been infusing precious capital of shareholders in these businesses year after year. Businesses
like Optare Plc and Albonair GmbH are such examples.