Ashok Leyland ups capex plans on buoyant CV demand

Chennai-based Ashok Leyland Ltd, is raising its capital expenditure (capex) plans for fiscal 2025 (FY25) on the back of stronger-than-anticipated commercial vehicle demand.

Managing Director and CEO Shenu Agarwal, speaking on a post-earnings call, said the company now expects to spend between Rs 500 crore and Rs 700 crore in FY25, up from around Rs 500 crore in the previous year. This revision comes despite earlier concerns about a potential demand slowdown due to general elections.

Agarwal highlighted that the initial projections anticipated a tapering of CV demand due to the elections and related slowdown in infrastructure activities "However, positive economic indicators of past few months, particularly those from April, suggest a robust outlook" "We are equally positive on first half of FY25." said Agarwal, before continuing that the positive economic indicators are good for the commercial vehicles segment, as they are considered as barometer of ecomonic growth.

During April 2024, the Indian commercial vehicles (CV) industry registered a surprisingly healthy YoY growth of 13.9% in wholesale volumes. However, they expectedly reported a sizeable sequential decline of 26.6% as the implementation of the model code of conduct for the general elections 2024 led to a slowdown in the infrastructure and construction activities. The domestic CV retail volumes, at 90,707 units in April 2024, reported a moderate 6.0% growth on a YoY basis while registering a nominal 0.6% sequential decline.  The domestic CV industry’s upcycle to plateau in FY2025, with an expected decline of 4-7% in volumes, a report by rating agency ICRA suggests.