With a fund raise on a slow track, Ashok Leyland to fund Switch Mobility's growth plans

Having engaged over a couple of dozen investors over 18 months period, Ashok Leyland the country's second largest medium and heavy truck maker - has decided to infuse funds itself into its EV arm - the Switch Mobility to cater to its growth plans.

The company continues to look for like-minded investors to build its electric vehicle arm - which will need close to Rs 5,000 crore in investments to grow into a leading EV player in the fast emerging zero-emission public transport space.

Speaking to media in the post Q1 earnings call, Dheeraj Hinduja, Executive Chairman, Ashok Leyland, said that the company's EV business under Switch Mobility is crucial for future-proofing the company. He added that while they continue to look at external investors, the Ashok Leyland board has approved an in-principle investment in Switch Mobility.

He added that Ashok Leyland's balance sheet is strong enough to support this initiative. "The EV market is growing gradually, and we are geared to participating in this growth with a clear roadmap.”

Ashok Leyland, the Indian flagship of the Hinduja Group, reported a more than eight-time jump in YoY quarter profits in Q1 FY24. Net Profits for the quarter stood at Rs 576 crore as against Rs 68 crore in the same period last year. Revenue for the quarter stood at Rs 8,189 crore as against Rs 7,223 crore in Q1 FY23.

The development occurs at the same time that a media report earlier this month by the business daily Financial Express claims Ashok Leyland will ask shareholders for permission to lend Switch Mobility Rs 4,000–5,000 crore, or to act as a guarantor for it. The company, for its part, stated that the resolution is only an enabling resolution and that the indicated amounts are not the absolute equity infusion, but a broad indicative range of the aggregate of transactions with Switch. The investment could be worth Rs 1,200 crore over time.

As per company officials, Switch Mobility is in the process of finalising its plans to fully utilise growth opportunities by placing high-quality, cost-effective products across various customer segments. Switch is also expected to launch electric versions of the Dost and Bada Dost vehicles within the current fiscal year.

The business has been looking for a financial partner for a while.  Dana, a US-based manufacturer of drivetrains, has taken a one percent share in Switch Mobility for US$ 18 million in July 2021.