ASHOK LEYLAND

 General overview
 Ashok Leyland is an Indian automobile
company headquartered in Chennai, India.
It is owned by the Hinduja Group.
 Founded in 1948, it is the second largest
commercial vehicle manufacturer in India,
fourth largest manufacturer of buses in the
world and 10th largest manufacturer of
trucks globally. Operating nine plants,
Ashok Leyland also makes spare parts and
engines for industrial and marine
applications. It sold approximately 140,000
vehicles (M&HCV + LCV) in FY 2016. It is
the second largest commercial vehicle
company in India in the medium and heavy
commercial vehicle (M&HCV) segment,
with a market share of 32.1% (FY 2016).
With passenger transportation options ranging
from 10 seaters to 74 seaters (M&HCV = LCV), Ashok Leyland is a market leader in the bus
segment. In the trucks segment Ashok Leyland primarily concentrates on the 16 to 25-ton
range. However, Ashok Leyland has a presence in the entire truck range, from 7.5 to 49 tons.

 DIRECTOR AND KEY MANAGERIAL PERSONNAL

 During the year under review, Mr. Vinod K Dasari, Chief Executive Officer and Managing
Director and Mr. D J Balaji Rao, Independent Director stepped down from the Board with
effect from the close of the business hours on March 31, 2019. Mr. Sudhindhar K Khanna,
Independent Director stepped down from the Board with effect from the close of the business
hours on April 5, 2019. The Board wishes to place on record its appreciation for the valuable
contributions made by them to the Board and the Company.
 Dr. Andreas H Biagosch, Mr. Jean Brunol and Mr. Sanjay K Asher were appointed as
Independent Directors on the Board of the Company with effect from July 26, 2014 for a
period of five years pursuant to the provisions of Section 149 of the Act, read with the
Companies (Appointment and Qualification of Directors) Rules, 2014 and the erstwhile
Clause 49 of the Listing Agreement entered with the stock exchanges. The NRC and Board
of Directors, on the basis of the report of performance evaluation of Independent Directors,
has recommended re-appointment of Dr. Andreas H Biagosch, Mr. Jean Brunol and Mr.
Sanjay K Asher as Independent Directors for a second term of 5 (five) consecutive years on
the Board of the Company from July 26, 2019 and upon July 25, 2024.
 The Independent Directors of the Company have submitted a declaration under Section
149(7) of the Act and SEBI Listing Regulations that each of them meets the criteria of
independence as provided in Section 149(6) of the Act and there has been no change in the
circumstances which may affect their status as Independent Director during the year. The
terms and conditions of appointment of the Independent Directors are placed on the website
of the Company https://www.ashokleyland.com/en/ companies-act-2013-compliance.

5 November FY 19
 Mr. Dheeraj G Hinduja, Chairman retires by rotation at the forthcoming Annual General
Meeting (AGM) and being eligible, offers himself for re-appointment.
 Mr. Gopal Mahadevan was appointed as an Additional Director and designated as a Whole-
time Director and Chief Financial Officer for a period of five years from May 24, 2019 to May
23, 2024, subject to the approval of the shareholders at this AGM.
 The resolutions seeking approval of the members for the re-appointment of Mr. Dheeraj G
Hinduja, Chairman, Dr. Andreas H Biagosch, Mr. Jean Brunol and Mr. Sanjay K Asher,
Independent Directors and appointment of Mr. Gopal Mahadevan as Director and Whole-time
Director have been incorporated in the notice of the AGM of the Company along with brief
details about them.
 The Company has also disclosed the Director’s familiarisation programme on its website
https://www.ashokleyland.com/ documents/1305159/1312436/Familiarisation-programmefor-
Directors-update-Mar-2019.pdf/b5316f0d-f0f7-1ca1-730cf55a98a7d98f.
 During the year, the Non-Executive Directors of the Company had no pecuniary relationship
or transactions with the Company, other than sitting fees, commission and reimbursement of
expenses incurred by them for attending meetings of the Company.
 Pursuant to the provisions of Sections 2(51) and 203 of the Act, the Key Managerial
Personnel of the Company are Mr. Gopal Mahadevan, Whole-time Director and Chief
Financial Officer and Mr. N Ramanathan, Company Secretary.

 Company is operated by Hinduja family

 Dheeraj is a third-generation member of the Hinduja Family, who owns and runs the Hinduja
Group, with diversified business interests all over the world. Employing over 50,000 people,
the Hinduja Group’s portfolio includes Global Investments, Investment Banking and
International Trading. He has over seventeen years of experience at strategic and leadership
levels covering a variety of businesses across diverse sectors such as Automotives, Energy,
Infrastructure, Finance & Banking, IT & ITES, Media and Healthcare. He has been leading
the Human Resources Function for the entire Group – driving an agenda of transformation,
through talent acquisition, engagement, retention and development strategies.
 Dheeraj is active on the Board of Hinduja Foundries, the largest jobbing foundry in India. He
is also on the board of Hinduja Global Solutions.

 Strengths in the SWOT Analysis of Ashok Leyland:

 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’s continuous growing. It is the
2nd largest manufacturer of commercial vehicles in India, also it is the 4th 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.
 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.
 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.

5 November FY 19
 Weaknesses in the SWOT Analysis of Ashok Leyland
 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.

 Opportunities in the SWOT Analysis of Ashok Leyland

 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.
 Order: Ashok Leyland has recently received an order worth 1200CR. V.R.L Logistic.
 Electric vehicles: As we know that electric vehicles are the future of Automobile industry in
the Ashok Leyland invest lot of money in electric vehicles to RND. In recent auto-export they
shown their first electric buses they planning to launch in India.

 Threats in the SWOT Analysis of Ashok Leyland

 Axle load norms: Existing truck carry extra load. Its effect on demand of new truck because
of that sell is less.
 Intense competition: Ashok Leyland faces competition from companies like Tata Motors,
Mahindra & Mahindra, Eicher Motors, Marco polo, etc. The government has allowed 100%
foreign equity ownership in manufacturing vehicles industry which also leads intensifying
competition.
 Bharat stage 6 emission norms: Government is come up to regarding emission norms ACT
to those norms all auto-mobile manufacturing company have to be incorporated as per
Bharat stage 6 emission norms because of that it will put huge effect on margin.
 Liquidity crunch: Most of (H&M) vehicles sold on loan now a day because of NBFC crises
people go through basic problem to getting loans.

 Peer Set Comparison

 Comparing 2 stocks from Industrials- Trucks & Buses

5 November FY 19
 Comparing various metrics against peers can give valuable insights on whether the
company's stock is over/under-valued and the company's growth outlook vs the industry as a
whole

 Valuation

Name Sub-Sector Market Cap PE Ratio PB Ratio Dividend Yield

Eicher Motors Ltd Trucks & Buses 59190.452 26.7% 6.63% 0.58%
Ashok Leyland Ltd Trucks & Buses 22471.461 10.8% 2.00% 4.05%
SML Isuzu Ltd Trucks & Buses 797.46 40.7% 1.93% 0.54%

 Companies having a higher P/E consider to be growth stock. This indicate positive future
expect and investor having a higher expect earning in future. The downside to this is that
growth stocks are often higher in volatility and this puts a lot of pressure on companies to do
more to justify their higher valuation. For this reason, investing in growth stocks will more
likely to be seen as a risky investment. Stocks with high P/E ratios can also be considered
overvalued.
 Companies with a low Price Earnings Ratio are often considered to be value stocks. It means
they are undervalued because their stock price trade lower relative to its fundamentals. This
mispricing will be a great bargain and will prompt investors to buy the stock before the market
corrects it. And when it does, investors make a profit as a result of a higher stock
price. Examples of low P/E stocks can be found in mature industries that pay a steady rate of
dividends.
 Here, Ashok Leyland having a lower P/E ratio as compare to other peers in same sector. It’s
mean that stock undervalued because traded as lower price. It’s will prompt investor to buy
the stock before the market correct. They having a huge opportunity to grow in future. Further
Ashok Leyland gave dividend compare to other peers.

 Technical
Market Price Momentum
Name Sub-Sector Cap Volatility RSI-14D Rank
Trucks &
Eicher Motors Ltd Buses 59190.452 38.56 64.51 37
Ashok Leyland Trucks &
Ltd Buses 22471.461 45.09 46.8 9
Trucks &
SML Isuzu Ltd Buses 797.46 43.62 37.58 22

 Here, Ashok Leyland highly volatile, it’s indicated that higher risk in that security as compare
to other.
 RSI indicator shows that stock had oversold zone its’s good time to consider that stock.

 Forecast
 we predict future values with technical analysis for wide selection of stocks like Ashok
Leyland Ltd. If you are looking for stocks with good return, Ashok Leyland Ltd stock can be a

5 November FY 19
 bad, high-risk 1-year investment option. Ashok Leyland Ltd real time quote is equal to 78.603
INR at 2019-11-11, but your current investment may be devalued in the future.

Buy
Reco% Percentage 1Y Forward EPS
Name Sub-Sector Market Cap Upside Growth
Trucks &
Eicher Motors Ltd Buses 59190.452 34.15 -17.62 -6.796651319
Ashok Leyland Trucks &
Ltd Buses 22471.461 41.46 -0.91 -32.00544408
Trucks &
SML Isuzu Ltd Buses 797.46 0 -0.79 87.05339154

 Conclusion
 I believe this is the worst phase of current down-cycle for M&HCV in general and AL in
particular. Though I expect similar slowdown to continue for the next 1-2 quarters, the
industry would witness sequential improvement steadily. Industry has been undergoing
through bottoming out phase of the downcycle. I expect lower deterioration, going forward
though YoY decline would continue till midFY21E. Higher axle load norm, NBFC issue,
economic slowdown and BS-VI transition would continue impacting till beginning of FY21E
(Captured in current price), in our view. We believe that post BS-VI pricing, the industry
would take a breather for a quarter, then it would rebound strongly on the back of new
investment cycle led by government’s tax relief and pent-up demand of previous 2 years. We
believe the industry would observe its down-cycle over FY20-FY21 and would strongly
rebound in FY22E. Therefore, it is more sensible to consider FY22 for CV industry to judge
the right scenario and fair valuation. We downgraded our recommendation on AL to
REDUCE due to expected down-cycle, post which it corrected by >31%. Sharp correction in
price captures most near-term negatives, while likely up-cycle in FY22E would bring back
high earning growth and valuation expansion, which transforms into strong potential upside
from the current level. Therefore, we upgrade our recommendation on the stock to “BUY’
from “REDUCE” with an upwardly revised Target Price of Rs111, valuing the stock at
17xFY22E EPS. New product models 4123, Guru 10T, Boss 1616 sleeper, Partner 17ft, were
launched in response to customer demand.

(Reference- market 11, annual report)

5 November FY 19