Ashok Leyland Aims To Make EV Arm Switch Mobility Fund Own Capex

Ashok Leyland Ltd. wants its electric vehicle arm, Switch Mobility, to generate enough profit to be able to fund its own capital expenditure, according to Chief Executive Officer Shenu Agarwal. 

The commercial vehicle manufacturer does not have any plans to go for an initial public offering for Switch Mobility right now, he told NDTV Profit in a conversation on Monday. "IPO is still a few years away."

"Number one, we wanted it to be Ebitda positive, which is positive in FY25. Next it has to be PAT (profit-after-tax) positive and generate enough cash to meet the requirements of its own capex, which we hope that we will achieve in FY26," the managing director said.

The third target is then to scale up Switch Mobility by gunning for market share and gunning for volumes, Agarwal said. "Once we achieve these three goals, then we can look at a possible IPO."

The top executive attributed this success not to short-term measures, but to a well-planned strategy implemented over the past two to three years.

This strategy primarily comprised three components. One is that the company wants to achieve higher realisation per vehicle. The other is a cost leadership position in the industry, according to the CEO. "Therefore, a lot of focus has been on looking at cost, whether it is material cost or any other cost and see how we can optimise the cost further."

"The last lever, we believe, is after-sales service is equally important, if not more than a superior product, in this CV (commercial vehicle) industry," he highlighted. 

Ashok Leyland announced a bonus share issuance for the first time in 14 years at the meeting of its board of directors on May 23. The company has also announced two interim dividends for FY25, amounting to Rs 6.25 per share, marking a 625% payout.

Agarwal described the decision to issue a bonus as a gesture to "reward our shareholders further". He highlighted the significant improvement in Ebitda, from 4.1% in FY22 to the current 12.7%.

"We have a very positive cash situation in the balance sheet. We have a clearly laid-out strategy in all parts of the business," the CEO said. "We are doing quite okay and the future prospects of the industry are good. We thought we should be rewarding the shareholder."