ASHOK LEYLAND Q3FY24 UPDATE

Ashok Leyland, a leading Indian automotive manufacturer, held a conference call on February 6, 2024, to discuss its financial performance for the first nine months of the current fiscal year (April-December 2023). The company reported strong results, with record-breaking revenue, EBITDA, and PAT.

KEY HIGHLIGHTS:

Revenue: Rs. 27,100 crores, highest ever

Sales Volume: 1,38,416 units, highest ever

EBITDA: Rs. 3,014 crores, highest ever

PAT: Rs. 1,718 crores, highest ever

EBITDA Margin: 12.0% in Q3, moving towards mid-teen target

INDUSTRY OUTLOOK:

Domestic MHCV industry growth: 9% in the first 9 months

Q4 industry growth may be subdued due to high base effect and union elections

Medium-term industry outlook remains favourable due to strong macroeconomic environment, healthy replacement demand, and improving freight demand

COMPANY STRATEGY:

Focus on profitable growth, not sacrificing margins for market share

Continuous cost reduction efforts

Strict pricing discipline

Expansion of sales network and service reach

Investment in electric vehicles through Switch Mobility

ELECTRIC VEHICLE BUSINESS(SWITCH MOBILITY):

Strong performance of Switch products in the market

First batch of electric LCVs to be delivered within the next few months

Commercial launch of electric truck and nearing market trials of electric tractor trailer

Investment of Rs. 662 crores in Optare PLC, the holding company for Switch UK and Switch India

FINANCIAL PERFORMANCE:

Q3 Revenue: Rs. 9,273 crores, up 3% YoY

Q3 EBITDA: Rs. 1,114 crores, up 40% YoY

Q3 PAT: Rs. 580 crores, up 61% YoY

Operating working capital: Rs. 2,004 crores

Net debt: Rs. 1,747 crores

ANALYST’S EXTRAPOLATION OF FUTURE PROFITS:

Based on the company’s strong performance and positive industry outlook, it is reasonable to expect continued growth in the next 2-3 years. The company’s focus on profitable growth, cost reduction, and expansion of its sales network and service reach should drive further revenue and margin improvements.

PROFIT FORECAST:

Based on the company’s strong performance in the first 9 months of the current financial year and the favourable industry outlook, it is reasonable to expect continued growth in the next 2-3 years. The company’s focus on profitable growth, cost reduction, and product differentiation should support margin expansion and revenue growth.

PROFITABILITY FORECAST:

Year 1: 13-15% EBITDA margin

Year 2: 15-17% EBITDA margin

Year 3: 17-19% EBITDA margin

MANAGEMENT GRADE:

The management team of Ashok Leyland has demonstrated strong leadership and execution capabilities. They have successfully navigated the challenges of the pandemic and positioned the company for long-term growth. The management’s focus on profitability, innovation, and customer satisfaction is commendable.

Based on the company’s strong financial performance, strategic initiatives, and focus on long-term growth, overall, I would grade the management team a score of 90 out of 100.

INFIBEAM AVENUES 3Q FY2024 EARNINGS CALL: SUMMARY

1. Financial Performance:

• Gross revenue for 3Q FY2024 reached Rs. 1.2 billion, a historic feat for the company.
• Digital payments business through CCAvenue led the revenue increase.
• Standalone business constitutes 94% of consolidated gross revenue, with strong operating and profit margins.
• Consolidated EBITDA margins at 61.2%, profit margins at 37.3%.

2. India Payments Business:

• India payments business added almost a billion rupees in gross revenue in a single quarter.
• CCAvenue added over 200,000 merchants, averaging 2,500 merchants daily.
• India payments transaction processing volume rose to Rs. 663 billion, growing at 34% YoY.
• Net revenue for India payments business grew 34% YoY, crossing Rs. 500 million for the first time.

3. International Business:

• Focus on growing international payments business, particularly in UAE (Amrit Kaal).
• Plans to scale international business further in the coming weeks to months.

4. GeM Contract Update:

• Infibeam Avenues continues to use the GeM platform, with discussions on intellectual property and commercial terms ongoing.
• Expects resolution within the quarter and will update stakeholders accordingly.

5. Artificial Intelligence Initiatives:

• Significant strides in building artificial intelligence capabilities for both payments and the platform business.
• Launched India’s first AI hub, Phronetic.AI, at GIFT City Gandhinagar.
• Signed Rs. 20 billion MoU with the Gujarat government for developing the AI hub.

6. Financial Highlights by CFO Sunil Bhagat:

• Gross revenue crossed US$100 million in the quarter, growing at 120% YoY.
• India payments gross revenue grew at 147% YoY.
• Net take rate stable at 8.5 basis points. Expecting it to increase going forward.
• Nine-month consolidated financial performance showed substantial growth across TPV, gross revenue, net revenue, EBITDA, and PAT. The company is on its way to post its best annual performance in FY24.

7. Future Outlook and Strategies:

• Focus on profitable growth rather than growth at any cost.
• Strategies include continuous addition of merchants, TapPay solutions, and international expansion.
• Strong performance in UAE, aiming to grow from 7,000 to 70,000 merchants in the next 12-24 months.
• Aspires to achieve double-digit net take rate in the India business.

8. Other Highlights:

• Investments in Pirimid Fintech for capital market software and lending frameworks.
• Exploring opportunities in real-time settlements, AI, and lending frameworks.
• Strong emphasis on the potential of AI to enhance productivity, security, and customer experience.

The company expresses confidence in sustained profitable growth and hints at further announcements in the coming weeks regarding their AI initiatives and expansion plans.