Ashok Leyland expects ₹600-crore revenue from bus orders from States

Ashok Leyland has got a massive order of 3,600 buses from State transport undertakings for FY17.

Moreover, the government plans to ramp up transportation in villages through mini buses, which presents a big opportunity to commercial vehicle manufacturers. Speaking to Bloomberg TV India , T Venkataraman, Senior Vice-President - Buses, Ashok Leyland, says the order will add anywhere between ₹450-600 crore to the company’s revenue, but margins may be stretched.

The company, which had a market share of about 44 per cent last year, hopes to consolidate its position, he said. Excerpts:

How much will the 3,600 buses add to your revenues and margins spread over the fiscal?

The State transport undertakings (STUs) business is volatile, in the sense that it is usually funded partly by the State government and partly by the Centre.

And usually, the STUs, which are self-sufficient or self-reliant, try to be a little proactive. So we are happy that Ashok Leyland has been consistent in this side of the business.

For sure, it helps us to add to the capacity and the build-up volumes. As far as margins are concerned, it is always tricky because each company is trying to quote the best it can to compete, and still be the one to win the tender. We are happy that we have done it this year, but margins are always stretched.

What kind of revenue and bottom-line growth will this order generate? And when will they get reflected?

I believe this is going to be something that you will see trickling down from the next few months, all the way till the fag end of the year.

Overall, on a very generic basis, this will add anywhere between ₹450-600 crore to the company’s revenue. And, I believe that you will see a large part of this happening in the third and fourth quarters of FY17.

Indian transport bodies are planning to buy close to 80,000 mini buses to connect villages. What type of opportunity does it offer Ashok Leyland?

This is right now a work in progress. The exact specifications are yet to be ascertained.

But it is a laudable option because last-mile connectivity is going to be an integral part of growing the bus business in the future.

Your market share in the bus segment rose from 33 per cent to 36 per cent in FY17 Q1. With the STU orders trickling in, what kind of market share gain are you looking during FY17?

Compared with last year, we will definitely gain a few percentage points. Last year, we closed at about 44 per cent market share. I believe we will consolidate our position.

With the kind of competition you are facing in India, do you think you will be able to defend the existing market share?

At the end of the day, everyone tries to position a product relevant to certain applications.

Each one has certain unique strength and advantages. We will leverage ours and try to maintain the poll position in the business.

There has been a fall in freight rates and the replacement demand is yet to pick up. Do you expect the growth momentum to continue in the industry?

I believe the uptrend will continue. Public-private participation and States replacing BS-III models with BS-IV models will lead to a positive growth.

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