Ashok Leyland avoids overseas deal rush, bets on India hub for global growth

According to Dheeraj Hinduja, chairman of the country’s third-largest commercial vehicle maker, the company is not looking for acquisitions for the sake of acquiring companies, as it continues to await right opportunities in growing markets, amid announcements of mega deals by rivals Tata Motors Ltd and Mahindra and Mahindra Ltd.

Hinduja said that Leyland is currently focused on high-growth markets like India, Asean and West Asia.

“Europe for a long time has been quite depressed. From our perspective, today where India stands in its capabilities, quality, and our vendor base, we have the potential to supply global markets from India,” Hinduja said.

He added that the company will still not shy away from acquisition, if it helps access new technologies or markets. “But primarily, India has an edge over other markets,” Hinduja said.

Ashok Leyland ended FY25 with a net cash surplus of ₹4,242 crore, and ₹3,284 crore of it was generated in the fourth quarter. The generation of such cash put the company in a position to target acquisitions, unlike in FY24 when it ended the year at ₹89 crore debt.

Ashok Leyland’s shares jumped 8.15% on Monday to settle at ₹131.90 apiece on the National Stock Exchange. The stock has surged 18.39% this year as against a 9% rise in Nifty Auto index.

While Leyland looks to cautiously deploy the surplus funds, Tata Motors and Mahindra and Mahindra have splashed money at key acquisitions to strengthen commercial vehicle play at a time when growth has been slow in the market.

Tata Motors announced the acquisition of Italian commercial vehicle maker Iveco for 3.8 billion Euros in July, while Mahindra acquired truck and bus maker SML Isuzu for ₹555 crore in April.

These acquisitions came as the commercial vehicle industry in India remained flattish, declining 0.1% in FY25 to 1 million units. Ashok Leyland held a 16.6% market share after selling 167,465 trucks and buses during the financial year, almost unchanged from FY24.

With a growth environment tepid in the commercial vehicle market, Tata Motors chief financial officer P.B. Balaji told investors on 31 July that disruptive acquisitions like Iveco are needed to continue growing at a rapid pace.

“Market shares are highly stable in the commercial vehicle business. It is not a very disruptive business. Diversification of cash flows is important to maintain growth in the business,” Balaji explained.

However, Hinduja had a different take on the issue.

“Every company makes their own decisions based on their focus areas, where our focus today is on the future technologies. We are building a future where we can address global markets as Indian manufacturers. We don’t need to have a global manufacturing footprint in specific markets where production can be high,” Hinduja said.

In March this year, Ashok Leyland announced that its electric vehicle subsidiary Switch Mobility will look to wind down operations in the UK and turn its focus to India due to a weak demand for such vehicles in the European nation.

Analysts note that Ashok Leyland’s conservative approach has resulted in better balance sheet health and has placed the company in a position of growth. In the April to June quarter, Leyland’s profits grew 21% year on year to ₹658 crore.

“Ashok Leyland’s disciplined approach to inorganic growth stands out in contrast to the more aggressive acquisition strategies of Tata Motors and Mahindra,” Shridhar Kallani, research analyst—auto, at Axis Securities, said.

Kallani noted that with a fortified balance sheet and a net cash surplus, the company has the capacity to pursue acquisitions, but management has indicated it will only consider opportunities that complement its core strengths in technology, EVs and global market access.

“While this measured stance may appear conservative, it ensures financial flexibility and long-term shareholder value creation,” he said.

However, others note that there are dark clouds over growth prospects of the company, as it comes under intense pressure from competition and low demand in the Indian market.

“We forecast a subdued performance ahead at a 1% CAGR over FY25–28E owing to reasonable utilisation levels at transporters’, increasing competitive intensity from Railways and a high base,” analysts at Nuvama Institutional Equities wrote in a note on 14 August.