Ashok Leyland Ltd Management Discussions

TO THE BOARDS REPORT MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A. MARKET TRENDS Economy - India

Indias economy delivered an outstanding performance in FY26, reaffirming its position as the fastest-growing major economy in the world for the fifth consecutive fiscal year. Indian economy delivered a real GDP growth at 7.6% for FY26, an acceleration over 7.1% in FY25 (First Revised Estimates) and 7.2% in FY24. Growth in FY26 was supported by five principal pillars: (i) decisive acceleration in government capital expenditure (ii) robust agricultural output translating into stronger rural consumption

(iii) continued resilience in services sector activity and (iv) gradual monetary policy easing cycle initiated by the RBI, Gross Fixed Capital Formation (GFCF) growth remained above 8.0% for the full year, reinforcing the investment cycle (v) reduction in GST rates from 28% to 18% in late 2025 materially lowered commercial vehicle acquisition costs, this resulting in both a direct (retail CV sales impact) and an indirect impact through higher logistics related demand from the stimulus to the consumer specific sectors.

The capex spending during FY26 reached 10.75 lakh crores against an allocated budget of 11.21 lakh crores ( 3.1% of GDP). Crucially, execution during this period was meaningfully stronger than in the corresponding period of FY25. The Ministry of Road Transport & Highways (MoRTH) targeted construction of over 12,000 km of national highways in FY26 - an acceleration from 10,457 km in FY25, with enhanced focus on completing balance sections under Bharatmala Pariyojana Phase I and tendering new economic corridors. Retail inflation, as measured by the Consumer Price Index (CPI), averaged approximately 4.0-4.2% for FY26, broadly in line with the RBI MPCs April 2025 projection of 4.0% and well within the 2-6% tolerance band. Rawmaterial cost trends in FY26 were mixed for the commercial vehicle industry.

Raw Material	FY26 Price Trend	Key Drivers
Steel	Stable (mild softening bias)	Sustained healthy demand
Aluminum	Volatile (trending upward)	Global supply disruptions; elevated energy costs
Copper	Strengthened significantly	Tight global supply conditions
PGM (Precious Catalytic Metals)	Stabilising after prior volatility	Normalising global supply; shifts toward alternative fuel architectures

Although stable steel prices partially mitigated cost pressures, sustained volatility in non-ferrous metals and rubber required disciplined cost management and calibrated pricing actions across the value chain.

In FY26, borrowing costs for commercial-vehicle buyers softened gradually on a month-over-month basis, driven by surplus system liquidity, improved transmission, and lower NBFC funding costs. Agricultural activity moderated in FY26 compared to the previous year, largely due to weatherrelated disruptions affecting parts of the kharif season. Despite this moderation, the sector remained supported by strong rabi sowing, adequate reservoir storage levels, and timely policy interventions. However, geopolitical risks affecting

fertilizer and gas supplies emerged as a key downside risk for future crop seasons. Rural demand showed gradual improvement during the year, driven by stable agricultural incomes, moderation in input cost pressures, and increased rural employment opportunities.

While geopolitical tensions in West Asia triggered volatility in global energy markets and led to intermittent spikes in the import parity prices of crude oil and LNG during FY26, domestic retail fuel prices were insulated from these shocks, remaining unchanged throughout the period. Looking ahead to FY27, the impact of West Asia-related geopolitical risks remain an area of close monitoring.

(Source: RBI MPC Apr26, World Bank Brokerage reports)

Economy - World

The global economy in FY26 operated under the shadow of renewed geopolitical crisis, with the Middle East conflict - and the near-effective blockade of the Strait of Hormuz - fundamentally disrupting energy markets, freight economics, and growth trajectories across our operating regions. The IMF projects global real GDP growth at 3.1% in CY2026, slowing from 3.4% in CY2025 and remaining well below the pre-pandemic average of 3.7%, with slowdown and inflationary pressures particularly pronounced in emerging market and developing economies. Brent crude averaged USD 82.22 per barrel in 2026, with sharp intra-year spikes driving elevated input, logistics, and energy costs across the commercial vehicle value chain. Renewed trade protectionism, persistent geopolitical fragmentation, and a policy-driven reversal of global economic integration continue to weigh on medium-term growth potential. The impact across our key markets - the GCC, SAARC, ASEAN, and Africa - was markedly differentiated, as summarised below, with US trade policy and Chinas competitive export posture adding further complexity to the global operating environment. While near-term headwinds dominate, sustained infrastructure investment mandates, structural logistics demand, and our diversified geographic presence provide medium-term resilience for the business.

Market Impact Summary - FY26

Market	Key Macroeconomic Impact	Commercial Vehicle Relevance
MENA	MENA region delivered 2.6- 3.0% real GDP growth in CY25, driven by a strong rebound in Gulf economies (led by Saudi Arabias 4.5% actual growth) and resilient non-oil activity, partly offset by weaker performance in oil-importing and conflict-affected economies.	MENA region delivered strong growth over last year given the strong focus on making economy resilient with robust non-oil economic activity.
SAARC	India retained its position as the fastest-growing major economy, supported by strong domestic momentum and reduced US tariff exposure. Bangladesh, Sri Lanka faced currency stress and elevated import costs.	India sustained infrastructure- led CV demand; Bangladesh constrained by political instability while Nepal and Sri-Lanka demonstrating robust recovery.
ASEAN	Regional growth moderated to 4.3% with higher energy prices rising production costs and export growth normalising.	China-plus-one supply chain shifts sustained logistics and industrial CV demand in ASEAN partially offsetting energy cost headwinds.
Africa	Africa grew by 4% in aggregate, led by strong Sub-Saharan Africa expansion ( 4-4.5%) driven by services, investment and reform momentum, while North Africa grew 3-4%, supported by tourism recovery and selective oil rebounds, despite external shocks and oil-price volatility.	Resilient demand in essential freight, mining and agricultural linked applications. Longterm trade corridor development remains a structural growth anchor.

On global supply chains resilience front, US policy and tariff regime continued to fragment global supply chains and raise cross-border component costs leading to localization pressure on OEMs. Despite reduced Chinese Govt. stimulus, Chinese OEMs continued aggressive pricing commercial vehicles in ASEAN and African markets, intensifying competitive pressure on incumbent manufacturers.

Global growth is projected to recover modestly to 3.2% in CY2027, with inflation expected to resume its decline, offering gradual relief on input and energy costs. Easing crude oil prices, monetary policy normalization, and stabilizing supply chains are expected to support a measured recovery in commercial vehicle demand across key markets. India and ASEAN remain the most promising growth theatres, underpinned by infrastructure investment and logistics expansion. However, structural risks - including geopolitical fragmentation, Chinese export competition, and US trade policy uncertainty will need to be factored in OEMs international operations strategies.

(Source: IMF World Economic Outlook)

Commercial Vehicle Market

FY26 was a landmark year for Indias commercial vehicle (CV) industry. Industry posted its best-ever annual sales of 10.79 lakh units - a 12.6% year-on-year increase, marking the highest annual volumes in seven years. FY26 was a year of two distinct halves for the Indian commercial vehicle industry. The first half was weighed down by inventory correction, regulatory transition costs, and subdued freight sentiment, while the second half delivered a historic recovery driven by post-GST 2.0 affordability, renewed infrastructure execution, strong freight demand, and a robust festive season. Full- year CV retail sales closed at approximately 10.79 lakh units, with H2 contributing a record-breaking performance across both Q3 and Q4 - the highest-ever volumes recorded for those quarters in the industrys history. Export momentum remained a consistent bright spot throughout the year, reinforcing Indias emergence as a globally competitive CV manufacturing and export hub.

Quarterly Performance Snapshot - Indian CV Industry, FY26

Quarter	Industry Volume / Key Metric	Segment Trend	Key Drivers / Headwinds
Q1 FY26	Muted; wholesale volumes subdued	MHCV soft (M&HCV retail down 4.4% YoY in May 2025); LCV showing early recovery	Inventory overhang from FY25; dealer destocking; weak freight sentiment
Q2 FY26	H1 FY26 cumulative retail: 4.63 lakh units (+2% YoY)	LCV and MCV resilient; HCV demand soft; September green shoots with CV demand pickup	AC cabin mandate effective Oct 2025 drove prebuy momentum; e-commerce and urban logistics supporting LCV
Q3 FY26	2.90 lakh units (+21.5% YoY) - Highest-ever Q3 in industry history	Broad-based recovery across all CV segments	Post-GST 2.0 affordability, festive season demand, resumed infrastructure execution, strong freight rates; CV exports up 22% in Q2 and sustained into Q3
Q4 FY26	3.25 lakh units (+18.9% YoY) - Highest-ever Q4 in industry history	Heavy trucks led by infrastructure; replacement buying accelerated	Sustained infra spend, high fleet utilisation in cement/ steel/auto freight sectors; strong export order book fulfilment for Africa and GCC markets
Full Year FY26	10.79 lakh units	H1 subdued; H2 structurally strong	Recovery confirmed as structural, not seasonal; India established as a competitive CV export hub

Overall, the commercial vehicle (CV) industry showed broad-based growth across most segments. M&HCVs recorded strong momentum, with total domestic volumes rising 12.9%, driven by a 15.7% growth in trucks, while buses remained largely flat. Export performance for M&HCVs was robust, growing nearly 45%, supported by strong trucks and bus shipments. LCVs also performed well domestically, registering 12.5% growth, led by healthy demand for LCV trucks, though LCV bus exports declined slightly. Overall, total CV domestic sales grew 11.8%, and exports rose 17.4%, indicating sustained recovery and improving global demand in FY26.

Segment	Domestic			Exports
	2025-26	2024-25	Change	2025-26	2024-25	Change
M&HCV Buses	67,149	67,307	-0.20%	16,874	11,241	50.10%
M&HCV Trucks	3,55,849	3,07,491	15.70%	16,829	12,015	40.10%
M&HCV Total	4,22,988	3,74,798	12.90%	33,703	23,256	44.90%
LCV Buses	61,597	54,807	12.40%	4,656	4,889	-4.80%
LCV Trucks	5,95,276	5,29,074	12.50%	56,434	52,606	7.30%
LCV Total	6,56,873	5,83,881	12.50%	61,090	57,495	6.30%
CV Total	10,79,871	9,58,679	12.60%	94,793	80,751	17.40%
Source: SIAM Flash Report March 2026

B. ASHOK LEYLAND - THE YEAR (2025-26) IN BRIEF

Your Company recorded domestic sales of 128,033 M&HCVs during the year, comprising 21,261 buses and 106,772 trucks (including Defence vehicles), reflecting a robust growth of 11.5% over the previous year. Domestic LCV sales reached 74,322 vehicles, registering a healthy year on year growth of 14.3%. During the year, Your Company achieved all time high sales volumes and revenues across several product categories, including M&HCVs, LCVs, International Operations, and the Power Solutions business, underscoring the strength of its diversified portfolio and execution capabilities. Your Company achieved a market share of 30.3% in the M&HCV bus and truck segment during the year, representing a marginal decline of 0.4 percentage points compared to the previous year.

M&HCV Truck segment

M&HCV demand recovery in FY26 was anchored by the resumption of government infrastructure expenditure following the general election-related slowdown in H1 FY25. Central Government capex growing 14.5% YoY (Apr-Feb FY26) directly translated into stronger tipper truck demand at road construction, mining, and real-estate project sites. Manufacturing sector GVA grew at 11.5% - with double-digit expansion in segments such as basic metals, motor vehicles, and pharmaceutical products - expanded industrial freight volumes, driving haulage truck demand in established logistics corridors. Your Companys sales in the M&HCV Trucks segment (excluding Defence vehicles) increased 15.2% to 105,905 units in FY26, compared to 91,960 units in FY25. During the year, the Company introduced several industry leading products, including 320 hp EGRbased tippers, AVTR 4828 multiaxle vehicles (MAV), Hippo 5532 tractors, and Taurus 320 hp tippers. These launches primarily strengthened the Companys presence in the medium and heavy commercial vehicle (M&HCV) segment, particularly in the highhorsepower tipper, tractortrailer and multiaxle

categories catering to mining, infrastructure, construction and longhaul applications. The new offerings enhanced the Companys competitiveness in higher tonnage and performanceintensive subsegments, supporting improved customer value proposition and product premiumization. These products are expected to help the Company defend and strengthen its market position, drive higher customer adoption in critical applications, and contribute positively to segment sales growth.

M&HCV Bus segment

The M&HCV bus segment witnessed relatively modest growth during the year, largely reflecting the high base created by strong demand in the previous year. In the earlier period, bus volumes were supported by accelerated fleet replacement by State Road Transport Undertakings (SRTUs), institutional purchases, and rising demand for public transportation. As a result, incremental growth in the current year moderated as several large orders were already executed in the prior cycle, leading to a natural normalisation of demand. The ongoing transition towards electric buses, while

structurally positive, also led to longer decision cycles due to higher upfront costs and the need for charging infrastructure and subsidy alignment. Your Companys sales in M&HCV Bus segment (excluding Defence vehicles) in India witnessed a modest decline of 1.9%, with sales of 20,840 units in FY26 versus 21,249 units in FY25, reflecting market normalization after peak demand in FY25. Notable product launches during the year included Garud 13.5M H64V, Sunshine Li, Oyster CNG (School), Garud 15M, Oyster ZMax, and Oyster Max.

International Operations

Your Company delivered its highestever sales of 18,082 units during the year, registering a strong growth of 18.5% over FY25. This performance reflects the Companys disciplined execution and sustained demand across key export markets, supported by selective capacity investments and deeper market engagement. The Company sharpened its focus on GCC markets, where enhanced manufacturing capabilities at the Ras Al Khaimah (RAK) facility enabled it to achieve its highestever production levels, reinforcing supply reliability and cost competitiveness. Growth across regions was further supported by improved spare parts availability, expansion of distribution and service touchpoints, focused capability building, and a more diversified customer base.

Market conditions remained mixed across select geographies. Political instability in Bangladesh and continued foreign exchange constraints in Nigeria moderated demand and impacted total industry volumes in these markets. In contrast, Sri Lanka witnessed a gradual recovery in commercial vehicle demand following the easing of import restrictions and improving macroeconomic stability, supporting a pickup in market activity, albeit with some moderation due to foreign exchange management and policy calibration. In South Africa, the Company strengthened its footprint through a strategic partnership with the Hallmark Group and significantly enhanced dealer coverage. During the year, the Company also initiated trials of its electric vehicle portfolio in select international markets and entered a strategic partnership with PT Pindad (Indonesia) for electric bus assembly and deployment under the TransJakarta programme, reinforcing its longterm growth strategy in the ASEAN region.

LCV segment

FY26 has seen a rebound, with H1 LCV wholesale growth of 5.3% and double digit growth in Q2. Ecommerce expansion, lastmile distribution, urban mobility needs and improving rural sentiment have supported LCV goods and passenger carriers, while GST 2.0 further reduced acquisition cost friction. Your Company achieved its highest ever sales of 74,322 units, delivering a strong year-on-year growth of 14.3%. Vahan market share reached an alltime high of 12.7%, representing an improvement of 80 basis points over FY25. The Company further expanded its presence in the 2-4tonne SCV segment with the launch of the BADA DOST XL series, increasing its addressable market coverage to 55.9%. During the year, the Company strengthened its position as the secondlargest player in the 2-4tonne segment. This performance was under pinned by a continued focus on profitable growth, bestinindustry SSI and CSI scores, lowest defects per vehicle, and best in class warranty and service retention. Network expansion remained a key priority, with the addition of 107 new touchpoints, taking the total dealer footprint to 945 touch points nationwide.

Power Solutions Business

FY26 witnessed steady growth for the industrial and power solutions engine market, supported by strong infrastructure execution, rising

construction and industrial activity, resilient agricultural demand and increasing requirements for reliable backup power across commercial, manufacturing and datacentre applications. During the year, the enforcement of CPCB IV+ emission norms remained a key regulatory driver, accelerating replacement demand and favoring technologically advanced, compliant engine platforms. Your Company has registered 10% growth, achieving alltime high sales of 36,046 engines, driven primarily by improved performance in industrial and agricultural segments. The Powergen segment remained stable, with sustained market demand. Year-to-date Ashok Leyland volumes grew 10%, supported by network expansion and new corporate orders.

Defence

In FY26, your Company delivered a strong performance in its turnkey solutions business, recording robust growth across key supply categories. Turnkey supplies comprised the delivery of 1,414 VFJ kits, reflecting a significant 60% year-on-year increase. On a combined basis, total deliveries of VFJ and CBU kits grew by 9.5% over FY25. Key orders executed during the year comprised 421 short-chassis buses and 241 MBPV 4X4 vehicles, reflecting the Companys capability to execute complex, customized programmes. This performance underscores the Companys strengths in end-to-end project execution, engineering competence, and its ability to address specialized customer requirements across diverse applications.

Aftermarket

In FY26, your Company continued to strengthen its aftermarket business, with spare parts revenue reaching 4,450 crore, registering a healthy growth of 12% over FY25. The growth was driven by higher vehicle parc, improved parts availability, deeper penetration of genuine spare parts, and enhanced digital and physical distribution capabilities. A strong aftermarket performance not only contributes to revenue and EBITDA impact but also enables customers to benefit from improved uptime, lower total cost of ownership and assured vehicle reliability throughout the lifecycle.

Network

To further enhance service reach and customer proximity, your Company expanded its service network by adding 108 new outlets and 883 service bays during the year, with 40% of the new outlets established across the North and East regions to improve coverage in highpotential and underserved markets. This network expansion was aimed at ensuring faster service turnaround, reduced vehicle downtime, and greater accessibility for customers across key transport corridors. The companys sustained focus on service excellence was reflected in its strong customer satisfaction performance, with Ashok Leyland being ranked No. 1 in the Dealer Satisfaction Survey (DSS) conducted by FADA, No. 1 in Sales Satisfaction Index (SSI), and No. 2 in Customer Satisfaction Index (CSI) by independent third party market surveys, reinforcing its customercentric approach in the commercial vehicle industry.

Foundry Division

FY26 was a landmark year for the Foundry Division, with production reaching an all-time high of 100,089 MT - a 3.4% growth over FY25 after seven years - and sales volumes rising 4.0% to 96,649 MT. Notably, 50,503 MT was sold to external customers, underscoring the divisions strengthened market presence, robust customer demand, and sustained manufacturing excellence. The year also sets new operational benchmarks, with the Division recording its lowest- ever rejection levels and energy consumption. Ennore Foundry

sustained rejection levels below 6% for the second consecutive year, while Sriperumbudur Foundry achieved its highest-ever production of 50,478 MT and sales of 47,510 MT. These results reaffirm the Divisions leadership in quality, process efficiency, and cost competitiveness - reinforcing its strategic importance to the Company and its strong positioning for sustained growth ahead.

Overall Summary

In summary, FY26 marked a landmark year for Ashok Leyland, with the Company achieving its highest ever vehicle sales performance. Total domestic vehicle sales reached an alltime high of 202,355 units, while export volumes rose to 18,082 units, reflecting the strength of the Companys diversified market presence and execution capabilities. This record performance was delivered through close coordination across teams, operational agility, and a sharp focus on meeting customer demand efficiently in a dynamic operating environment. Ashok Leyland remains firmly committed to advancing industryleading standards in quality, environment, safety and health, while simultaneously strengthening its focus on innovation, new product introductions and best in class technology. Looking ahead, the Company is well positioned to further reinforce its market leadership through differentiated products, customercentric solutions, and sustained investments aimed at enhancing competitiveness and longterm value creation.

C. OPPORTUNITIES AND THREATS

FY27 is expected to mark a year of disciplined, consolidation-led growth for the Indian commercial vehicle industry - building on the strong volume base established in FY26, with underlying demand drivers remaining structurally intact.

Opportunities

Across the M&HCV segment, replacement demand from ageing fleets, mandatory government vehicle scrappage, and continued infrastructure execution are expected to sustain heavy truck demand and accelerate the structural shift toward higher-tonnage tractor-trailers for long-haul movement. In the bus segment, state transport undertaking replacement programmes, staff and school transportation, and growing adoption of electric and alternate- fuel buses under urban decarbonisation mandates will keep the vertical strategically relevant. The LCV segment is poised to continue momentum, driven by strong agricultural performance, rural consumption resilience, and continued e-commerce and logistics formalisation, with LCVs playing a critical role in first- and last-mile connectivity. Power Solutions and defence verticals offer additional opportunity - steady farm mechanisation and infrastructure construction activity support engine demand, while the Companys established execution track record in specialised defence platforms provides for a robust medium-term order pipeline visibility.

Threats

Near-term risks include geo-political disruptions affecting supply chain, the effects of the West Asia war crisis impacting global crude prices, global trade disruptions and tariff uncertainty weighing on export demand and commodity inflation, rising regulatory compliance costs - particularly from alternate fuel and emission mandates, and tightening retail financing conditions potentially deferring fleet acquisition decisions. In LCVs, competitive pressure from electric three-wheelers in select urban applications poses a structural substitution risk in the near term. Macroeconomic volatility in key export markets, particularly the GCC and Africa, and the risk of delayed government capital expenditure remain key downside sensitivities.

Outlook

For well-positioned OEMs, FY27 presents a compelling opportunity to strengthen market share through new product introductions, alternative fuel platforms, and service and solutions expansion - translating cycle strength into long-term value creation.

D. RISK MANAGEMENT

During the year, the Commercial Vehicle (CV) industry witnessed a sharp turnaround, culminating in a record volume performance. After a subdued start, demand accelerated significantly in the second half, supported by the reduction in GST rates from 28% to 18% in September 2025. Industry growth was driven by sustained Government expenditure on infrastructure, revival in private capital investment and replacement demand arising from an ageing on-road fleet with an average age of nearly ten years.

In this evolving macro-economic and operating environment, your Company continues to focus on long-term value creation by strengthening organisational resilience, enhancing competitiveness and safeguarding stakeholder interests, including those of shareholders, employees, customers, regulators and society at large. Proactive response to external and emerging risks, disciplined cash-flow and liquidity management, and focused productivity and cost optimisation initiatives remain integral to the Companys strategy to protect and create stakeholder value over the short, medium and long term.

Risk management forms a core component of the Companys governance framework. Your Company has a well-established Enterprise Risk Management (ERM) framework aligned with the COSO ERM principles and ISO 31000:2018. The framework enables a structured and consistent approach to risk identification, analysis, evaluation, prioritisation, mitigation, monitoring and reporting across the organisation and supports informed decision-making.

Risks identified are assessed using a standardised risk assessment matrix, which evaluates risks based on probability and impact. Based on the assessment, risk value are assigned in line with the AL ERM framework. These scores are used to prioritise risks into appropriate categories, enabling focused management attention, allocation of resources and escalation to senior management and the Board, as necessary.

Risk mitigation actions are aligned to the prioritised risk ratings and are monitored through defined ownership, timelines and key risk indicators. The risk assessment and prioritisation process is reviewed periodically to reflect changes in the internal and external environment, ensuring continued relevance and responsiveness. Below is the Risk Assessment Matrix and actions based on risk priority.

					Risk Value (P x I)
	Critical	5	5	10	15	20	25
	Major	4	4	8	12	16	20
Impact (1)	Significant	3	3	6	9	12	15
	Minor	2	2	4	6	8	10
	Insignificant	1	1	2	3	4	5
			1	2	3	4	5
			Rarex (<10%)	Unlikely (<30%)	Possible (30-70%)	Most Likely (>70%)	Certain (>90%)
					Probability (P)

Risk Value	Risk Priority	Actions
1-5	Low	Accept Risk but Monitor
6-15	Medium	Manage & Monitor Risk
16-25	High	Manage, Monitor Risk with periodic review by Top Management

During the year, the ERM framework was further strengthened with the formation of focused Risk-led Cross Functional Teams (CFTs) to address key enterprise and business risks. These CFTs comprise representatives from relevant functions and are responsible for developing, implementing and tracking mitigation plans aligned with the risk ratings and the Companys strategic objectives.

A Risk Steering Committee, comprising members of the senior leadership team, provides strategic guidance, reviews the risk landscape and evaluates the effectiveness of mitigation plans proposed by the CFTs. The significant risks, mitigation status and emerging risk themes are periodically placed before the Risk Management Committee (RMC) of the Board, thereby strengthening Board-level oversight and governance.

E. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Given the nature of business, size and complexity of operations, your Company has designed an adequate internal control system to ensure:

a. Transactions recorded are accurate, complete, and authorised;

b. Adherence to accounting standards, complying with applicable statutes and conforming to Company policies and procedures;

c. Effective use of resources and safeguarding assets.

Your Company has complied with the specific requirements laid out under Section 134(5)(e) of the Companies Act, 2013 which calls for establishment and implementation of an Internal Financial Control framework that supports compliance to the Act in relation to the Directors Responsibility Statement.

The Internal Control Framework adheres to the COSO (Committee of Sponsoring Organizations of the Treadway Commission) Internal Control 2013 Framework and the ICAI Guidance Note on Audit of

Internal Financial Controls over Financial Reporting. This approach ensures a systemic evaluation of both the design and the operating effectiveness of controls in a consistent manner.

To ensure holistic oversight, your Company has implemented the Three Lines of Defense model:

1. First Line (Management): Front-line management identifies and manages risks through implementation of appropriate internal controls as an integral part of their day-to-day business processes.

2. Second Line (Risk & Compliance): Dedicated functions establish policies, define frameworks, and monitor risk and compliance activities to ensure alignment with Company policies and standards.

3. Third Line (Internal Audit): An independent, multi-disciplinary Internal Audit team provides objective assurance to the Audit Committee regarding the reliability of the control environment.

Governance and Monitoring

The Audit Committee provides rigorous oversight of the internal control environment through:

1. Risk-Based Audits: Annual audit plans as approved by Audit Committee are dynamic and prioritized based on operational, financial and compliance risk, ensuring high-impact areas receive consistent scrutiny.

2. Validation & Closure: Significant deficiencies, if identified, are monitored till resolution and validated for closure.

3. Board Oversight: The status of internal audit findings, risk mitigation plans, and residual risk assessments are presented to the Audit Committee quarterly and referred to the Board as required.

Ethics and Vigil Mechanism

Your Company fosters a culture of integrity and accountability. Whistle-blower Policy and Vigil Mechanism provide a secure, confidential and independent channel for employees, vendors, and all other stakeholders to report concerns regarding fraud or unethical behaviour. All reported complaints are handled with strict confidentiality, ensuring a protective environment free from fear of retaliation.

Ethics Committee evaluates all ethics related complaints, performs unbiased review and actions if any are taken based on gravity of charge.

INFORMATION SECURITY

Information is an invaluable asset, and your organization is very committed in safeguarding the same from internal & external threats, through adoption of best practices in Information Security. With a focus on robust Information Security Governance, your Company has an independent function to oversee the protection of information assets, ensuring their confidentiality, integrity, and availability. Your organization has been certified for ISO27001:2022 which is the collection of best practices in Information Security.

IT and cyber risks are an integral part of the ERM framework and receive focused oversight. These risks are periodically reviewed by management and placed before the Risk Management Committee of the Board, given their increasing relevance to operational resilience, data protection and stakeholder trust.

Role-based access control (RBAC) are in place to ensure appropriate segregation of duties and authorised access to systems and data. The Company has instituted continuous monitoring mechanisms and conducts periodic reviews, including Segregation of Duties (SOD), Sensitive Access (SA) and End-User Access Rights (EUAR) reviews, to strengthen IT general controls and mitigate the risk of unauthorised access or control failures.

Your organization has a Security Operations Center which continuously monitors and protects the organization from cyberattacks. Your organization has invested in various security tools and partnered with security consultants for Cyber Managed services in line with benchmarked best practice.

F. FINANCIAL REVIEW (FY 2025-26)

A summary of the Standalone Statement of Profit and Loss is given below ( Rs. Crores):

Particulars	2025-26	2024-25	Inc/(Dec) %
Sales	44,007.03	38,752.74	13.6
Other income	315.17	250.25	25.9
Total	44,322.20	39,002.99	13.6
Expenditure
Material Cost	31,417.14	27,622.78	13.7
Employee benefits expenses	2,606.69	2,406.27	8.3
Finance cost	169.73	216.91	(21.8)
Depreciation and amortization	715.19	719.34	(0.6)
Other expenses	4,250.95	3,793.13	12.1
Total	39,159.70	34,758.43	12.7

Particulars	2025-26	2024-25	Inc/(Dec) %
Profit before exceptional items and tax	5,162.50	4,244.56	21.6
Exceptional items	(348.48)	103.73	(435.9)
Profit before tax	4,814.02	4,348.29	10.7
Tax expense	1,248.49	1,045.00	19.5
Profit after tax	3,565.53	3,303.29	7.9
Basic earnings per share (in )	6.07	5.62*	7.9

*Adjusted for Bonus

FY 2025-26 continued to reflect your Companys focus on profitable growth, driven by steady execution across businesses, richer mix and disciplined cost management. Revenue from operations increased to 44,007 crores (FY 2024-25: 38,753 crores). Profit after tax stood at 3,566 crores (FY 2024-25: 3,303 crores) and basic earnings per share increased to 6.07 (FY 2024-25: 5.62, adjusted for bonus).

MHCV truck industry volumes, which had remained broadly stable for three consecutive years (around 3,20,000 vehicles in FY 202223 and FY 2023-24, and around 3,07,500 vehicles in FY 2024-25), witnessed strong growth in FY 2025-26, increasing by about 15.7%. Your Companys truck volumes grew broadly in line with the industry trend, while market share remained healthy at 30.0%. The share of Intermediate Commercial Vehicles (ICVs) in the mix improved by about 3.4 percentage points during the year, supported primarily by consumption-led demand.

MHCV bus industry, which had witnessed record volumes of 63,983 units (excluding EVs and Defence) in FY 2024-25, moderated by about 4.5% to 61,125 units in FY 2025-26. Your Companys bus volumes declined by 1.9%, thereby outperforming the industry. Your Company continued to maintain its leadership position in buses, with market share remaining steady at 34.1%.

Sale volume of Defence vehicles was 1,288 vehicles in FY 2025-26 versus 1,584 units in previous year. Defence-kits sales were at 1,414 sets, 60.0% higher than previous year (884 sets). Defence revenues were stable.

LCV industry volumes witnessed a strong rebound during FY 2025-26, driven primarily by improvement in consumption-led demand, aided by GST rate rationalization in the second half of the year. Against this backdrop, Your Company recorded its highest ever domestic LCV volumes of 74,322 units in FY 2025-26, representing a growth of 14.3% over 65,049 units in the previous year. LCV revenue grew broadly in line with volume growth during the year.

International Operations (IO) delivered a strong performance in FY 2025-26, with sales improving to 18,082 units from 15,255 units in previous year, representing a growth of about 18.5%. This growth was achieved despite the crisis in West Asia towards the end of the financial year. Your Company recorded volume growth across key international markets, including SAARC, the Middle East and Africa, and some seed volume in ASEAN, reflecting the strength of its market presence and distribution network.

Your Company recorded highest ever CV sales of 2,20,437 CVs in FY 2025-26 representing a growth of 13.0% over previous year (1,95,097 nos.) and 11.7% growth over previous peak of 1,97,366 nos. in FY 2018-19.

Domestic spare parts revenue (including service products) grew by 8% to 3,782 crores from 3,500 crores in previous year, which is again a new all-time high.

Power solutions (engines) volumes grew to a new historical high of 36,351 units in FY 2025-26 representing a growth of 10% over FY 2024-25 volumes (32,930 units).

Consequent to the overall CV volume increase of 13% and growth in non-CV business, Your Companys revenues grew by 13.6% to 44,007 crores over previous year ( 38,753 crores).

Costs:

Material Cost: Material cost increased by 13.7% to 31,417 crores in FY 2025-26 as against 27,623 crores in FY 2024-25, broadly in line with the 13.6% growth in revenue from operations. As a percentage of sale revenue, material costs remained largely stable year-on-year.

During FY 2025-26, commodity trends in India remained mixed. Steel prices, particularly in flat steel and certain ferrous inputs, were relatively soft for a significant part of the year before firming up towards the latter part of the year. In contrast, Aluminum remained on a firmer trajectory, while copper and lead were softer in the first half before moving up in the second half. Tyre-related input costs also hardened, especially in the latter half of the year. In addition, prices of platinum group metals (PGMs) used in exhaust aftertreatment went up and remained a key area of cost pressure.

Despite these headwinds, Your Company continued to benefit from focused procurement actions, price negotiations, value engineering, localization, turnover discounts and business-share optimisation, which helped contain the overall cost impact and supported margins.

Staff Costs: Staff costs went up by 8.3% during FY 2025-26 primarily due to

a) Full year impact of wage settlements at Hosur and Ennore Units

b) Manpower (additional) at our new Lucknow plant and

c) Increments to the executives during the year,

Manpower cost excludes one-time charge of 308.48 crores on account of the New Labour Code, which is stated as an exceptional item. In November 2025, the GoI notified four consolidated Labour Codes namely the Code on Wages 2019, the Code on Social Security 2020, the Industrial Relations Code 2020 and the Occupational Safety, Health and Working Conditions Code 2020. The impact of the revised regulatory framework was assessed based on the best information available through FAQs issued by the Ministry of Labour and Employment and the guidance issued by ICAI. The assessment resulted in one time charge of 308.48 crores on P&L, which pertains entirely to the past period.

Finance Costs: Finance costs were lower by about 21.8%, primarily due to improved cash surplus situation and working capital management during the year. Cash generated from operations was utilised to repay long-term and short-term borrowings.

Depreciation for the year was at 715.19 crores which is almost same as last year.

Other expenses at 4,250.95 crores is higher than last year by 12.1%, lower than the revenue growth, enabling your Company to secure benefits of economies of scale. Further, it also includes a contribution of 108 crores to an electoral trust.

Total Capital Employed by your Company increased by about 12% to 28,594 crores in FY 2025-26 from 25,526 crores in previous year.

Total shareholders funds as of March 31, 2026, stood at 13,113 crores, reflecting an increase of 1,595 crores, primarily due to profit for the year of 3,566 crores, offset by dividend payout of 1,835 crores.

Summary of the Balance sheet is given below ( Rs. Crores)

Sources of Funds	March 31, 2026	March 31, 2025	Inc / (Dec) %
Shareholders funds	13,113.42	11,518.79	13.8
Non-Current liabilities	2,153.60	2,576.26	(16.4)
Current liabilities	13,326.64	11,426.13	16.6
Liabilities directly associated with assets classified as held for sale		4.65	(100.0)
Total	28,593.66	25,525.83	12.0
Application of Funds
Fixed Assets	5,282.08	4,683.51	12.8
Right of use asset	263.04	275.33	(4.5)
Intangible Assets	1,323.04	1,311.41	0.9
Investments	6,559.29	5,654.26	16.0
Loans and other noncurrent assets	504.22	1,269.02	(60.3)
Current assets	14,661.99	12,308.62	19.1
Assets classified as held for sale	-	23.68	(100.0)
Total	28,593.66	25,525.83	12.0

Capital expenditure and investments

During the year, your Company incurred 1,050 crores towards capital expenditure predominantly towards:

a) Greenfield Integrated bus plant in Lucknow.

b) Development of Alternate fuel vehicles like BEV, H2 ICE, Fuel Cell, LNG, CNG.

c) Digital Initiatives in manufacturing.

d) Enhancing Infrastructure in all plants related to FSM capacity improvement, capability, sustenance, safety and energy saving.

e) New model vehicle development for domestic and exports, covering entire product range

f) New Engine nodes extending range at both end

g) Regulatory projects like AC regulation in Trucks

During the year, Your Company has invested 386 crores into subsidiaries. This includes 370 crores invested in Optare Plc, 10 crores in Gro Digital Platforms Limited and 6 crores in Vishwa Bus and Coaches Limited. In addition, GBP 45 Mn 499 Cr invested in Optare Plc during FY 2024-25, allotment of equity shares happened in FY 2025-26. In FY 2024-25, this amount was reflected in advance pending allotment.

Your Company has recognized a net fair value gain of 19.30 crores during the year, comprising fair value gains of 49.76 crores in Switch Mobility Automotive Limited and 6.94 crores in Ashok Leyland UAE, offset by a fair value loss of 33.40 crores in Hinduja Energy India Limited and an impairment loss of 4.60 crores in Gulf Ashley Motors Limited.

Current assets as of March 31, 2026, were at 14,662 crores when compared to previous years level of 12,309 crores. The increase of 2,353 crores was primarily on account of increase in investment in mutual fund units by 1,101 crores, increase in bank balance of 900 crores, offset partially by reduction in cash and cash equivalent of 629 crores Inventory increased by 529 crores (Finished goods inventory increase by 73 crores and production inventory increased by 456 Crore), Trade Receivables increase by 63 crores and other current assets (including other financial assets) increased by 389 Crore.

Liquidity

Your Company could generate cash during the year primarily due to better profits. Internal accruals enabled your Company to meet capital expenditure, dividend commitment, long term loan repayments as well as working capital requirements. Your Company manages its liquidity through rigorous weekly monitoring of cash flows.

Details of key financial ratios:

Ratios	Formula used	FY 2026	FY 2025
Debtors turnover	Revenue from operations / average debtors	15.08	12.00
Inventory turnover	COGS / average inventory	9.75	8.99
Interest coverage ratio	Earnings before interest and tax / interest expense	62.47	34.95
Current ratio	Current assets / current liabilities	1.10	1.08
Debt equity ratio- Net	Net Debt / equity	-	-
Operating profit margin (%)	EBITDA / Revenue from operations	13.03	12.72
Net profit margin (%)	PAT without exceptional items / revenue from operations	8.89	8.26
Return on net worth (%)	PAT without exceptional items / total equity	29.85	27.78

Profitability

Domestic CV volumes, both MHCV and LCV, grew in double digits. Commodity costs were stable in the first half of FY 2025-26 but hardened during the later half. During the year, AC regulations for MHCV Trucks were rolled out resulting in cost increase. Your Company could improve the price recovery on domestic MHCV, however price recovery in LCV could not be achieved. Our export

volumes improved from the first quarter of the financial year and registered strong growth for the financial year. Various initiatives covering product cost reductions, value engineering, operating cost control measures continued with same rigour. Performance of other businesses covering defence, spare parts and power solutions (engines) was good and supported your Companys performance throughout the year. The contributions from these businesses have gone to mitigate the fixed costs significantly thereby reducing the pressure on MHCVs. All these actions enabled Your Company to post consistent improvement in operating profit (EBITDA) quarter on quarter. The operating profit improved year-on-year in all the quarters of FY 2025-26. Operating profit margin (EBITDA %) expanded year-on-year in first 3 quarters of the year, however, it shrunk marginally in Q4 FY 2025-26. Overall, for full year operating profit margin was up by 30 basis points to 13.0%.

The financial ratings of long term and short-term facilities / commercial papers as given by rating agencies viz., CARE and ICRA in FY 2025-26 are given below.

Agency	Long Term	Short Term Facilities / Commercial Paper
CARE	CARE AA+; Stable Outlook	CARE A1+
ICRA	ICRA AA+; Stable Outlook	ICRA A1+

Your Company has serviced all its debt obligations on time.

Results of Operations

Your Company generated an after-tax profit from operations of 4,379 crores in FY 2025-26 which is 7% higher than 4,079 crores in previous year. FY 2025-26 witnessed strong doubledigit growth in Medium and Heavy commercial vehicles and Light Commercial Vehicles volumes. Though volumes and revenue grew in double digits, operating controls ensured operating working capital reduction at the end of the year (further release of 414 crores). With our efforts in collections the Trade Receivables went up marginally by 38 crores. Inventory was higher by 529 crores reflecting increase in business activity, and trade payables went up by 1,024 crores. This helped with a substantial reduction in operating working capital.

Increase in other non-current and current financial assets and other non-current and current assets by 293 crores, increase in non-current and current financial liabilities by 140 crores, increase in contract liabilities by 302 crores, offset by decrease in non-current and current provisions and other current liabilities by 89.52 crores and decrease in Others of 103 crores.

Cash outflow for acquisition of fixed assets for FY 2025-26 was at 978 crores as against 925 crores in previous year. Your Company has invested 386 crores (net) in Subsidiaries, made current investments of 1,005 crores, Invested 900 crores in bank deposits and received Interest & Dividend of 58 crores & 6 crores respectively. All this resulted in net cash outflow of 3,205 crores in Investing activities.

Cash outflow of 2,217 crores from finance activities primarily reflect the repayment of non-current borrowings (net) 277 crores, interest & other payments of 108 crores, dividend payment of 1,835 crores (FY 2024-25 - 1,248 crores & FY 2025-26 - 587 crores), and realization from sale of equity shares of 3 crores.

Bonus Shares

During FY 2025-26 your Company had declared and issued Bonus (Jul25) Shares at ratio of 1:1 i.e. 1 Bonus share for each share held.

Dividend

During the year, your Company declared and paid 1 st interim dividend of 1 per share for equity share of 1/- each in November 11, 2025. Second interim dividend of 2.50/- per share has been declared on May 28, 2026 for the financial year ended Mar 26. In all your Company has declared a total interim dividend of 3.50/- per share per equity share of 1 each representing 350% dividend.

Dividend of 4.25/- per share (Pre Bonus Issue) declared during May 2025 for year ended Mar25 was paid out during the year.

Cash flow statement ( Rs. Crores)

Particulars	31.03.2026	31.03.2025
Profit from operations after tax	4,378.50	4,078.74
(Inc)/Dec in Net working capital	413.60	3,740.68
Net cash inflow from operating activities	4,792.10	7,819.42
Payment for acquisition of assets - net	(977.73)	(924.31)
Cash outflow for investing activities	(2,227.47)	(3,153.55)
Cash outflow from financing activities	(2,217.12)	(3,023.50)
Net cash (outflow) / inflow	(630.22)	718.06

The year ahead

FY 2025-26 marked another year of resilient performance for your Company, supported by a diversified business model and sustained focus on execution. Looking ahead, the operating environment is expected to remain influenced by global volatility in commodities, interest rates, foreign exchange and logistics, while domestic macro fundamentals and infrastructure-led activity are expected to continue to provide support to the commercial vehicle industry.

Revenue grew by 13.6% year-on-year and operating profit before tax increased by 21.6% in FY 2025-26. Your Company had to consider 308.48 crores charge (classified as exceptional) towards new wage code introduced by Government of India.

The performance underscores our commitment to profitable and sustainable growth through levers of product premiumization, cost leadership, and expansion of service reach. Our focus remains on expanding operating leverage through stronger price realization, cost optimisation and a favourable business mix. Continued momentum in aftermarket, international operations, defence and power solutions provides resilience across cycles and supports sustained profitability.

Your Company continues to maintain a strong balance sheet and liquidity position, enabling investments in future growth and technology transitions while meeting capital expenditure and shareholder return commitments.

CV industry volume growth exceeded expectation set at the beginning of the FY 2025-26. Post GST rate realization effective September 2025, the sentiments on the ground improved significantly. Consumption demand growth, which had been

subdued for few quarters, picked up strongly post GST 2.0. With more disposable income in the hands of consumers, demand grew strongly. The impact of the consumption-led growth and consequential improvement in sentiment was reflected in high double-digit growth in CV volumes in the last 4 months of FY 2025-26.

Domestic macroeconomic indicators and policy thrust on infrastructure and logistics continue to be supportive. Normal monsoon season, sustained public capital expenditure and steady activity across core sectors are key drivers for freight movement and commercial vehicle demand. Global uncertainties, however, have created multiple headwinds to this progress - hardened commodity prices, logistics disruptions, fuel supply issues and energy Inflation and remain key monitorable.

Your Company remains cautiously optimistic for the commercial vehicle industry in FY 2026-27, with growth expected across key segments, supported by infrastructure activity and replacement demand. Your Companys product portfolio is robust, with a strong pipeline across conventional and alternate-fuel platforms. Your Company will continue to strengthen the core propositions of reliability and fuel economy, while further enhancing customer experience by transforming sales and service operations. Leveraging these initiatives, your Company is confident of sustaining momentum in both trucks and buses, while progressing towards its medium-term goal of achieving 35% market share in MHCV.

Demand outlook for FY 2026-27 is expected to be shaped by (i) continuing infrastructure and road-building activity, (ii) replacement demand supported by an ageing fleet and higher utilization in select corridors, and (iii) improving operating economics driven by better payload and fuel-efficiency choices. In trucks, demand will be led by core haulage and intermediate commercial vehicle applications, while construction and tipper demand will continue to be influenced by the pace and mix of public and private capex. In buses, sustained demand is expected from staff transport, tourism and school segments, along with opportunities in state transport undertakings and institutional tenders.

In LCVs, demand is expected to be supported by last-mile logistics, intra-city distribution and the continued shift towards organized fleet operations. Your Companys priorities include improving portfolio coverage across tonnage and body applications, strengthening channel throughput, and expanding service touchpoints to improve up-time-led customer experience. Your Company will continue to focus on disciplined pricing and value-led variants to build share without compromising profitability.

International Operations are expected to remain an important growth lever, with focus on deeper market coverage, stronger product-market fit and improved parts/service support in key geographies. Exports will continue to be influenced by macro conditions, currency movements and funding availability in certain markets; accordingly, we will remain selective in market prioritization and work closely with channel partners on retail financing solutions. In Defence, our focus remains on execution of the order pipeline, increasing indigenization and deepening capabilities across mobility platforms and aggregates. Aftermarket and power solutions will continue to be strategic priorities given their resilience across cycles and their contribution to operating leverage and cash generation.

From a profitability perspective, your Company will continue to pursue a balanced mix of actions: improved price realization through richer product mix, value engineering and localizations to structurally reduce material costs, and tight overheads control.

Working capital discipline will remain a key focus area, supported by sharper retail collections, inventory optimisation and improved payables management.

The industry is progressing through a multi-technology transition, where alternate fuels and electrification are expected to gain share in specific applications, depending on route profiles, duty cycles, payload requirements and total cost of ownership (TCO). Your Companys approach is to participate across pathways. CNG and LNG for specific regional and long-haul use-cases, battery electric solutions for urban and short-haul duty cycles, fuel cell electric platforms for inter-city applications where refueling time and range are critical, and hydrogen ICE as an evolving option for certain heavy-duty applications. Your Company is ready with products with all the alternate powertrain options and is in position to capitalize on the growth or adoption of any of these technologies.

To further navigate this transition, your Companys priorities include: (i) consolidating modular product architectures that enable commonality across powertrains and faster variant development, (ii) increasing localization and supplier capability for critical aggregates such as batteries, e-axles/e-drives, power electronics and high- pressure fuel systems, (iii) strengthening software, connectivity and energy management capabilities to improve real-world efficiency and uptime, and (iv) expanding the service ecosystem for alternate- fuel vehicles through technician training, special tools, spares availability and safety protocols. In parallel, we will continue to work with ecosystem partners on charging and refueling infrastructure, service models and financing construct to accelerate adoption where customer economics are favourable.

Your Company has already progressed well on developing capabilities in eV motors and eV batteries. During Q4 FY 2025-26,

your Company announced ground-breaking for a greenfield battery pack manufacturing facility at Pillaipakkam near Chennai, intended to support Companys electric mobility programmes

Technology transition is also closely linked to the evolving regulatory landscape. We will continue to invest in compliance and validation capabilities for upcoming emission and environmental requirements, and in manufacturing and quality upgrades that support new technologies at scale. These efforts complement our ongoing capital expenditure priorities, including alternate-fuel development programs, digital initiatives in manufacturing and infrastructure improvements across plants.

Key risks to the outlook include demand volatility linked to macro conditions, abnormal increase in fuel prices, interest rates and freight availability, commodity and foreign exchange fluctuations, supply chain disruptions, and heightened competitive intensity. We seek to mitigate these through diversified business levers (aftermarket, exports, defence and power solutions), a strong new- product pipeline, proactive cost and working capital actions, and a continued emphasis on customer experience through stronger uptime and service reach.

G. CREDIT RATINGS

The details of credit ratings are furnished in the Corporate Governance Report which is attached as Annexure-C to this report.

H. HUMAN RESOURCES

During the year under review, the total number of people on the rolls of the Company is 9,891. Material developments in the Human Resource / Industrial Relations front have been detailed under the head Human Resource in the Boards Report.