ashok leyland ltd Management discussions

A.MARKET TRENDS Economy - India

According to the second advance estimates released by the National Statistical Office (NSO) in January this year IndiaRss real GDP growth for FY23 is placed at 7.0%, driven by private consumption and public investment. Economic activity remained resilient in Q4. Index of Industrial Production (IIP) expanded by 5.2% while the output of eight core industries rose even faster by 8.9% in JanRs23 & 6.0% in FebRs23, indicative of the strength of industrial activity. In the services sector, domestic air passenger traffic, port freight traffic, e-way bills and toll collections posted healthy growth in Q4, while railway freight traffic registered a modest growth. Purchasing Managers Indices (PMI) pointed towards sustained expansion in both manufacturing (56.4) and services in March (57.8).

A good rabi crop should strengthen rural demand, while the sustained buoyancy in contact-intensive services should support urban demand. The governmentRss thrust on capital expenditure, above trend capacity utilization in manufacturing, double digit credit growth and the moderation in commodity prices are expected to bolster manufacturing and investment activity. GOI in the Union Budget 2023-24 increased total capex outlay by 33.0% to ^ 10 lakh Crore. 100 critical transport infrastructure projects, for last and first mile connectivity for ports, coal, steel, fertilizer, and food grains sectors have been identified. Budgetary allocation for MoRTH saw a 25.0% increase totaling to ^ 2.6 lakh Crore. The TIV for e-Buses & e-LCVs is expected to grow at CAGR of 37% and 73% respectively till 2032. The external demand drag could accentuate, given slowing global trade and output. Taking all these factors into consideration, RBI has forecasted IndiaRss real GDP growth for FY24 at 6.5%.

The inflation trajectory for 2023-24 would be shaped by both domestic and global factors. The expectation of a record food grains production bodes well for the food prices outlook. The impact of recent unseasonal rains and hailstorms, however, needs to be watched. Crude oil prices outlook is subject to high uncertainty. Taking into account these factors and assuming an annual average crude oil price (Indian basket) of US$ 85/barrel and a normal monsoon, CPI inflation is projected at 5.2% for FY24.

Domestic demand in India is expected to be robust and domestic steel mills are not facing demand constraints. Rising oil stocks in the US and expectations of further interest rate increases are likely to weigh on crude prices. With CNG prices moving downwards from Apr 2023 and if diesel prices expected to stay at current levels, the difference between diesel and CNG prices is expected to move higher and that could drive higher demand for CNG vehicles going forward. Overall globally and domestically commodity costs are expected to be stable for FY24. Going into 2023 automakers are more optimistic about the end of chip shortage. However, some industry insiders have suggested that the semiconductor shortage could stretch into 2024 but not with the same intensity as earlier.

(Source: RBI MPC, Apr 2023)

Economy - World

The global economy appears poised for a gradual recovery from the devastating effects of the pandemic and of war in Ukraine. China is rebounding strongly following the reopening of its economy. Supply-chain disruptions are unwinding, while the dislocations to energy and food markets caused by the war are receding. Simultaneously, the massive and synchronous

tightening of monetary policy by most central banks should start to yield results, with inflation slowly going down. Although inflation has declined as central banks have raised interest rates and food and energy prices have come down, underlying price pressures are proving sticky, with labor markets tight in a number of economies. Side effects from the fast rise in policy rates are becoming apparent, as banking sector vulnerabilities are coming into focus and fears of contagion have risen across the broader financial sector, including nonbank financial institutions. Policymakers are taking forceful actions to stabilize the banking system. Global growth will bottom out at 2.8% in 2023 before rising modestly to 3.0% in 2024. Global inflation will decrease, from 8.7% in 2022 to 7.0% in 2023 and 4.9% in 2024.

(Source: IMF WEO, Apr 2023)

Commercial Vehicle Market

The Commercial vehicle market (MHCV and LCV) in India grew by 34.3% YoY in total industry volumes (TIV) to 962,468 units from 716,566 units. This growth was led by 49.2% growth in M&HCV segment which grew to 359,003 units from 240,577 units. The LCV segment grew by 26.8% to 603,465 units from 475,989 units in FY22.FY23 started with economic activity stabilizing as a result of the ebbing of the third wave of COVID-19 and the easing of restrictions. Urban demand expanded while weakness persisted in rural demand. Investment activity gained traction. Merchandise exports recorded double digit expansion for the fourteenth consecutive month in April. Non-oil non-gold imports also grew robustly on the back of improving domestic demand. In Q1FY23, CV Demand was higher compared to Q1FY22 driven by both MHCVs & LCVs. CNG prices saw a huge revision in AprRs23 and with Diesel prices being unchanged, the cost differential between them dropped and that started a decline in the CNG TIV which continued all of FY23.

In Q2FY23, urban consumption was lifted by discretionary spending ahead of the festival season and rural demand gradually improved. Investment demand also gained traction, as reflected in rising imports and domestic production of capital goods, steel consumption and cement production. Aggregate supply conditions also improved south-west monsoon rainfall above the long period average. Activity in industry and services sectors remained in expansion, especially the latter, as reflected in PMIs and other high frequency indicators. Demand for MHCVs and LCVs continued to increase compared to Q1FY23. RBIRss enterprise surveys pointed to some easing of input cost and output price pressures across manufacturing, services and infrastructure firms; however, the pass-through of input costs to prices remained incomplete.

In Q3FY23, economic activity exhibited resilience supported by good progress on the north-east monsoon and above average reservoir levels. Activity in the industry and services sectors was in expansion mode with urban consumption being lifted by pent-up spending and discretionary expenditure during festival season. GST collections remained above ^1.4 lakh Crore during the quarter. Overall demand for MHCVs continued to rise while & LCVs lagged.

Economic activity remained resilient in Q4. IIP expanded faster in Jan & Feb, indicative of the strength of industrial activity. In the services sector, domestic air passenger traffic, port freight traffic, e-way bills and toll collections posted healthy growth, while railway freight traffic registered a modest growth. The governmentRss thrust on capital expenditure, above trend capacity utilization in manufacturing, double digit credit growth and the moderation

in commodity prices bolstered manufacturing and investment activity. With BS VI - OBD II norms coming into effect in AprRs23 and OEMs indicating their intention to increase prices on account of OBD II and commodity impact, sales of MHCVs was boosted by pre-buying. Both MHCV & LCV TIVs were close to previous highs seen in FY19 with LCV growth lagging MHCV growth.

The LCV Trucks (0-7.5T Segment) grew by 22.6% while the LCV Bus segment also grew by 122.1% on a low base. CV exports degrew by 14.8% over last year primarily led by 55.1% drop in MHCV Trucks and 6.1% drop in LCV Trucks because of the ongoing global slowdown and currency weakness in key Indian export markets.

Segment	Domestic			Exports
	2022-23	2021-22	Change	2022-23	2021-22	Change
M&HCV Buses	38,410	11,804	225.4%	10,543	6,499	62.2%
M&HCV Trucks	320,593	228,773	40.1%	11,524	25,682	-55.1%
M&HCV Total	359,003	240,577	49.2%	22,067	32,181	-31.4%
LCV Buses	44,315	19,957	122.1%	1,799	1,785	0.8%
LCV Trucks	559,150	456,032	22.6%	54,779	58,331	-6.1%
LCV Total	603,465	475,989	26.8%	56,578	60,116	-5.9%
CV Total	962,468	716,566	34.3%	78,645	92,297	-14.8%

Source: SIAM Flash Report March 2023

B.ASHOK LEYLAND - THE YEAR (2022-23) IN BRIEF

Your Company sold 114,247 M&HCVs in the domestic market (10,767 M&HCV Buses and 103,480 M&HCV Trucks including Defence vehicles), registering a growth of 75.5% over last year. LCV with sales of 66,669 vehicles grew by 27.7% over the previous year. Your Company was able to achieve market share of 31.8% in M&HCV Bus and Truck segment, an increase of 4.7% over last year.

M&HCV Truck segment

Industry sales of commercial vehicles saw steep growth in FY23 on the back of economic activity supported by Government interventions and infrastructure growth. Your Companys sale in M&HCV Trucks segment (excluding Defence vehicles) in India grew by 68.6% to 102,753 units in FY23, as compared to 60,947 units in FY22. Your Company enhanced its product portfolio in the ICV trucks segment with the Partner Super platform to cater to the boost in demand for ecommerce and last-mile delivery applications. Further, product variants for RMC applications and mining tippers helped your Company strengthen its presence in the Construction and Mining industry. Your Company pioneered in launching the 42Ton and 44Ton Tractor trailer models, along with the introduction of CNG variants in the Haulage segment, which were well received during the year.

M&HCV Bus segment

Industry sales of M&HCV Bus segment witnessed a multifold growth of 225.4% in FY23 compared to FY22, augmented by the reopening of schools and colleges along with the replenishment of fleets by State Transport Undertakings. Your Companys sale in M&HCV Bus segment (excluding Defence vehicles) in India grew by 256.7% to 10,764 units in FY23, as compared to 3,018 units in FY22.

International Operations

In International markets, during FY23, your Company made significant strides in line with our strategy to expand addressable market through geographical and product portfolio expansion. Your Company added distributors in 12 countries and launched 5 new products and their variants. It now has presence in over 25 countries in Africa for retail market operations. Your Company continued to strengthen its market leadership position in bus segment in SAARC and GCC. LCV products, both in RHD and LHD, launched in African and GCC markets have helped it make very good inroads in the Goods segment. Due to acute forex constraints and depreciation of local currencies in most of the markets (except GCC), where your Company is present. Last year saw industry MHCV exports from India dropping more than 30.0% over FY22. However, your Company sold 11,289 units in IO markets, an increase of 2.0% over previous year.

LCV segment

In FY23, RsBada Dost PlatformRs has helped your Company reach highest ever sales of 66,669 nos since inception. In addition, for the first time in the commercial vehicle industry, your Company released a Limited-Edition variant of the BADA DOST. This Limited edition Bada Dost, came packed with many Industry first offerings such as touchscreen infotainment with Bluetooth, reverse parking, central locking etc. Your Company Market share in the SCV category stood healthy and strong at 19.6% despite economic challenges and semiconductor shortages. Your Company is on track to launch three new products in FY24 for the domestic market. Your Company continues to deliver best- in-industry SSI/CSI, lowest defect product, low warranty cost and high service retention through its network of 620 outlets, achieving a service market share of 71.0%. Bada Dost i2 was awarded Pick up of the Year 2022-23 and Bada Dost special edition was awarded the Marketing campaign of the year at the Global Awards for Retail Excellence presented by ET Now and World Leadership Congress.

Power Solutions Business

Your Company has achieved a growth of 9.0% in Power Solutions Business. Aggressive rural and industry development coupled with ongoing infrastructure expansion activities has favored Powergen and Industrial business segments. While there has been an establishment phase of BS CEV IV in Industrial segment, our market development measures in new applications with equipment manufacturers has favored the sustained growth opportunities. Positive trend backed by good monsoon in Agricultural segment has fueled the demand. Overall, your Company has achieved sales of 22,925 engines in FY23.

Defence

In FY23, your Company supplied 782 completely built-up units (CBUs) & was able to reduce dependency on VFJ Kits. Your Company is proud to execute 360 water bowsers in record time to Indian Army, expanded into DGBR (Directorate General Border Roads) with BAGH variants & Indian Navy with HMV 4x4 (RIV - Rapid Intervention Vehicle). Your Company also launched Jeet 4x4 in Light vehicles segment during Defence expo.

Aftermarket

Your Company is actively focused on serving the needs of customers throughout the product life-cycle through its Aftermarket offerings. The Aftermarket business grew by 31.0% over last year and added to the overall profitability of the Company. Your Company ensured continuous availability of its extended range of parts during disruption of global supply chain, through early interventions at Spare Parts Warehouses, Supplier partners and Channel Partners. Targeted engagement with suppliers and logistics partners ensured that margins of Spare Parts Business were sustained, despite the commodity price increase. Aftermarket channel saw record participation from independent garages and ended the year with highest ever number of exclusive retail parts store for seventh year in a row. Leykart, the online fulfillment mobile app for Ashok Leyland Genuine Spares, delivered growth in order fulfillment and user-participation for the fourth year in a row. Service function continues to improve penetration in service products. Automation and Digitalization initiatives enabled the service function to reduce cycle times of key internal operations and delivered substantial operating costs reduction. Significant focus was accorded in building capability of Channel partners by way of exhaustive and multi-modal training curriculum. AL Care app continues to serve as a one-stop solution to address service needs of our customers.

Network

Your Company continued to expand its primary network in both MHCV & LCV segments to enhance accessibility of service across cities in India. Your Company added 80 new MHCV outlets & 73 new LCV outlets during the year, increasing the total count to 809 MHCV touch-points and 620 LCV touchpoints respectively. To keep up with the rising commercial vehicle operations in Northern and Eastern regions of India, and the booming mining pockets in Central regions of India, your Company opened more than half of the new MHCV outlets in these regions.

Foundry Division

The Foundry Division of your Company is mainly catering to the automotive industry in product segments of Cylinder Block, Head and Tractor Housings. For the year FY23 the Foundry division achieved the production of 98,117 MT (increase of 30.4% over last year) and sales of 94,972 MT (increase of 39.1% over last year).

Overall Summary

In summary, during FY23, your Company recorded total vehicle sales of 180,916 units in the domestic market and 11,289 units in the export market. Your Company worked as one team to overcome the challenges and ramp up the operations with singleminded focus and agility to fulfill the demand. Your Company has set an ambitious mission of transformative performance, across all our business segments, over the coming years. Your Company is committed more than ever to industry-leading standards of quality, environment, safety, and health.

C.OPPORTUNITIES AND THREATS

The Indian commercial vehicle industry is optimistic about growth prospects for FY24, driven by pick-up in construction and mining, and steady macro-economic growth. This growth comes from a higher base (strong rebound in the last 2 fiscals) and possibly cross the previous peak TIV seen in FY19. The healthy allocation for capital spending in the Union Budget 2023-24 is expected to lead to infrastructure development in segments like roads, metros, railways etc. which would in turn drive volumes for the CV industry. Furthermore, the increased focus on replacement of old vehicles and on green mobility also augurs well for the sector. The National Logistics Policy announced last year aims to improve the competitiveness of Indian goods in domestic and export markets by enabling smooth movement of goods across the country. This will provide an all-encompassing plan for the growth of the logistics industry as a whole. There are green shoots (enablers) for an emerging eMaaS business model for the logistics industry led by customerRss strong desire to engage sustainable fleet solutions driven by decarbonisation ambitions. In ICVs growth is expected to be by the e-commerce sector with a progressive shift to more CNG-powered vehicles. In MHCVs the growth is primarily driven by movement of bulk goods & construction materials; which in-turn will fuel growth in Tippers & Tractor trailers. Also, migration from MAVs to higher GVW Tractors will happen in industries like cement, coal, iron ore etc. Growth for MHCV Buses is expected to be driven by opening up of offices, educational institutes and post-Covid revival in intercity & mofussil segments. Further, scrappage of older government vehicles is expected to drive replacement demand from State Transport Undertakings STUs. Downside risks for FY24 growth could emerge from rising interest rates on the back of persisting inflation, commodity costs rising on the back of escalating geopolitical tensions and volatile financial market conditions.

D.RISK MANAGEMENT

During the year, the overall CV industry witnessed robust growth in Total Industrial Volume and sales spurred by capital and infrastructure investments by Government of India, positive economic activity, increased movement of people, goods & services, etc.

Your Company also had an uptick in sales volumes in both M&HCV and LCV segments. Your Company focused on proactively managing the external and internal risks through appropriate business strategies to overcome supply chain constraints, continued to focus on employee health, safety & well-being, worked closely to improve dealer & supplier sustainability, launched several new products to bridge product gaps and remain competitive, enhanced productivity and initiated cost optimization initiatives. These multi-dimensional efforts have supported your Company to remain agile and resilient to the ever-changing business environment while remaining focused on enhancing stakeholder value.

Your Companys well-established Enterprise Risk Management (ERM) framework has proactively supported in identifying the risks and opportunities and addressing them through focused mitigation plans that are measurable and monitored on a periodical basis. The ERM process of the organization is well integrated with the strategic business planning process.

The risk management process encompasses risk identification, impact assessment, effective mitigation plans, and risk reporting. The significant risks identified are tabled to the Risk Management Committee ("RMC") of the Board along with a mitigation plan.

The Companys ERM process is overseen through the RMC of the Board who ensure that the Company has an appropriate and effective ERM framework and apprise the Board on effectiveness of the ERM framework, significant enterprise risks identified, and the risk response implemented/planned.

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 DirectorsRs Responsibility Statement.

Your Company follows the COSO (Committee of Sponsoring Organizations of the Treadway Commission) Internal Control Framework, 2013 and The Institute of Chartered Accountants of IndiaRss Guidance Note on Audit of Internal Financial Controls Over Financial Reporting that supports in evaluating the design and operating effectiveness of internal controls in a consistent manner.

Further, your Company, through its inhouse independent and multi-disciplinary Internal Audit function with support of external experts where appropriate, carries out risk based Internal audit reviews, based on the annual Internal Audit plan as approved by the Audit Committee of the Board. The Internal Audit function reviews compliance with established design of the Internal control, while ensuring the efficiency and effectiveness of operations.

Significant deficiencies in Internal control identified if any, are tracked for closure and validated.

The summary of the Internal Audit findings and status of implementation of action plans for risk mitigation, are submitted to the Audit Committee every quarter for review, and concerns around residual risks if any, are presented to the Board.

F.INFORMATION SECURITY

At Ashok Leyland, we safeguard our vital Information from threats, both internal and external, through adoption of best practices in Information Security. This has enabled your Company minimize risks from cyber and other information security threats. In the ever-increasing cyber threat landscape, your Companys Management has focused on ensuring adequate and effective Information Security governance across the organization.

Your Company has implemented Information Security best practices through the adoption of IS standards and building a robust culture across the organisation. The IS governance is overseen by an independent function responsible for the planning, review and improvement of the Information Security processes to protect Confidentiality, Integrity, and Availability of information assets.

During the year, your Company has undertaken adequate precautions and implemented relevant Information Security safeguards to ensure security of Information assets, along with cyber security assessment as part of continuous monitoring on hardware, software and cloud environment.

G.FINANCIAL REVIEW

Summary of Profit and Loss account is given below:

Rs Crores

Particulars	2022-23	2021-22	Inc/ (Dec) %
Sales	36,144.14	21,688.29	66.7
Other income	116.14	76.13	52.6
Total	36,260.28	21,764.42	66.6
Expenditure
Material Cost	27,849.15	16,761.07	66.2
Employee benefits expenses	2,113.86	1,694.60	24.7
Finance cost	289.09	301.11	(4.0)
Depreciation and amortization	731.96	752.76	(2.8)
Other expenses	3,250.43	2,238.10	45.2
Total	34,234.49	21,747.64	57.4
Profit before exceptional items and tax	2,025.79	16.78	11972.6
Exceptional items	84.61	510.83	(83.4)
Profit before tax	2,110.40	527.61	300.0
Tax expense	730.29	(14.22)	5235.7
Profit after tax	1,380.11	541.83	154.7
Basic earnings per share (in Rs)	4.70	1.85	154.7

During FY Rs23, MHCV truck volumes of your Company has grown by 69% vs 40% growth registered by the Industry. This has led to the market share improvement of your Company by 5.5% over FY Rs22. Your Companys domestic truck market share has improved from 26.8% in FY Rs22 to 32.3% in FY Rs23. Your Company could also initiate price increase in every quarter during FY Rs23 there by recovering ~ 7.0% (point to point) in domestic MHCV trucks.

Though the volume growth in terms of percentage is high for Bus (184%), volumes are yet to catch up with the pre covid level. Total industry volumes were at 38410 nos. as against a volume of 40000 to 45000 buses in a normal year. Price increases during the year fetched ~ 5.0% (point to point) in domestic MHCV buses.

Your Companys LCV domestic volumes also grew by about 28% from 52222 nos to 66669 nos in FY Rs23. Price increases during the year fetched ~ 5.0%.

IO volumes for FY Rs23 were at 11289 nos. which is 2% higher than previous year (11014 nos).

Domestic spare parts revenue (including service products) grew by 24% from Rs 1869 Crores in FY Rs22 to Rs 2311 Crores.

Power solutions (engines) volumes grew by ~10% to 22925 units in FY Rs23.

Consequent to the volume increase as well as the price recoveries, Your Companys revenues grew by a significant 67% to Rs 36144 Crores over previous year (21,688 Crores).

Costs:

Material Cost: Prices of commodities covering flat, proprietary & spring steel, forging, casting and aluminium went up in Q1 only to end up with a substantial reduction in Q2, Q3 & Q4 of FY Rs23. Tyre prices went up by 2.5% in Q2 and 2% in Q3 resulting in 4.5% increase for full year. There was no major movement in precious metal prices during the year.

Through various internal initiatives covering price negotiation, value engineering, turnover discounts and business share optimization, your Company managed to secure a reduction of about 0.6% during the year.

Staff Costs: Staff costs went up by 25% during FY Rs23 primarily due to the long-term incentives, increments and promotions sanctioned to the executives during the year. Increase also reflects the higher quantum of bonus provided in FY Rs23. Your Company also entered in to a settlement of wages for associates across Hosur and Ennore plants during FY Rs22 the full year impact of which is in FY Rs23.

Finance Costs was marginally lower by about 4% primarily due to better management of cash and working capital during the year. No fresh long-term loans were availed during the year. Cash generated from the business was used to repay the long term and short-term loans.

Depreciation for the year is at Rs 731.96 crores which is marginally lower than last year.

Other expenses at Rs 3250.43 crores is higher than last year by 45% reflecting the increase in volume and activity levels. All expenses covering delivery charges, production overheads, sales and administration overheads recorded increase over last year in line with the volumes growth. Thanks to the Reset initiative driven across the organisation in FY Rs21, Administration overheads continued to be at low levels in FY 2022-23.

Total Capital Employed by your Company increased by about 11% from Rs 20,334 crores in FY 2021-22 to Rs 22,592 Crores in FY 2022-23.

Total shareholderRss funds as at March 31, 2023 stood at Rs 8426 crores reflecting an increase of Rs 1089 Crores primarily reflecting the profit for the year Rs 1380 crores as reduced by dividend Rs 294 Crores, other comprehensive loss - Rs 2 Crores and securities premium on allotment of shares by exercising ESOP - Rs 5 Crores.

Summary of the Balance sheet is given below:

Rs in Crores

Sources of Funds	March 31, 2023	March 31, 2022	Inc / (Dec) %
ShareholderRss funds	8,425.80	7,336.90	14.8
Non-Current liabilities	3,093.03	3,449.59	(10.3)
Current liabilities	11,061.93	9,535.51	16.0
Liabilities directly associated with assets classified as held for sale	10.87	11.78	(7.7)
Total	22,591.63	20,333.78	11.1
Application of Funds
Fixed Assets	4,796.80	5,088.23	(5.7)
Right of use asset	236.98	296.58	(20.1)
Intangible Assets	1,402.89	1,410.36	(0.5)
Investments	3,892.18	3,521.58	10.5
Loans and other non-current assets	559.16	509.89	9.7
Current assets	11,631.70	9,443.51	23.2
Assets classified as held for sale	71.92	63.63	13.0
Total	22,591.63	20,333.78	11.1

Capital expenditure and investments

During the year, your Company incurred Rs 488 Crores towards capital expenditure predominantly towards:

a)Improving manufacturing capacity and capability covering Frame side member, LCV and MHCV Engines and cab paint

b)Meeting OBD II norms for MHCV and LCV as per regulation

c)new products covering Bada Dost, Project Vayu (CNG), and other alternate fuel vehicles (H2 IC Engine, Fuel Cell, BEV), Multi Axle Coach, Partner 9T to 11T, etc.,

d)Design, software upgradation, 33KV substation, and advanced engineering equipment

e)Unit replacement & maintenance capex for sustenance

During the year, Your Company has invested Rs 16 Crores in Ashley Aviation, Rs 4 Crores in Vishwa Bus and Coaches Limited. Thus, in all your Company has invested Rs 20 Crores in cash in subsidiaries during the year.

During Feb Rs23 amount owed by Switch Mobility Automotive India Ltd (SMAL) towards the Business Transfer Agreement consideration with accrued interest and working capital adjustments for Rs 301 Crores was converted into 8.5% Non-Cumulative, Non-Convertible redeemable preference shares of 3,01,00,000 shares of nominal and issue price of Rs 100 each.

Your Company has considered a fair value gain of its equity investment in Hinduja Energy Limited for Rs 65.67 Crores. There had also been other fair value / impairment changes of Rs 16 Crores (adverse) during

FY 2022-23.

Current assets as at March 31, 2023 were at Rs 11,632 Crores when compared to previous year level of Rs 9,444 Crores. The increase of Rs 2,188 Crores was due to increase in inventory by Rs 699 Crores (Finished goods inventory Rs 497 Crores, raw material and components Rs 157 Crores and stock in trade Rs 45 crores) increase in investment in mutual fund units Rs 1473 Crores, increase in receivables Rs 966 Crores; decrease in bank balances, cash & cash equivalents Rs 546 Crores (mainly due to redemption of deposit of Rs 500 Crores during the year), decrease in other financial assets Rs 414 Crores (deposits reduction (net) Rs 100 Crores, slump sale consideration received Rs 279 Crores), increase in other current assets Rs 10 crores.

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. No fresh long-term loan was borrowed during the year. Your Company manages its liquidity through rigorous weekly monitoring of cash flows.

Details of significant changes in key financial ratios:

Ratios	Formula used	FY 2023	FY 2022
Debtors turnover	Revenue from operations / average debtors	10.10	7.32
Inventory turnover	COGS / average inventory	11.48	7.95
Interest coverage ratio	Earnings before interest and tax / interest expense	11.18	3.53
Current ratio	Current assets / current liabilities	1.05	0.99
Debt equity ratio - Net	Net Debt / equity	-	0.10
Operating profit margin (%)	EBITDA / Revenue from operations	8.11	4.59
Net profit margin (%)	PAT without exceptional items / revenue from operations	3.58	0.14
Return on net worth (%)	PAT without exceptional items / total equity	15.4	0.4

The reason for change in ratios by more than 25% is mainly due to higher volumes and profitability achieved during the year ended March 31, 2023 in comparison with year ended March 31, 2022.

Profitability

Domestic MHCV volumes started improving gradually quarter on quarter in FY 2022-23. Commodity costs primarily steel prices which went up in Q1 started receding in subsequent quarters. Further your Company could improve the price recovery on domestic MHCV and LCV quarter on quarter consequent to concerted price increases every quarter. Various initiatives covering product cost reductions, value engineering, overhead cost reduction actions were initiated and carried out during the year. Performance of other businesses covering exports, spare parts and power solutions (engines) was also good and supported your Companys performance throughout the year. All these augured well from the profitability point of view. All the above actions, enabled Your Company to post consistent improvement in operating profit (EBITDA) quarter on quarter. The operating profit went up from

4.4% of net sale revenue in Q1 to 6.5% in Q2, to 8.8% in Q3 to 11.0% in Q4 (Full year 8.1%).

The financial ratings of long term and short-term facilities / commercial paper as given by rating agencies viz., CARE and ICRA in FY Rs23 are given below. During Oct/Nov Rs22 both the rating agencies have revised the outlook from negative to Stable.

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 Rs 2563 Crores in FY 2022-23 which is higher than Rs 1077 Crores in FY 2021-22. For the second consecutive year, in FY 2022-23, demand for Medium and heavy commercial vehicles went up quarter on quarter from 75,685 nos in Q1 to 117990 nos. in Q4. Consequently, working capital requirement was higher at the end of the year to meet the improvement in demand. Trade receivables and inventory went up by Rs 968 Crores and Rs 699 Crores respectively. This is partially offset by an increase in trade payables (Rs 295 Crores), non-current and current financial liabilities (Rs 338 Crores), Other current liabilities (Rs 227 Crores), other non-current and current provisions (Rs 361 Crores) and others (Rs 20 Crores). All these have resulted in increase in working capital by Rs 426 Crores.

Cash outflow for acquisition of fixed assets for FY 2022-23 was at Rs 488 crores as against Rs 393 Crores last year reflecting an increase of about Rs 95 Crores in FY 2022-23. Rs 63 Crores proceeds have been received by way of surrender of leasehold land in FY 2022-23. FY 2022-23 indicates a net cash outflow of Rs 1309 Crores representing Rs 1440 crores of investments in mutual fund units, purchase of noncurrent investments (net) Rs 13 Crores offset by net receipt of ^ 100 Crores from deposits as well as interest receipts of Rs 44 Crores during the year. Cash outflow of Rs 940 crores from finance activities primarily reflect the repayment of non-current borrowings Rs 376 Crores, interest & other payments of Rs 277 Crores, dividend payment of Rs 294 Crores offset by proceeds from current borrowings (net) Rs 2 Crores and sale of equity shares Rs 5 Crores.

Dividend

The Directors have recommended a dividend of Rs 2.60 per share per equity share of Re. 1/- each for the financial year ended Mar Rs23.

Cash flow statement

Rs in Crores

Particulars	31.03.2023	31.03.2022
Profit from operations after tax	2562.55	1077.31
(Inc)/Dec in Net working capital	(426.54)	1569.62
Net cash (outflow) / inflow from operating activities	2136.01	2646.93
Payment for acquisition of assets - net	(488.35)	(393.32)
Cash inflow / (outflow) for investing activities	(1246.18)	(1065.59)
Cash inflow (outflow) from financing activities	(940.17)	(723.76)
Net cash inflow / (outflow)	(538.69)	464.26

The year ahead

FYRs23 has been a remarkable year for Ashok Leyland. Not only your Company could significantly increase its market share, it did so with an acute focus on profitability and cash generation. FY23 performance has been truly wholesome - as your Company grew its market share in all major markets and also in all major product segments.

While inflation continued to affect every one of us during the year, your Company was able to more than neutralize through better price realization. This was backed by excellent response to our new product platforms - specifically AVTR in MHCV and Bada Dost in LCV segment. Also, your Companys consistent focus on expanding its network both in MHCV and LCV businesses immensely helped in increase its market penetration.

Auto Expo held at New Delhi in January this year provided a great opportunity to demonstrate the technological readiness for the future. Your Company displayed a wide range of alternative fuel products ranging from CNG and LNG, to Battery Electric, to Hydrogen ICE and even FECV - across our LCV, ICV and MDV platforms.

Going forward, your Company continue to remain optimistic about CV Demand as well its ability to beat the industry growth. FY Rs24 CV demand is likely to surpass the previous peak of FY Rs19. Your Company believes that the CV industry in FY24 will grow by 8-10% over FY23, supported by government infrastructure spending, strong replacement demand and a healthy traction from core industries like steel, cement and mining.

Crisil expects shift in demand from ICVs due to the non-availability of CNG related arbitraging opportunities, to medium duty commercial vehicles (16.2T to 25.0T). This will aid the growth of 14% - 16% in the Haulage segment. Vehicles with higher load carrying capacity are being preferred by Large Fleet Operators (LFOs) which will drive the demand for Multi Axle Vehicles (MAVs) which is set to grow by 16% - 18% in FY Rs24. Demand for tippers is set to grow by 10-12% aided by increase in construction, infrastructure and mining activities.

Bus sales is set to grow at a faster pace due to sharp increase in mobility post the pandemic. Further growth is possible with enforcement of scrappage policy as well as increasing urbanization and replacement of JNNURM buses bought in FY 10-13.

Tonnage addition is expected to further improve due to a better product mix, that is trend of higher growth in MAV and tractor trailers demand.

Factors driving the long term MHCV sales will be a) improvement in industrial activity in the country, b) steady agricultural output and c) the governments focus on infrastructure.

The softening of commodity prices, particularly steel, has impacted the margins positively. Your Company expect this trend to continue through the current year, with an exception of Q1 where some upward trend of commodity prices is seen.

Your Company, even while growing market share has been raising prices, is backed by better acceptance of its AVTR product platform.

LCV - both Dost and Bada Dost - are gaining inroads and have been growing stronger by the day. Both these products hold immense potential for exports and are a perfect fit in our addressable markets.

After Market and power solution business continue to perform well.

Your Company is also putting greater efforts in reducing costs - both product costs as well as overheads. In fact, FY23 has been a record year in efficiency improvements. Many of the initiatives started last year covering value engineering, waste reduction, digitization of manual processes, other overhead reduction etc., have yielded good results and are continued in FYRs24 with even a greater rigor.

Switch is very strategic to us and we are committed to develop Switch as a global electric vehicle company. We have established a name and a platform as a credible EV manufacturer. Our sales order pipeline is robust. We are in the process of finalizing our plans to utilize growth opportunities fully by placing high-quality cost-effective products across various customer segments. Switch is also expected to launch electric versions of Dost and Bada Dost vehicles within this fiscal year.

Your Company is confident and extremely well positioned as a pure play CV player with New gen products and talented people to reach new heights in terms of volume and profits as the market demand picks up.

H. HUMAN RESOURCES

During the year under review, the total number of people on the rolls of the Company is 9,603.

Material developments in the Human Resource / Industrial Relations front have been detailed under the head “Human Resource" in the Boards Report.