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Focusing on developing new technologies

ALL has launched the ‘AVTR’ platform to drive cost efficiency in the MHCV (Medium and Heavy Commercial vehicle) segment. This will result in a lower number of parts, lower raw material inventory and more productivity, thereby increasing operating efficiency. It is actively working on developing new technologies in the areas of Safety, and Green Energy. In terms of safety, it plans to create products with Advanced Drive Assistance Systems (ADAS) in the next 2-3 years. On Green Energy, the company has launched the electric version of LCV (Light Commercial Vehicle) i.e Dost and Bada Dost, as it is witnessing increased requirements from many courier and logistic companies. This should result in increase in realization per vehicle and margins for the company in the future.

Growth to pick up pace

The company plans to grow by focusing on 2 things: 1) Get deeper penetration in India. The company didn’t have a strong presence in the North and East regions (market share of ~25% in FY23). As a result, ALL has tied with the TVS group for a presence in the National Capital Region to have a strong foothold and increase in the market share. The company aspires to reach an overall market share of ~35%, with the expansion in North and East region as compared to ~31% in FY24.

2) Ensure that LCV, International and Defense (Growth business) grow at a faster pace than the overall growth of the company. The growth business has slightly better margins than the MHCV. Currently, ALL addresses ~50% of the LCV market, while it targets to cover 70-80% of the market in the next few years

The growth in MHCV trucks and LCV trucks will be backed by macroeconomic environment recovery, replacement demand and pickup in infrastructure activities. Healthy growth in the end-user industries like cement, steel and mining as well as an increase in general manufacturing activity and consumption trends continue to support demand from fleet operators for tippers and mutli-axle vehicles. Apart from the core sectors like real estate, steel, cement etc, ecommerce has gained much importance, especially after the Covid period. Higher allocations in the recent budget for the core sectors will help drive the momentum in economic activity, thus helping CV industry growth.

Margins to witness uptick

In FY24, the company embarked on cost reduction initiatives viz, material cost reduction program, which focuses on bulk buying, consolidating vendors, and alternative design, which would enhance the performance and reduce cost. The company saved Rs.600- 675cr in FY24. This benefit is likely to continue in FY25 as well, according to the company’s management. We expect the EBITDA margins for the company to improve by 80 bps from FY24-27 to 12.8%, on account of the favourable product mix and development of new technologies

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