Hello, am I audible?

Mukesh, you're audible.

Great. Thank you, everyone.

Good evening, everyone. Mukesh Saraf here from Avendus Spark.

Appreciate everybody logging into this 4Q FY '26 earnings call of Ashok Leyland Limited. From the management team, I'm pleased to host Mr.

Shenu Agarwal, Managing Director and CEO; K M Balaji, President - Finance and CFO; along with the Investor Relations team. I now hand over the call to Mr.

Agarwal for his opening remarks, post which we'll begin with the Q&A. Over to you, sir.

Good afternoon, everyone, and thank you for your trust in Ashok Leyland, as always. I'm pleased to report that FY '26 has been a truly milestone year for our company.

We achieved all-time high CV volume, revenue, profit, and cash surplus, marking the best annual performance in Ashok Leyland's history. Building on FY '25 record results, we have delivered another year of broad-based growth across all our core businesses, demonstrating the resilience of our operations and the trust that our customers placed in us.

Basis standout performance of FY '26, the board of directors have recommended a second interim dividend of ₹2.50 per share. Q4 FY '26 provided a strong finish to the year with a solid performance that reflects the strength of demand in the CV industry and our disciplined execution.

Domestic vehicles volume growth, led by GST 2.0 rate rationalization, gained further momentum during the quarter. Q4 domestic MHCV industry volume was higher 21.5% YoY, and for full year, it was higher 12% YoY.

Ashok Leyland domestic MHCV volume grew in line with industry, with market share of a healthy 30.8% for quarter four. Ashok Leyland domestic MHCV trucks volume for FY '26 was 105,905 units, with market share of 30.2%, and MHCV bus volume was 20,840 units, with a market share of 34.1%.

Ashok Leyland continued its leadership position in MHCV buses. Ashok Leyland domestic LCV volume for Q4 was at 21,801 units, higher 23% YoY, growth better than that of industry.

LCV VAHAN market share for Q4 was 12.8%, with a gain of 90 basis points on YoY basis. For full year, LCV volume was 74,322 units, higher 12% YoY, and full year LCV VAHAN market share stood at 12.7%, higher 80 basis points YoY.

This is the highest ever annual volume recorded in LCV. Our export volumes for full year reached a historic high of 18,082 units, delivering a robust growth of 18.5% over the previous year's 15,255 units.

For the quarter, volume at 500 322 units 5,322 units was marginally lower YoY, primarily due to international logistics issues faced in March. Overall CV volume scaled a new all-time high of 220,437 units, surpassing the previous peak of 197,366 units achieved in FY '19.

This includes defense vehicles. Our non-CV businesses also demonstrated remarkable growth.

Domestic aftermarket revenue for the quarter was up 11.2% YoY, and higher 9.5% for the full year. FY '26 revenue from power solutions business was higher by 16.4% YoY.

Revenues from defense business, including revenue from our defense subsidiary ALDS, was higher 20% YoY. Defense order book and tender win pipeline remains ever strong.

Coming to financial performance, Ashok Leyland achieved all-time high quarter four revenue, EBITDA, and operating PBT. Revenue for Q4 was at ₹14,161 crore, higher by 19% YoY.

EBITDA was at ₹2,066 crore, higher by 15.3% YoY. FY '26 revenue was at ₹44,007 crore, higher by 13.6%.

EBITDA for the quarter was at ₹2,066 crore, and EBITDA margin was at 14.6%. With full year EBITDA margin at 13%, we have now truly entered the teen bracket.

This is an improvement of 30 basis points from last year. Q4 PBT before exceptional items was at ₹1,909 crore, higher 14% YoY.

PAT excluding exceptional items was at ₹1,405 crore, higher 13% YoY. Full year PBT before exceptional items was ₹5,163 crore, higher 22% YoY, and PAT excluding exceptional items, I repeat excluding exceptional items, was at ₹3,914 crore.

May note that during Q3 of FY '26, on account of the new labor code, there was a one-time charge of ₹308 crore. Material cost as a percentage of revenue for Q4 was 71.4%, higher by 80 basis points on YoY basis.

For full year, the ratio was at 71.4% again, 10 per 10 10 basis points higher than last year. Despite commodity headwinds, we could maintain and even improve our gross margins.

This was made possible through better price realizations, rigorous cost saving efforts, and continued focus on improving product and business mix. CapEx for the quarter was at ₹203 crore, and cumulatively at ₹1,050 crore for the year.

Most of the capital expenditure has been deployed towards new products, including future technology development, alternate powertrain technologies, and electric vehicles. Investments in subsidiaries in Q4 was ₹371 crore, primarily towards repayment of loans in the Optare books.

Investments for full year was at ₹387 crore. Our cash position, net of debt, has got even stronger.

We had net cash of ₹5,899 crore at the end of the year, an increase of more than ₹1,650 crore YoY. We are resolutely pursuing the path of premiumization, working diligently on delighting our customers with superior products and services and maintaining operational discipline.

The highlight of the year was our launch of Hippo tractors and Taurus tippers, with industry-best power and torque, delivering best-in-class TCO. In MAV category, we launched new trucks with improved powertrain of 280 hp.

In LCV segment, we launched new 4.1-ton Bada Dost, with industry-best payload. We also launched our most advanced LCV product, Phoenix, for the export markets.

Our product pipeline remains strong, with substantial portion of our CapEx being allocated in creating new product capabilities. For strengthening our service delivery, we added more than 100 touchpoints each in our MHCV and LCV businesses.

More than 45% of our touchpoint additions have been in the north and the northeast regions. At the end of FY '26, Ashok Leyland network has a total of 2,104 touchpoints, 1,159 for MHCV and 945 for LCV.

In international markets, we expanded our network to four new countries in the previous year. A particularly noteworthy achievement in FY '26 was our progress in electric mobility and alternative propulsion vehicles, areas that are critical to our future growth.

During Q4 FY '26, we announced groundbreaking for a greenfield battery pack manufacturing facility at Pillaipakkam, near Chennai, intended to support our electric mobility programs. Our EV subsidiary, Switch Mobility India, delivered a standout performance, attaining net profitability in FY '26, a major milestone in our electrification journey.

During the year, Switch India achieved market leadership position in electric buses as well as in 2- to 4-ton electric LCV market. Switch significantly scaled up deliveries of electric buses and light vehicles during the year, with 1,530 buses, higher 238% YoY, and 1,600 electric LCVs, higher 56% YoY.

Order book at the end of the year for Switch India stood at 1,600 units. Ohm Mobility, our e-MaaS subsidiary, improved operational fleet to over 1,400 e-buses now.

Hinduja Leyland Finance, our vehicle financing subsidiary, delivered robust growth in FY '26, with its AUM expanding by 24 years year on year to approximately ₹59,000 crore. HLF's strong performance not only contributed to our consolidated results, but also enabled vehicle sales through continued financing support to our customers.

HLF's PAT, at ₹491 crore, was higher 20% YoY. Hinduja Housing Finance, or HHF, similarly saw its AUM grow by 15% YoY to approximately ₹16,000 crore, on back of steady demand.

HHF PAT, at ₹387 crore, was higher 4% YoY. Both HLF and HHF maintained healthy asset quality, with consolidated net NPAs at 1.4% approximately.

Delivering solid profitability alongside prudent risk management augurs well for the future growth of both the financial companies. Reverse merger of HLF with NDL Ventures is progressing as per plan and should get consummated within this or the next quarter.

We remain focused on our ESG commitments. Our Road to School and Road to Livelihood program continues to grow, extending their reach to about 6.3 lakh students now.

Our Dow Jones Sustainability Index ESG score has improved significantly, and we are now in global top 2% of the industrial engineering and electrical equipment companies. In our commitment towards RE100, we have achieved a 77% RE status against 69% in FY '25, with our Tamil Nadu plants now at 91% RE100.

In summary, FY '26 was an outstanding year for Ashok Leyland, as we executed our strategy effectively and delivered record results while planting seeds for future growth. Looking forward, we are entering the new fiscal year with cautious optimism.

Demand drivers for commercial vehicles remain positive overall. However, we are mindful of the macroeconomic headwinds, such as global economic uncertainties, commodity price volatility, and diesel price increases.

However, our foundations remain strong. We will keep innovating, attuned to our customers' need, with intense operational discipline and heightened focus on prudent fiscal management.

Ashok Leyland is well positioned to navigate the road ahead and continue creating long-term value for our stakeholders. Thank you once again for your continued trust on us.

Now I hand it over back to the moderator.

Hi, good evening, sir. Congratulations on a strong performance.

My first question is on demand itself. Recently, we have seen fuel price hikes.

Just wanted to check what are the demand signals you are observing, has there been any change, and for FY '27 as a whole, is there any outlook you would like to give on the growth for MHCVs? Similarly on export also, if you can share the outlook.

Thank you, Kapil. It's a very relevant question, and we do hear a lot of noise in the media about several things.

I just wanted to clarify what our outlook or what our view about the market is. Of course, you know that since October, the market has grown very strongly, both MHCV side and the LCV side.

The reason was basically, one, the effect of the GST rationalization, which reduced the prices by about 10%, and the other reason was also that this GST rationalization acted as a trigger for replacement of the aged fleets, and we know that the aging of the fleet is at its all-time high. Now, having said that, Q3 and Q4 had very strong growth, and April also was very positive.

In May, we are not seeing any significant slowdown both on the MHCV and LCV side. However, there is kind of a sentiment attached to the diesel oil prices that is there in the market, which is affecting the current logistics operations also in many routes and in many areas.

However, I think the resilience of the demand based on GST and on the replacement factor is acting very, very strongly, and it is protecting a minimum baseline on the CV demand right now. Of course, we have to watch how the diesel oil price situation in terms of availability and in terms of the price hikes how these pan out.

To that extent, we have to have a kind of wait-and-watch approach. I can tell you for sure that when we are talking to our customers and the big fleet owners, and I was traveling in the eastern region last week or a couple of weeks back, I think that base-level demand resilience is very, very strong.

On the export side, the situation is very similar. At least in our home markets of GCC, Africa, and SAARC, although the oil prices has gone up quite significantly, but we are not seeing any significant slowdown in the demand on the retail level.

Now, of course, export volumes may get still affected because of the international logistics situation. Like even in March and also in April, while there was demand, we could not ship out the quantities according to the demand because of logistics issue.

Exports might drop, I would say in Q1, although things are now coming back to normalcy as we speak. The situation in our factory in RAK also, we had to drop the production there because of local challenges.

We had some effect in March and also in April, but now we are trying to bring it back to 100% capacity utilization. It may take few more weeks to do that.

Overall, the demand scenario is not very concerning.

That's good to hear. Sir, second question was on margins.

The gross margins have seen a improvement this quarter. You alluded to it.

If you could just elaborate, how much was the price hike we took, and what was the commodity cost pressure that was felt during the quarter, and also the outlook for next quarter, if you have taken any price hikes, and how much commodity pressure should we expect in the coming 1Q FY '27?

Thank you. Thanks for the question, Kapil.

Actually, we have taken a price increase of about 1% effective January, and we could continue to recover that 1% for the entire quarter. That was the recovery part.

On the cost side, there has been some increases which have happened on the cost, but we have been successful enough to get the savings on account of this value engineering and e-sourcing and commercial negotiations, etc., which is much higher than the kind of commodity increase which we witnessed in Q4. That is where we have sort of managed the commodity cost increases through the value engineering and e-sourcing savings.

That has really helped us on the gross margin front.

Okay. For 1Q, what is the outlook on both pricing and costs?

See, pricing, we have taken a price increase of about 1, 1.5%, but we'll have to wait and see whether we'll be able to sustain the kind of a price increase for the full quarter. On the commodity cost side, there has been an increase.

There has been a significant increase which has happened on the commodity cost side, predominantly steel. There it is going to be a challenge which we'll be facing as far as the Q1 is concerned.

Any number you can share, what's the range of commodity pressure we are facing?

No, it's too early to give a range or a number, Kapil.

Thank you. That's all from my side.

Yeah. Thank you, sir, for the opportunity, and congrats on a good set of numbers.

Sir, firstly, just on the demand side, post-GST, we are seeing a good demand from the small transporters. Just want to check how that has seen in recent times with the price hikes seen in the vehicle and also the diesel and the disruption what is happening in the market, sir?

Thank you.

Thank you for the question. As far as the impact of the GST was concerned, you are aware that it had a slightly different level of impact, of course positive impact, on various segments of the CV industry.

The LCVs, the smaller vehicles, were the ones that that had the most positive impact, followed by the intermediate commercial vehicles, or ICVs, and then the heavy-duty trucks. Within the heavy-duty trucks, I think tipper demand has been more stronger than the rest because of various infrastructure activities also helping the demand.

Now, this also indicates that the demand push was better or stronger on the retail side, and also the fact is that the fleet owners were still kind of, making their bets in terms of calculating the real impact of GST because of input tax credit issues, etc. The fleet owner demand started surging from December onwards, while the first two months it was largely on the retail side.

Basically, that is the scenario, and as I said to in response to the previous question, we think this is a fundamental factor that will play out even in the long run, that is for next several quarters. Now the price increase there was no price increase actually taken between October and March, and but from April 1, we have taken a price increase, like Balaji said, between 1 and 1.5% depending on various categories of products.

If you compare that 1 or 1.5% with the 10% advantage that GST created, it is not a it is not a significant price increase. In any case, taking 1, 1.5% over 6 months of period is a very normal phenomenon in the CV or the larger automotive industry.

Right? I think let us not be too concerned about the price increase and its impact that has happened.

However, the situation on the ground is a little bit challenging for for the for truck operators, and mainly the reason is availability of diesel, not throughout the country, but in certain pockets there are facing some problems with the availability of diesel, and some of the pumps have even rationed it. When we speak to the government, the government says there is no shortfall of supply.

Some in the some people indicate that probably this is because of the hoarding, etc., or a general fear in the minds of the people as to whether diesel supply will actually get impacted. The situation is quite manageable.

Like I said, last year last month I was in eastern zone, and I met several fleet operators there. I think they have clearly laid out their plans for next 12 to 18 months in terms of how much fleet they will add in to and what kind of fleet replacement they will do, and they are all sticking right now they are all sticking to those plans.

Got it, sir. Thanks for this answer.

Just if you can share, how would the mix for retail or the small transporter versus the fleet or institutional buyers, sir?

See, generally, at the industry level, retail would be about 55 to 60%, and the rest of it will be fleet. I am talking about heavy-duty trucks mainly.

When you look at ICV and LCVs, the retail proportion is much higher. For heavy-duty trucks, it ranges between 55 to 60% right now, and the rest is fleet.

Got it, sir. Thanks for this answer.

Sir, just on the financial side, this quarter other operating income has seen a rise to ₹86 crore versus ₹56 crore. Any reason for that increase?

Lastly, what are plans for FY '27 CapEx and the investment, sir?

On the other income, the sundry income side, there is no specific reason except that we had some returns which we have got on account of the investment of these surplus funds. That is the reason for the increase in the sundry income.

On the capital expenditure side, last year we incurred about ₹1,000 crore. Next year also, the plan would be to incur about ₹750 to ₹1,000 crore on the capital expenditure side.

On the investments, we will decide based on the requirement of the subsidiaries. Even in the previous calls I have stated, many of you wanted to know how much we will invest before this year end.

I indicated to you at that time itself that we will go based on the requirement of the funds by the subsidiaries. We have actually repaid about $30 million out of the $80 million loan which was there with the Optare PLC, with the Switch UK company.

This I had indicated, and we have not disbursed any other funds to any other subsidiary company during the quarter. We will do that based on the requirement.

We have plans, as indicated to you earlier, some of the subsidiary companies like Hinduja Leyland Finance and its subsidiary Hinduja Housing Finance, as well as Ohm, these would require funds. Of course, Switch, you would have noticed, Switch is in a very comfortable position now.

They have made profits. They have moved for the first time.

They have reported a profit after tax of about ₹100 crore, ₹100-plus crore. They are all in a comfortable position.

For the needy subsidiaries, we will step in and then we will provide the funds, and that will absolutely be on the need base, and it will be very difficult for me to put a number now and then give you the details on that.

Got it, sir. Thank you, sir, for the opportunity.

Hi, team. Thanks for the opportunity.

In the opening remarks, you shared the net cash number. I missed that.

Could you repeat that again?

That is ₹5,899 crore. That is at the end of the year.

Because

the December net cash was ₹2,600 crore. That's a quite a good jump between December to March outside of

Binay, that's very typical of the automotive industry, especially CVs.

working capital changes that came through for you.

Because CV demand in Q4 is very high, we have to purchase a lot of raw material for that. The payables of those raw material at the peak level is comes into April and May.

I think it is better to compare it with last year, because that phenomenon is there for Q4. At the end of last year, like I said, it was ₹1,650 crore lesser than what is at the end of.

That is the real gain in the cash, not okay to look at Q3 versus Q4 to that extent.

Correct. Secondly, team, could you share us what was your FY '26 numbers for spares, defense, and exports?

Spares, defense, and exports, you want the revenue numbers?

Basically the non-truck item revenue numbers.

For Q4? For Q4, you want?

For FY '26 only you can share. FY '26.

For FY '26,

spares would be around ₹3,800 crore, power solutions business would be around ₹1,400 crore, and exports, it has crossed ₹3,000 crore, it is at ₹3,200 crore.

Right. Defense on standalone, how much?

Yeah.

Defense is at ₹800 crore. Defense is at ₹800 crore in the books of AL, but overall defense business is at ₹1,200 crore, including our subsidiaries' defense business.

Right. Team, lastly, just next year for subsidiaries, we've seen turnaround this year, but how to look at subsidiary performance next year?

Subsidiaries, actually, they are doing well, especially Hinduja Leyland Finance and Hinduja Housing Finance, they are growing at a 15 to 20% basis year on year. While on one side it is good to know that the growth is quite good and it is continuous, but on the other side, they would also require funds at times because the Tier 1 capital sometimes is low compared to the peers in the same industry.

That is also in a way requiring us to invest in Hinduja Housing as well as Hinduja Leyland Finance. On Switch, it is growing very well.

You would have seen the numbers. The numbers have gone several times, especially on the buses side, as well as on the light commercial vehicle side also, we have sold about 1,600 e-LCVs.

The going is quite good now. For the first time, as per our plan, as indicated earlier in our earlier conference calls, the company has touched profit figure, PAT is about 100 ₹100-plus crore.

They have quite a good and a strong order book position also, about 1,600 vehicles order book position they have from various state transport undertaking as well as on the private requirement side. Overall it is good.

On the Ohm side, as indicated earlier, they might require some funds because they will have to buy the vehicles, and then they will have to run it for the STUs. They might require some funds wherein Ashok Leyland might have to chip in with some investments in Ohm.

Similarly, as I indicated to you, we may also have to invest some funds in Hinduja Leyland Finance as well as in Hinduja Housing Finance. These will be the two companies that would require some funds towards their growth plans.

Right.

Team, earlier in September, we had talked about the CALB partnership, right, on the battery ecosystem. Any update on that?

I assume it's not a part of the investments that you are talking about, right?

No, the battery business is currently housed within Ashok Leyland only, it's not housed in a separate subsidiary yet. All those investments would be part of our own CapEx that number Balaji has given you.

As far as the business itself is concerned, it is moving on track. We have already done the groundbreaking ceremony of setting up this battery pack manufacturing facility at Pillaipakkam, which is not very far from Chennai.

We should be able to start construction work within the next 8 to 10 weeks, I would suppose, and the target for the start of production would be Q2 of next year.

On cell manufacturing?

No, we are starting with pack first. It is the phased approach that we are adopting.

We are starting with pack for captive consumption and also for energy storage systems. In the second phase, we will expand the pack capacity to get into non-captive demand also on the automotive side, and then in the third phase, we will look at cell manufacturing.

It is a phased approach that we are following because one thing is manufacturing, but also the other thing is the penetration of electric vehicle in India. We'll have to just dovetail our own manufacturing investments with the demand scenarios that will emerge in the country.

Right. Lastly, just team, any thoughts on PLI, when do we expect that on the electric side?

PLI, we are still trying to match up to those thresholds as per the government scheme, there are some investment proposals that are coming up. I think we should be able to provide you a better update on that hopefully in 4 to 5 months from now.

Great. Thanks for that.

Thanks.

Thanks a lot for the opportunity, sir. Sir, before I go into the business questions, the first clarification, can you just share the 4Q non-vehicle revenue bit, Balaji, like how we shared the spares and exports and defense bit for the full year, can you share it for 4Q and how has it grown year on year basis?

4Q, spares is 1,000 ₹1,060 crore for the spares. Last year number was ₹950 crore.

Engines, 400 ₹425 crore, last year the same level. Exports, ₹1,100 crore, last year was ₹825 crore.

Defense, ₹275 crore, last year was ₹170 crore.

These non-vehicle revenue, do you expect the momentum to continue in 1Q, because we do have a bit of problem on the commodity and even on the demand side. I'm just trying to see will we get the benefit what we got in 4Q in the subsequent quarters from non-vehicle revenue or there could be some moderation there as well, or seasonality rather?

As of now, it appears that the demand continues to be there for the non-vehicle side. We don't see any dip happening on the non-vehicle revenue side, Pramod.

That's good to hear, Balaji. Shenu sir, a question to you.

It's understandable given the macro and the situations what you explained. We have all been working with mid-single-digit to high-single-digit industry growth for next year for fiscal '27, and this is even with the second half base kind of coming in, which is quite daunting.

Now given the current scenario, what would be the conservative or if you can give us a range of growth which you expect assuming that this situation doesn't resolve or the commodity escalation doesn't reverse out soon, and which could be the bottom case in terms of a number for the industry, and that will be really helpful, sir, because we are all trying to kind of work with this uncertainty, but you are definitely got a much better picture on demand on the on-the-ground pulse and everything. If you can just help us understand there as to what could be the range of outcomes here on the growth front?

Pramod, listen. I would have loved to give you an estimate, but I wouldn't hazard a guess here because I'd be really shooting in the dark.

I can tell you two things, and then you can make your own judgments around it. One thing is, like I said, the base-level demand in CV industry we have seen has been very, very resilient, even after the outbreak of the war, even after the increase in the diesel prices.

This I am suggesting not just because of the numbers of April and May so far, but I am also suggesting this based on several conversations we had with the customer. Like I said, most of the customers had made very ambitious plans on the replacement of fleet and addition of the fleets after GST, around December, January they had created those plans.

The customers that are fully loyal to us, of course they do share their plans with us so that we can work together and fulfill their expansions. Until about last week, I can say, and this is after the price hikes on the diesel, people are not changing their plans right now.

While there is a bit of a challenge on the ground, and it is limited to some areas, not the entire country like I said, in terms of uptime, in terms of TAT that they have to deliver, mainly because of the diesel shortages in some pockets, but most of the fleet owners are sticking to their plans for the year in terms of expansion of the fleet. That is a kind of a very good signal as far as the demand is concerned overall on the next 2 to 3 or 4 quarters basis.

Now, what we need to see is how much of a inflation we see on the oil, on the diesel side. Far, they have increased it about ₹7, which I said is very manageable for the fleet owners, and I think the general view is that even if it goes to around 10 to ₹15, they would be able to manage by passing on most part of it to the suppliers and bearing a little bit of compression there.

I think that is the situation. It will be very difficult to put a number on it, how much Q1 will grow or how much Q2 will grow, but I am quite optimistic that at least Q1 is concerned, this industry-level CV performance would be better than last year Q1.

We can see that in April itself, sir. Let me put it this way, on a full-year basis, do you envisage a scenario where you could actually see no growth at the industry level?

Is that a possibility?

Pramod, the way I see it is like this. Let us assume that there will be some setback in the demand in quarter one, quarter two, or so.

Now, my feeling is that even if there is a setback, this demand is not going to go away permanently. It is going to convert into a pent-up demand.

The reason I say that, because fundamentally the situation is very strong on the ground. The sentiment is very strong.

People have huge expansion plans. The aging of the fleet is at its highest.

The rate cut has really improved the economics and the TCO of the fleets. Right?

When the fundamentals are strong, even if there is a temporary dip because of a certain macroeconomic factor, don't you think that will end up becoming a pent-up demand for the industry? Even if there is a dip in Q2, it should come back in Q3 or Q4.

That is my view. People may have other views, but that is my view talking to a lot of people in the industry.

Fair enough, sir. Last question to Balaji sir on margins.

I think it's a tough hand what you have here. You've got a very solid base for last few years in terms of execution on margins.

Kudos to you and the team. Now given this scenario and the high base, how should one look at the margins on the near term, because even if the war stops tomorrow, I don't think the commodity price are easing back any in a hurry.

In the near term, Balaji, if you can help us understand Ashok Leyland margins given all the inflation and demand potentially being a bit soft, and which limits our pricing capability. If you can just help us understand the margin outlook for the near to medium term, for the next two to three quarters, please?

See,

there are various pockets where we can work out on the cost. See, you can broadly divide the entire cost into two.

One is controllable, the other one is not controllable. The non-controllable costs are the ones that are predominantly this commodity cost where you don't have any control.

On the other side, we also have, just like how we did in Q4 of last financial year, we have control on the savings, the value engineering, e-sourcing, the commercial negotiations, the turnover discounts from the suppliers, etc., where we can work and then we can try and reduce and negate. This also, I can tell you that we can do it only up to a certain extent.

If the commodity cost grows exorbitantly high, then it becomes an issue. We are confident that we can effectively reduce the cost which are in our control.

Actually, we have started now forming the cross-functional teams essentially to understand and look at each of the operating expense accounting head-wise, individually, and then work on the possibility of the reduction. We have started this process, and you will see the benefit of this coming inside in the subsequent quarters.

Balaji, yeah, what's the under-recovery, sir, right now as of 1Q? Where are we on the under-recovery on commodity?

How much is under-recovery? See, Q4 Q4

Q4, we could recover more than the cost increases. In Q1, we'll have to see, we'll have to wait and see, because there is combination.

There's also a price increase which we have taken, and there's also a cost increase which has happened, and the balance we'll have to recover by way of the operating expense reduction as well as the value engineering and e-sourcing. Right now, the gap seems to be somewhat manageable, but we'll have to wait and see.

Pramod, the situation on the commodity side is definitely challenging. You guys also have those data points, what is happening in the steel, on aluminum, copper, rubber, etc.

We are just hoping that some of it we can neutralize through price increases, which has already happened. Now the question is whether we can sustain them, those price increases, for the whole quarter.

The second is, like Balaji said, we have initiated a whole lot of cost control measures inside the company. Of course, we do not want to dilute any programs which have a future positive impact on the company, because like I explained, even if there is a dip in the market, we do hope that it will convert into a pent-up demand, which will start showing back up again in the later half of the year.

We do not want to sacrifice on that view or that demand which might come up later. Anything which is discretionary, anything that can be pushed out, anything that is not really adding a huge value over the next few quarters, each and every bit of cost we are looking at, and we are trying to put some restraints on those costs.

I know you want a particular number, but it is very difficult. There is definitely a impact on the margins from the commodity side, but let us see how much of it we can neutralize through price increases and cost controls.

Best of luck, sir. Thank you.

Yes, hi. Thanks for the opportunity.

My first question is actually regarding the quarter. In 4Q this time, we did not see the kind of operating leverage on the staff and other costs that we normally see in every fourth quarter as volume goes up.

Is there anything that is a one-off or anything that we should keep in mind when we are looking at the financials for this quarter?

Your observation is quite right. We could not get much of leverage as we got in the first three quarters of the last financial year, that is FY '26.

This quarter, actually, in line with the performance, we also had to make some provision towards the performance-related bonuses for the executives. This we wanted to provide after it reaching the threshold limits.

This we did only in the fourth quarter. That's why you see that happening.

On top of it, I did speak about this commodity cost increases. Though effectively we contained, but in the earlier three quarters, we didn't experience this kind of a surge on the commodity cost.

In a way that has also indirectly impacted, though quarter on quarter there has been 80 basis points improvement on the gross profit, but this has not really helped us on the operating leverage side. Your observation is right.

Sure. Just as a follow-up, obviously we talked at length about the commodity pressures and what the company can do.

Given that there is a general inflation and there are challenges on employee costs, wages, diesel availability, gas availability, is there something that we need to keep in mind in your other expenses for next year? Do we need to keep something in mind whether this could be a year of extraordinary inflation, or it will be a normal year and the only challenge is the raw material line which we need to monitor?

We will also get challenges on the operating cost side also. Especially there are few expenses like this transportation expense which we incur towards movement of the chassis from the plant to the selling point.

There are certain expenses which are going to go up, which are entirely dependent on this fuel price. Similarly, there is also a lot of conversion which happens even on the raw material side where we pay the conversion cost.

Finally, no, we'll also have to look at how this exchange is going to behave. Rupee if it is going to weaken further, then that could also add up to the cost.

These could be the possible costs which can get inside the other expenditure.

Okay. That's helpful.

Just lastly, if I can ask you, the last 2, 3 years, you have been very judicious in taking price hikes. I think the industry in general has not tried to do a price war.

Given the inflationary scenario and the uncertainty, is the industry still continuing to be judicious and disciplined, or just some thoughts on that?

I think the current situation should add to that discipline. Like I said, definitely there would be a challenge on the commodity cost side.

Industry, to the extent possible, should use their judgment to see how much of it can be passed on to the market without affecting the demand. Generally speaking, yes, we are hoping that industry should look at taking multiple price hikes during the year.

Okay. Great.

That's good to know, sir. Thank you.

Congratulations, sir, on a strong FY '26. A couple of questions.

Firstly, within the MHCV, how do you see the demand for various subcategories? Which segments could outperform and underperform the overall market?

Raghu, thank you for the question. Like I said, so far what we have seen as an impact of GST is more on the side of the ICV.

ICV demand has grown more than the heavy-duty truck demand, and that has created some kind of a mix pressure on us, heavy-duty trucks are more margin-accretive. However, we do believe that initial enthusiasm on the ICV side will start to moderate, and the demand momentum on the heavy-duty truck side should start coming across now.

Heavy-duty trucks has gone through a good momentum since February, although first three months larger fleet owners, they took time to adjust to the new system, especially the tax system. This year, we are thinking that the tipper segment and the multi-axle segment would be the fastest growing segments, followed by a segment which we call trip trailer, which is part of the tractor trailer, because trip trailers are generally used in the mines.

Anything that is to connect with the mines or infrastructure projects or construction projects, I think they would show tremendous promise this year. While the tractor trailer and in some routes of long haul, which is non-steel, non-cement, non-iron, may little bit moderate.

That is our view right now. Little bit moderation in ICV, and moderation when I say, it's not with respect to last year, I say this respect to last six months.

ICV and tractor long haul might moderate, but anything related to mine would show tremendous promise, is our view currently.

Thank you, sir. That is very helpful.

Also if you can speak on LCV and defense, how do you see the outlook? Specifically on defense, how big is the pending order book, and after a 20% growth in FY '26, how do you see the prospects for FY '27?

Raghu, like I explained, we had a fabulous FY '26 in defense, more than 20% growth, revenues increased to ₹1,200 crore plus, including that of the subsidiary. Also the fact is that our order pipeline on defense is strongest ever.

It is above ₹1,500 crore, which are the orders in our hand, which are due for execution and supply. We also hope to receive many orders during the year also.

Right? On defense, we are very sure that it's not just this year, but at least for the next 2 to 3 years, we will show very strong growth.

Noted, sir. Thank you so much.

How do you see the outlook for LCV?

Sure. Thank you.

Hi, sir. Thank you for the opportunity.

Just one question on the market share side. Recently you have launched the new series of trucks, but at the same time, we have seen market share is largely stable, or I would say slightly declined in last 3 to 4 years.

How do you see the new portfolio launch helping in recovering or gaining some market share in future? Do we still have some white spaces in our portfolio which can be plugged in future to gain some good market share?

Hey, Vipul, thank you, first of all. Maybe I'll ask our Investor Relations team to get in touch with you to clarify that we haven't lost market share in last 3, 4 years, but we have tremendously gained, actually, on the MHCV side, looking at FY '22 as a base.

So '23, '24, '25, '26, four-year data if you look, there's a substantial increase in the MHCV market share. However, that we can discuss later, but right now let me just tell you that we are very, very confident of the new product launches, and I am not just saying because this is any other launch, I am saying because we have put in lot of effort into these launches.

One of the reason we lost some market share in some limited segments was also that we were a little bit kind of delayed in coming to the market with these higher-horsepower tractor and tippers. Now since we have these in our fold, and undoubtedly I can tell you that these are the best in the industry right now in terms of power, torque, and mileage, reliability, etc.

We would definitely see a positive impact in our market share or market penetration. Now, having said that, we have just started shipping these products.

As far as last year is concerned, we just started shipping in February or March, and there are only a few hundred units that we have shipped out until 31st March. You cannot see the impact in last year, but you will definitely see this impact starting quarter two.

In quarter one also, the dispatches would not be to the full extent of the demand, because there is a certain lead time in ramping up the production of new products. You will see that impact definitely in especially two segments.

One would be the tipper segment, and the other would be a tractor-trailer segment.

thank you for the opportunity, sir. Sir, just one follow-up question that I wanted to understand on defense.

You mentioned that around ₹1,500 crore order book we have. This is execution or anything on peak annual revenues?

If you can help us understand ₹1,500 crore we'll be executing in the current year or it is split into 2 to 3 years?

The way it happens is that different orders have different supply schedules. Right?

Most of the orders cannot be fulfilled in just 1 year. Right?

They have a longer supply schedule ranging between 1 to 3 years. The order book will not all be delivered in this year.

However, as I said, there would be many new orders we'll receive during the year, which will also help us building the top line for the current year. One thing I can tell you that we have been delivering 20% growth in defense business over last few years, and at least that trend we hope to continue with.

That is really helpful, sir. Just as you explained to us that segment-wise MHCV there might be some moderation over the next 2 months, how do you look at the ICV and LCV space?

Do you see some moderation over there also in the coming quarters?

I just want to clarify that when I am saying about moderation, I am not comparing it with last year. I still believe our volumes will be higher than last year.

Moderation when I am saying, I am referring to Q4 essentially, because Q4, the industry went kind of berserk. All that GST effect started playing in all the segments, right?

That is what my view is, because LCV demand I think was up 20, 25% at that industry level in Q4. When I say moderation, I mean moderation from those levels.

Got it.

Some moderation would be seen in LCV and ICV, and some pick up in demand, relative demand as from Q4, should be seen in the heavy-duty trucks. That is how we view it.

Actually, this will be helpful in terms of the mix as well, because heavy-duty trucks is much more richer in terms of mix.

Got it. Sir, just one thing in terms of geography, where do we see good substantial demand coming in if you can just help us understand which regions are expected to do well compared to last year?

I think it would be quite broad-based, but if I were to pick on one or two specifically, I would say all the sectors related to mining and infrastructure would see the strongest demand this year. Most of the mining is happening around Maharashtra, Odisha, Chhattisgarh, Jharkhand, West Bengal, etc.

That part of the country, I think will be strong because of mining, and also the other factor would be infrastructure and construction projects. Now, these are quite broad-based, but you can figure out where the money is coming, which projects are running right now or which new projects are coming.

That is how we also plot our demand on the area-specific basis.

Right, sir. Got.

Thank you so much, sir.

thank you once again for your continued trust in us. We know there is a lot of noise in the market around various macroeconomic factors.

I just want to once again tell you that the way we see the demand in CV industry, we think that there is a lot of resilience in the baseline demand. Now, how much we will grow with respect to Q4 and Q3 and how much we will grow with respect to last year is something which remains to be seen.

I think the sentiment is very positive, especially on the fleet owners' side. They still have very ambitious plans to add fleets or replace fleets.

The material cost situation is challenging, but like Balaji explained earlier in the call, we are looking at all avenues to see how we can neutralize it through price increases and also through cost savings. With that, I would like to close the call.

Thank you very much once again for joining us.