Ashok Leyland

The stock plunged 10% yesterday and was amongst the top losers on the bourses. The company declared its Q1FY14 numbers and they were much worse than expected. It was widely expected that it would post a loss of around Rs.50-60 crore but it actually came in at a shocking Rs.142 crore. Net sales for the quarter also declined, down 22% (YoY) and down 36% (QoQ) at Rs. 2313 crore. The decline in the topline got further aggravated due to a 22% rise in interest outgo, and tax outgo more than doubling. Lower sales meant the company went in for aggressive discounts and price cuts and this too left a telling effect on the margins. EBIDTA margin, YoY slumped by 700 bps.

In Q4, the company was able to post a much better net profit only on account of the exceptional gain of Rs.134 crore. Things continue to look pretty bleak for the company given the consistent fall in auto sales and with RBI hiking bank rates, demand is expected to further take a beating. Though banks do not have plans to hike loan rates, the sentiments have got weaker. The news that promoters have pledged shares, 35.95% of the promoter’s stake now stands pledged. With consistent hike in fuel prices, the outlook as of now does not look too promising.