Why has Ashok Leyland taken such a hard hit in the last few weeks?

During the current week, the stock of Ashok Leyland, India’s leading CV manufacturer, hit a 15-month low price of Rs.93.20. Looking back, Ashok Leyland has now slipped by 22% in one week and about 30% lower in the last one month. There are several reasons for this damage. On reason is that the overall demand for all kinds of auto products has been weak. Another reason is the supply chain constraints hitting output. But it is finally about costs.

There are serious margin concerns for Ashok Leyland due to rising raw material costs. This is a problem across the board and price hikes have only partially compensated. For Dec-21 quarter, the EBITDA margins shrank 123 bps to 4% while input costs were up by 78% yoy. Ashok Leyland is confident that the demand for MHCVs would be strong in the medium term. The company has transferred its electricals vehicles (EV) business to Switch Mobility.