Ladies and gentlemen, good day and welcome to Ashok Leyland Q4 FY23 earnings conference call hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during the conference call, please signal an operator by pressing star then 0 on your touch-tone phone. Please note this conference is being recorded. I now hand the conference over to Mr. Dheeraj Gandhi from Motilal Oswal Financial Services Limited. Over to you.
Thank you, Renju. Good afternoon, everyone. On behalf of Motilal Oswal Financial Services, I would like to welcome you all to fourth quarter and FY 23 post results conference call of Ashok Leyland. Ashok Leyland is re-represented by Mr. Dheeraj G. Hinduja, Executive Chairman, Mr. Shenu Agarwal , Managing Director and CEO, Mr. Gopal Mahadevan, Whole-Time Director and CFO, and Mr. GM Balaji, Deputy CFO. We would like to thank the management for taking time out for this call. I will now hand over the call to Mr. Hinduja for his opening remarks. Post which we will start with Q&A. Over to you, Mr. Hinduja.
Thank you. Good afternoon, ladies and gentlemen. It is a pleasure to have you at the Ashok Leyland Q4 FY 2023 earnings call. Thank you very much for the interest shown in Ashok Leyland. At the beginning of the year, we had set out to achieve the following objectives: Improve our market share on a pan-India basis, continue to launch industry-leading products, refresh and strengthen our network, grow our non-MSDB business, improve operational efficiency and reduce costs, drive bottom line improvements, generate cash, improve returns, and improve the performance of our subsidiaries. I'm happy to see that we have been able to check all the boxes. The strategy will continue in the coming year as well. We continue to be the most profitable CV company in the country today. We will continue to pursue leadership on that front, along with growth in market share.
Speaking on market share, FY 2023 has been a remarkable year as we enhanced MSDB market share across regions and product segments, we, which was done profitably. At the end of the year, our MSDB market share was at 31.8%, 4.7% higher than the previous year. The AVTR range has been a true differentiator and instrumental in the growth of MSDB business. We have grown share in MSDB in MAV, college, tractor, and tipper. While we gained market share in ICV Plus by nearly 5%, we are now focused on extending the ICV range to enhance our presence further. This is clearly an opportunity for us. We are also very well geared to capture the opportunities in CNG if the market opens up again. As we shared with you at the beginning of last year, the bus market is fast expanding.
With COVID lockdowns behind us, we are witnessing growth in all segments of the bus market as well. As with trucks, we plan to expand the bus portfolio, especially in the IC range. We will pursue market share growth by filling in product gaps and expanding our network. The focus now is to expand market share in the north and east, where we believe that we can scale up to 30% in the first stage. This will help Ashok Leyland reach the mid-thirties market share point. While our international business saw volume growth of 2.5%, you must view this in the perspective as other large players witnessed a decline of 30%-40% in export volume. FY 2024 should see further growth in exports as well. All non-MSDB businesses, such as Aftermarket and Power Solutions, have shown healthy growth.
LCV market share was marginally down by 0.7% over FY 2022 due to ship shortages experienced at the first half of the financial year. Going forward, we will be expanding the LCV network in the non-cloud region, and this should help for further growth. Research houses have predicted a growth of CV PIB of 8%-10% in FY 2024. We believe this is very much possible. Ashok Leyland's aim will be to beat the industry growth. FY 2024 CV demand is likely to surpass the previous peak of FY 2019. The growth in PIB will be supported by government infrastructure spending, strong replacement demand, and a healthy traction from core industries like steel, cement, and mining. CRISIL expects 88,000 MSDBs and 57,000 LTVs to get replaced in FY 2024.
As mentioned, 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 traffic policy as well as increasing urbanization and replacement of the JNNURM buses bought in FY 2010-2013. Tonnage addition is expected to further improve due to better product mix as the strength of higher growth in MAV and tractor trailer demand. Factors driving the long-term MSDB sales will be, A, improvement in industrial activity in the country, B, heavy agricultural output, and C, the government's focus on infrastructure. Commodity prices are expected to soften in FY 2024 and this tailwind, along with better realization, should help industry margins to improve further. Ashok Leyland will continue its market share enhancement, revenue optimization, cost reduction, and cash flow management and aim for significantly better financial outcomes in FY 2024.
Auto Expo, held at Delhi in January this year, provided a great opportunity to demonstrate our technological readiness for the future. Switch's presence is growing, and I'm happy to share that our products are performing extremely well. I will now quickly run you through the Q4 and full year performance. Q4 revenue stood at a record INR 11,626 crores, 33% higher than the previous year. Q4 EBITDA of INR 1,276 crores was 11% as against 8.9% in Q4 last year. Q4 PBT before exceptional items has more than doubled to INR 1,068 crores as against INR 528 crores in Q4 of last year. The PAT before exceptional items was INR 695 crores versus INR 431 crores in the previous year.
The company generated cash INR 2,286 crores during the quarter. AL was net cash positive by INR 243 crores at the end of FY23. For the full year FY23, revenues stood at INR 36,144 crores, which is higher than last year by 67%. This is actually the highest ever revenue recorded by Ashok Leyland. EBITDA is almost tripled and stands at INR 2,931 crores, that is 8.1%, up from INR 995 crores, which was 4.6% last year.
Profit after PAT, profit after tax, after exceptional items for the year has gone up 2.5 times and is at INR 1,380 crores versus INR 542 crores in FY 2022. Operating working capital is negative at INR 222 crores as against negative of INR 1,565 crores for last year. Capital expenditure for the year is at INR 502 crores against INR 400 crores in the previous year. Net debt as of March 31, 2023, was negative at INR 223 crores as against INR 720 crores at the end of FY 2022, making Ashok Leyland a cash generative company. I wanted to share two final points with you before I open the floor for questions.
One, we remain very positive and optimistic on the future of electric vehicle, and Switch is very well positioned compared to many of its global competitors. Two, going by the positive developments in the industry, we believe Ashok Leyland is well poised to deliver double-digit EBITDA margins in the current year, and we plan to aim for mid-teen EBITDA targets in the medium term. Thank you.
Should I open the floor for questions?
Yes, please do.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes on the line of Chandramouli Muthiah from Goldman Sachs. Please go ahead.
Hi, good afternoon. Thank you for taking my questions. My first question is on the other expenses line. I think there's been some impressive control quarter-on-quarter. The other expenses have grown 20% QOQ versus top line, which has grown close to 30% QOQ. If you could share some color on the drivers of the expense discipline and what sort of run rate we should consider heading into the next fiscal.
Hey, Muthiah, very quickly, you see, as I mentioned and as Dheeraj had mentioned, we have been having considerable amount of, you know, cost, I won't say reduction, but optimization. We've been actually channeling the, you know, overall expenditure to the right things and administrative overhead, right, typically, which is part of, you know, the other expenditure, which is approximately about a INR 600 crores spend, okay, give or take, some crores. This is something that we have actually been able to retain it at something like 15, 16, 17 levels without inflationary impact.
You know, that has been very crucial for us and the bill line management. We did two, three things. If you notice in the current this year, what has been special about the company's performance? EBITDA margin in Q1 was 4.4%. It went to 6.5% in Q2. It went to 8.8% in Q3, it was 11% in Q4. You could see two, three things happening. Steady improvement in margins and faster rates of improvement in margins. This was happened because of realization improvements, operating leverage because of higher volumes. That operating leverage has happened because we have been able to rein in expenses. For us to tell you exactly what you can budget is not what we can share with you.
You can do a trend line now going by the last, you know, four quarters or even for the last few years. Because what has happened is we are forecasting about a, you know, as Chairman mentioned, and I'm sure you're gonna hear Shenu also say this, that we are expecting the industry to grow this year, right? I mean, all the rating agencies have also mentioned that there's a 10%-12% growth. If that happens, what we would want to do is to ensure that we secure operating leverage on that growth and improve the bottom line further.
Got it. That's helpful. My second question is on the prevailing structure for the EV business. Is there potential for EV buses to be sold maybe through a leasing company, which can in turn sort of lease them out to the various municipalities and states so that there's relief capital blockage at the CV OEMs? Is this a business model that can be worked on the way aircraft leasing works today?
Dheeraj, should I take it?
Sure, go ahead.
Yeah. I think see the first, you know, again, I would put two large beliefs in this. One is EV business is here to stay. It's here to stay and grow. You're going to see a faster acceleration in EV business, which is why, you know, as Chairman mentioned, we are extremely confident about our, I think, the potential of EV, and we will continue to invest into this business. It's very, very important for us. The second bit is the EV business is still nascent, and business models are evolving in India, which is possibly different from what is happening in the rest of the world. One of the first things that we happened, which you correctly mentioned, but it will not happen the way aircraft leasing has happened, will be in e-mobility as a service.
We would possibly see even operators buying these vehicles from OEs such as ours and then having an operating model where they will cater to the requirements of either intercity transporters or STUs or even within the state or within the cities. You are going to see. I think these operators are not going to go out of business, right? If the market changes to EV, they are going to swap their ICE buses to EV buses. That's all. We need to cater as an industry, and we are catering, we are making ourselves ready as a company to ensure that we are catering to this segment. The second segment is STU businesses, where you will see a mix of both ownership and e-mobility as a service coming in.
The e-mobility service, as things go further, will start to mature and will become even more profitable as the volumes start to pick up. Thirdly, there would be private sector ownership, where, you know, you have the institutions, the schools, and the private operators which I talked about. They would start to also, you know, procuring this. Ultimately, the whole talk about EV is that at the moment the capital cost is higher, but the operating cost is negligible, right? Once these operators and some of the STUs start to secure funding, they may want to actually take up an ownership model. We are actually keeping ourselves open for all three models.
Got it. That's helpful. Thank you very much, and all the best.
Thank you. Next question comes from the line of Pramod Kumar from UBS Securities. Please go ahead.
Yes, sir. Thanks a lot for the opportunity. My first question is on the current demand environment. The biggest, how would you say concern what the Street has is on the CV cycle health as to where exactly we are, and whether do we have another couple of years of growth or this is gonna be the last year of growth from a cyclical perspective. If you can help us understand how is demand looking from your vantage point, especially in the recent weeks and as we look into the next month? Because there was reasonable pre-buy in the first quarter versus expectations. Demand being on the ground, how would you look at demand from a cycle perspective in terms of getting it beyond FY24 guidance?
If you could just help us understand on that.
Yeah, Pramod, I think.
Okay, Dheeraj, go ahead, please.
No, no. Thanks, Shenu. Please go ahead.
Okay, okay. Okay. Pramod, thank you for the question. As Dheeraj said, you know, I mean, we are very optimistic about the industry, not just for this year, but we also think the industry could go for a longish upswing cycle this time. You know, even the councils from customers, from large fleet owners, indicates that this will be a longish cycle. For this year, like we said, most of the research houses are pegging the industry growth, overall industry growth at 8%-12%. We also think that industry growth should be in that direction, you know, at least 10% or more. We are very optimistic. I mean, as far as the Q4 pre-buying is concerned, that is a fact.
Some pre-buying happened in May, by and large, and it may have, some impact on April or maybe May. After that, you know, I mean, I think that the growth would be back. For the whole year, we are very optimistic.
Shenu, just a quick follow-up question.
If I could just add in over there just a few more points. Firstly, you know, a lot of our business is very much dependent on the economy. As you know, India is moving at a very fast pace and is expected to become the third, if not the fourth largest economy. In that context, the growth will go hand in hand for our business of commercial vehicles, trucks, and buses. Also, one other issue on international operations, I know we've spoken about this many times, but I'd like to emphasize that during the course of the last year, our traditional markets of SAARC completely crashed. Irrespective of that, we were still able to grow slightly because of expansion we've done in the Middle East and the African markets.
There is hope that during this financial year, many of the SAARC markets come back as well. I would say that we are optimistic of international sales improving. As you were saying, looking outwards, personally, we feel that the cycles for CV can have this traditional growth of three four years. We've only had one good year so far. FY 2024 is looking good. We don't see any immediate show blockers which should indicate otherwise, and we do feel that this growth momentum should continue beyond FY 2024 as well.
Dheeraj, just, you know, what does which specific areas where you're seeing more strength, which is kind of, giving you that visibility? I understand the industry, the fleet industries are heavily formalized. I think, you can engage more with the large fleet owners and understand the on the ground situation. If you could just help us understand pockets of strength, in terms of the fleet side, what's working well, and where do you see further upside, potentially next year or so, for example. If you can give some comment on that, this will be helpful.
Well, I would say that, you know, for us in this last year, we have, as I mentioned, we have grown in every product segment. The growth definitely seems to be across the board, although the LCV segment has not grown as fast as LCV. Even the predictions for this year are in the range of around 5%-6%. Barring that, I think we remain quite optimistic from ICV to MAV tractors, haulage. They are all showing quite positive signals. Shenu, would you like to add something and on the buses as well, Shenu, if you'd like to expand that?
Yeah. Dheeraj, like Dheeraj said, you know, I think this overall momentum will continue in most of the segments. You know, we have done very, very well in MAV tractor business in the past year, as you can see from our numbers. ICV is, I think, one area where we have lot of headroom, both in terms of the trucks, right? We are preparing ourselves, beefing up our products, beefing up our network on this. I think in FY 2024 and beyond, we would like to put an extra focus on ICV segment because of just the headroom available there. I think on the bus side, you know, the growth expectation is actually close to 30% or more, you know, because buses are coming out of a very, very low base after the pandemic. Yeah.
you know, we are very, very strong. Ashok Leyland is very, very strong in the MCV side of the buses. We hope to gain from that momentum, that growth momentum. Even on the ICV side, as I said, you know, we are putting a lot of more focus now on both trucks and buses and we hope to gain substantial market share there as well.
Thanks. Dheeraj, you made comments in your opening remarks about seeing as in margins in the fleet. Can you just help us understand a bit more because it's actually quite surprising to hear given how the cost base has moved for industry, right? Percentages, trying to push margins higher is like actually quite ambitious, given how inflationary the environment is. Just, can you just help us understand what's giving you the confidence? What are the factors which will drive this and whether the modular transition on the LCV side is also part of that story? If you could just help us get more color on that, sir.
Sure. I think, look, one of the key areas for us that has helped us gain our market share as well as the product performance of the Aspire range in BS6 has been very good. You know, we have explained this in the past. The advantage of having this modular program has been that we've been able to rationalize a lot of our supply base, which has led to a lot more efficiency as well. As Gopal was explaining, we a lot of internal cost control has been achieved. As we see with the softening of the commodity prices comes in as well, we do feel the opportunities of achieving double-digit EBITDA margins and moving that further into the future should be possible. The volume growth as well. Market share growth, volume growth.
We are feeling, going by the performance of the last financial year, quite optimistic in terms of having identified pockets where further cost reduction opportunities exist. As I said, the product range itself, the modularity does help us significantly.
Thanks a lot and wish you all the best, sir. Thank you.
Thank you.
Thank you. Next question comes on the line of Mahesh Sarraf from Edelweiss Financial Services.
Yeah, thank you for the opportunity. Just in continuation to the previous couple of questions on heavy industrials.
Give some sense on the current, say in FY 2023, how was the replacement mix versus say new fleet addition mix in terms of the customer profile? Typically with your experience of the previous cycles, you know, how does this mix change as you approach the end of the cycle? Can you give some sense of that?
Well, you know, it's an interesting question, but, you know, this industry is still a little bit, you know, anomalous. I think there are two, three things that we have to remember. In FY 2022/2023, one of the key things that has happened is there possibly has been increase in primary demand. Okay. The primary demand has come in because for the last two, three years, if you notice, there has not been any major demand at all, right? After FY 2019, we thought that FY 2020 will be a great year after, you know, before the launch of BS6, but it was a flat year. After 2020/2021/2022, were virtually You know, there was no real demand.
To answer your question, our internal estimates may be, you know, tell us that a lot of this has actually come from primary demand. That is why we are also optimistic about at this point in time, when we are sitting in the month of May, we are optimistic about the growth in 2024. You know why? Because of two, three reasons. One, the mix of, you know, large fleet operators versus first time buyers, first time users, the mix in FY 2022/2023 has been more in favor of large fleet operators. The full first time users has not come in because of two reasons again. One, you know, they are also waiting for the industry to mature, demand to keep going up. The second one is interest rates have also been high, right?
We are actually yet to see the full potential of first time and first time users coming into the market. The second thing is replacement demand will start kicking in now because we believe that just as Shinu had mentioned or Dheeraj had mentioned, I think this industry has a bit of potential because what is happening is on one side there is a lot of, you know, regulation coming in on environment pollution, ESG, the government is pushing for clean energy, et cetera. On the other side, we are a country where you have vehicles from BS2 to BS6 plying. The third aspect of it is that the government itself has visibly started the scrappage policy, but it is for maybe government-owned vehicles in the initial stage.
What is going to happen is this catch-up is going to happen and in the years to come, you know, in 20, possibly it will start in 2024, it may go to 2025, 2026, you are going to see the replacement demand kicking in. You will see that, you know, that is going to be one more aspect that will drive the 2BW demand. What the growth rates are, little difficult to tell, but the other tailwind that may come up is we have seen the peaking of interest rates. Even with the, you know, high interest rates in the last year, what has been surprising has been the level of demand that has come in, right? I mean, the last year the industry has grown at about 40% or so.
This has been with, you know, with a certain amount of challenges built into it. This year in macro terms will be relatively easier, but with a higher base. Even with this, if we have a 10%-12%, it's a very good thing for the industry. Yeah.
Sure, sure. Thank you for that there. Secondly, on pricing, can you give some sense on what kind of price hikes you have taken so far, and how is the absorption of that price hike in relation to how the discounts are moving?
Yeah, I think, see, firstly, I would like to say that there is a, I think a big realization in the entire industry that our industry is going to change in the years to come, right? I mean, therefore, all the players like Ashok Leyland have to invest in the future. For that, you know, we cannot just remain at the levels of EBITDA that we are as an industry. I think that realization is definitely there that we have to increase our profitability levels. Now, in terms of price realization, like Dheeraj explained, you know, I have been in the market myself, visiting a lot of customers and dealers, and definitely this new modular of our platform-based products are being accepted very, very well.
You know, I mean, especially in the higher tonnage in particular in the tractor-trailer and MAV segments. You know, there is a lot of pull because of this new platform. On back of this trend, you know, we have been able to have much better price realizations last year. I think we still have headroom there, right? I mean, we will play it by the market, you know, I mean, how the market behaves. Definitely there is an opportunity there. There is no doubt in that.
Sure. That was helpful. Any numbers you'd like to give on the price hikes, taken, so far in the month of April?
In April we took about a 2% price increase. Just like Shenu mentioned, what is happening unlike in the past is the retention of the price hike is almost 80%-90%. We are not increasing the price and increasing the discount. The industry is also not doing it. You folks know it. In Leyland, you know, we have never been actually, you know, wanting to do this as a leading practice. For us, we are extremely happy about the outcome because this has been a great year for the industry and why should we sell it at such, you know, low margins? There is no necessity for it. For the industry to be sustainable, we need to improve pricing, we are seeing that happening in the current year.
I would also add one more positive in this. I mean, not to sound overly positive, but these are, you know, facts that all of us know. One is pricing retention has been better. The second one is commodity prices seem to be coming off, right? If the industry were to deal with this intelligently, it should actually shift its margin base to the next level. You know, that's what should be the outcome of this. Let's hope it happens.
Right. Right. Sure. Thank you for that. I'll get back to you.
Thank you. Before we take the next question, a reminder to all the participants, please restrict yourself to two questions. Next question comes from the line of Gunjan Patidar from Bank of America.
Yeah, hi, thank you for taking my two questions. First is essentially a clarification on some of the comments that you've made. 2% pricing freeze in April, does this pertain to the BS6 Phase 2 ID transmission?
Hi, Gunjan. This is Shenu. Yes. I mean, we had have some impact of OBD-2 norms, but not a big impact. This is a general price increase to cover, you know, I mean, to cover rising cost as well as to increase our margins.
Okay. The OBD related cost is fully passed through?
Yes, it is.
Okay. The second clarification was on this commodity pricing cooling off. I just wanted to get an understanding as to how much of the tailwind from commodities we saw in quarter four. When we're looking into the next one or two quarters, you know, are we seeing there is some pending benefit still coming because of metal corrections, steel contracts, whatever that you have visibility on?
Hey, Gunjan, what has happened is last year the peaking happened at the beginning of the year, you know, where there was a huge increase and all of us were expecting steel prices to go further and further, up, et cetera. We found that there were a confluence of both domestic and international factors which resulted in the pricing cooling off a bit. In the fourth quarter, the challenge was that coking coal prices started to shoot up. The steel prices started to inch up a bit. What is happening is, as you know, in this industry, especially when buying of steel is concerned, there is always a, you know, kind of two months order lag in the settling of the prices.
We expect that when we settle the prices, there could be a little bit of pricing done on the Q4 range itself or maybe slightly lower. After that we know that China demand has cooled off again significantly. There are other countries like Australia which are waiting to export out because they are also seeing a, you know, a domestic glut there. We are the outlook on steel prices for the current year is that we would see prices coming off in Q3, Q2, Q3, Q4 itself. If this were to happen, this is going to be very good for us, you know, because the industry, you know, benefits immensely from steel price reduction.
Okay. Got it. That's helpful. The second question is on this investment that you've called out on the Switch Mobility business, you know, which is INR 1,200 crores progressively, and there's about INR 200 crores some ICAs in this quarter itself. just a clarification, does this pertain to Switch? I want a broader understanding of, you know, we were looking to raise money externally and now we're looking to infuse this. This will be done over how long? If you can quantify that period. What will these investments go towards? some color around that will help.
Well, you know, let me first clarify this. Maybe we should have called it a short-term loan or, you know, a loan instead of calling it ICA. This is only for Switch. Okay? For the operations of Switch. There is a lot of integration, by the way, between the operations of Switch and Ashok Leyland in India. As I told you, one of the most important, you heard Chairman say that you are very extremely bullish about Switch. Why are we talking about that? First of all, because Switch is backed by, you know, a 75-year-old experienced EV3 player like Ashok Leyland and one of the world's largest bus manufacturer. With its own networks, relationships, understanding of the product, understanding of the applications, et cetera, right?
This is certainly a benefit that Switch is having, that is how Switch is actually gaining, you know, acceptance very quickly in India. The second bit of it is, while we are looking for investors, what we said is, while we will continue to look for investors, we would want to ensure that the business plan of Switch continues, is on track. For us, this is not just another company. You know, we are trying to kind of address the future of Ashok Leyland. While ICA will continue and continue for a long time, EV is going to gain more and more traction and maybe even H2 ICE for that matter, right? Alternative forms of energy. When we're doing that, we want to ensure that we are able to fund the operation.
To answer your question, yes, the INR 200 crore which was given earlier, which is declared, is the loan that is given to Switch India. The investment horizon that we are looking at, which currently is about INR 1,200 crore, will be spread out in tranches maybe over the next 12 months. We will again revisit this. What we want to ensure that the balance sheet of Ashok Leyland is very strong, right? We have the ability to fund the expansion of Switch, and we will continue to do that.
This is largely towards tech alone. Yeah, sure. Go ahead.
I was just gonna add in, most of this funding would be needed for completion of the programs of the new product. I think one of the most significant product that we would be launching, and the first sale will be going into Spain in January, is a brand new development of a European 12-meter bus. I think we would probably be the first electric Indian player to have developed a whole new platform. We remain quite optimistic because this 12-m bus has the potential for not only the European market, UK, Europe and the Middle Eastern markets as well. This year is a very high CapEx year for Switch, predominantly for the new product, the two new LCVs, electric Dost, electric Bada Dost.
It's the low floor 12-m bus and the low floor 9-m bus for the Indian market, and then the low floor 12-m E1 bus for Europe.
Got it. This is very helpful. Thank you so much.
Thank you. Next question comes from the line of Kapil Singh from Nomura. Please go ahead.
Good afternoon. Congratulations on result. Could you share your CapEx and investment plan for FY 2024, and in what areas they will be going? Overall consolidated numbers.
Yeah. I mean, you know, normally as a company we spend about INR 500 to INR 6 crore, INR 600 crore in CapEx. In FY 2024, the amount is little bit higher. It's going to be roughly INR 600 crore-INR 750 crore in CapEx. Some of it will go towards capacity augmentation and debottlenecking of our supply chain. That would be not a major amount, because we have enough capacity right now, at least for next one or two years. I think most of the CapEx would be on product development. You know, as I said, we have hear about certain areas or certain product segments where we need to beef up our product offerings, including international markets.
Most of the CapEx would be there. Also, as you know that, in Auto Expo this year, we displayed a vast range of electric vehicles across the range ICV, MCV, buses, LCV, et cetera. That CapEx has been going on for last couple of years, and we just want to accelerate that further so that we can bring these products to the market in the next one or two years.
Sir, investments?
No. Investments I think predominantly will be in Switch, which I think, you know, is what is in planned. Other than that, I don't see any major investments. I think Hinduja Leyland Finance is already well funded. They had INR 900 plus crores of, you know, of capital investment being done. We are not seeing any bigger investments coming in. Maybe a small investment here and there to sustain some of the smaller subsidiaries.
What is your consolidated net auto debt?
Consolidated what? Sorry.
Net automotive debt, excluding the financing business.
Consolidated debt, is it?
Net automotive debt.
Excluding the finance business. Kolady, can you just share that? Kolady will just share it. Do you have any other question while he takes the number out?
Sure. On EVs, I just wanted to check for Switch. You know, we are investing this INR 12 billion next year. From when will the revenue start to flow, and what kind of profitability do you expect from this business? Is it a gross profit positive, EBITDA positive? Any color you could give there. Anything on the order book that it has so that we can build revenue against this investment?
Well, you see, as far as, you know, this is, as we, as Dheeraj had mentioned, you know, we have variants to be launched, products to be launched in light commercial vehicles variants. We have the nine-meter and 12-m launches in India as well as in Europe, right? These investments are going to, you know, take up some, quite a bit of the portion of the investment that we are planning into Switch. What we can tell you, see, the market is evolving. In the initial periods, one can't expect it to straightaway become EBITDA positive from year one. In the medium term, this business is profitable, just like, you know, ICE business.
We can possibly have greater color and share it with you in the later part of this year, because it's a little too early to share numbers with you. But all we can tell you at the moment is Switch is has got volumes already. It is actually doing both direct sale, which is not very significant, but e-mobility as a service. You know, we have supplied to, you know, to BMTC, Bengaluru Metropolitan Transport Corporation, Chennai Municipal Corporation, and we have started supplies for BEST. We have a couple of private orders also where they are looking at e-mobility as a service. All we can tell you is that...
You know, this was, don't hold me to the date, I don't have it readily, but I think three, four years back, we were one of the first to start the whole EV, e-mobility as a service with the Gujarat, Ahmedabad, you know, bus transport authority, then followed it with Bihar. What we can tell you is that with each passing order, we are getting better and better at this. We are actually extremely confident about the performance of the product, and more importantly, also about the uptime of these products. You know, the uptime of these vehicles is at 99%. It's, it's, you know, it's something that we have understood and are able to do very, very efficiently.
While we will continue to pursue and, you know, Switch will continue to pursue and sell direct sales, you know, with the launches of a larger product portfolio, we believe that the traction in the business will start to gain faster. The market is also evolving, you know, because year-over-year now the market has started to grow. We'll have to wait for the growth in the market to happen, you know, over the current next couple of years, and you will see that the EV business volumes will start to scale up.
Thank you, sir. Wish you all the best.
Thank you.
Thank you. Next question comes from the line of Pramod Sampath from Omnis Capital. Please go ahead.
Yeah. Hi, thanks for taking the question. It's related to your new products and market share ambition. If I have to look at, you have recently got back your oldest customer and the largest, the top taker, as per that time. Wanted to know, is it a more of a reassurance of your new product or it's still the pricing game being played in the marketplace at the moment? Second is, if I have to look at your market share on overall CV, you are at, like, two-decade high with the success in LCV. What are the new product launch timelines in the coming quarters and your ambitions on the market share in the short, medium term?
Are you referring to the VRL order? Sorry, I was just clarifying. Were you referring to the VRL order?
Yeah, exactly.
Okay. Yeah, please go ahead, Shenu.
Yeah, yeah. VRL order, we are very, very proud to get them back. They have been associated with us for many, many, very many years. You know, I mean, I think there are a lot of factors, not just one. I think one is just the relationship itself, and the other is, of course, the products are speaking for themselves in terms of performance and reliability. Also, I think it is, it has got a lot to do with the after-sales network also. The kind of service that we have been experiencing from Ashok Leyland, I think it's the multiple accounts that we got that order back, and we are really proud of it. What was your second question about?
Second one was related to your short, medium-term market share ambition. You're already at a two-decade high on the overall CV market share, if I look at near 18%. How does the new product launch pipeline or timeline is to support these ambitions?
Yeah, see, as Vinod had also said in his opening statement, you know, I'm confident that, you know, to stay beyond the 30 now. Our goal is to get to mid-thirties in the next few years in the near term, right? That is what the focus is. The reason for that confidence is also very clear. I mean, not just the product story, but also, you know, the big laggards, like in our journey, were mainly the North and the East markets, right? If you see our market share in North and East in FY23, we have had a very significant jump, roughly about 4%-5%.
While we grow in, I mean, all the zones, we are really happy about the North and East growth in our market share, which is already like sitting 24%-25% now. In the past you would see, like even in FY22, we were kind of 20 or below 20, right? That is giving us a lot of confidence because the network is shaping up. We have the right profile of dealers coming up in the right places. We are setting up, we are investing a lot in our service reach as well. You know, and customers have started appreciating that.
That gives us the confidence, not just the product on the product side, on the success of the i-modular platform, but also that we have been able to place the right set of dealers in the markets where we were traditionally weaker.
Sure. Thanks a lot.
Thank you. Next question comes from the line of Shubham Shukla from JM Financial. Please go ahead.
Hi. Good evening, everyone. I hope I'm audible.
Yes.
First question is about our debt level. How much is our gross and net debt, so far? What will be the case going forward?
Yeah. I think Balaji will answer that. While he's picking out the number, let me tell you that the whole strategy of the gross and net debt has been that we conservatively manage the debt to ensure that long-term debt is funding the long-term plans of the company. We don't continue, you know, we don't use this aspect of the cash is there to prepay the debt and then borrow, et cetera, because we would want to see consistent cash flows in the company, right? What is happening, the long-term debt is about INR 3,200. Is it?
Two thousand nine hundred crores.
Okay. Go ahead, Balaji. Go ahead.
Long-term debt is at INR 2,900 crores.
Okay.
You can ask him the short-term cash or the.
Short-term cash is INR 3,150 crores.
Okay. Our average cost of fund, if you could provide?
We'll tell you. I mean, you know what we have done, while we can't give you that exact number at the moment, I'll tell you that the treasury team has done a good job in locking some of the, you know, some of the debt at fixed rates when the interest rates were low. You know, some of the debt levels, I'm not saying the overall debt percentage is that, but some of the earlier debt that was taken is at 7.75%, which is extremely low when compared to the current interest rates. Yeah.
Okay. The later ones are like, quite high or like, just like slightly higher than these numbers?
It will obviously gradually high. It won't be very high. Absolutely. We keep borrowing every year, right? I mean, See, irrespective of the cash it is, cash that is there, because this is, see, we need to manage long-term and short-term separately, right?
Yes.
While there could be some amount of carry, et cetera, it doesn't matter. Because what happens is, you must remember when in a situation like COVID, right, when the entire thing came to a grinding halt, this was this philosophy that actually helped the company. You know, so you know, we were able to not get worried at all about the long-term requirement of the company because that was already funded.
What we needed was short-term money which could be got, it got either through short-term loan or commercial paper, and we were able to get some of the finest rates. Going forward, I don't see an issue on the debt profile of the company because our, even, you know, on a net basis, even last year, our debt equity is hardly. I may be wrong in this number, but it's 0.2 or 0.25. There is sufficient headroom for us to borrow, if there is a necessity. See, at the rate that, you know, industry is growing and with better improved margins, I believe that the pressure on the, on the balance sheet for, you know, going in for, you know, for debt will also be much, much lower.
Okay, thank you. On the CapEx side, like how much CapEx will we have in this quarter?
You want the quarter or full year?
The quarter four. Like full year, I'm assuming it was supposed to be INR 600 crores for the year. Like so far, Q3-
Q4 was around INR 180 crores.
180.
Full year, full year was close to INR 500, not INR 600. Not INR 600, it was INR 500 crores.
Okay. Okay.
Believe me, there is extremely efficient management. Please understand, when a company is delivering what I wanted to share with you is at INR 36,000 crores of revenue and at these levels of volume, I think the manufacturing, operation and product teams have done a great job in actually reining in the CapEx at just about INR 700 crores. You know, that's very, very important to know. We're very clear that while we will ensure that we are invested for all future growth, right? We are not going to shortchange the future for the present. We will invest. We are very, very clear that the whole organization is actually driving towards profitability, not only in revenue optimization, cost efficiency, but even in CapEx.
The operating teams are actually working at doing how do I get better productivity out of this CapEx, out of this facility? That is why we are seeing this INR 500 crores such a lot, which, I won't use the word some trick, but I'm saying, the outcome of this INR 500 crores of CapEx on a company such as Leyland, yeah.
Okay. Thank you so much. Thanks quite a show.
Thank you. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, we have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments.
Thank you for your questions. I think I would just like to emphasize a few areas that I've, I believe that I've heard that are of concern. One is the continuing growth of the commercial vehicle cycle, whether beyond FY 2024 the market will continue on a stronger note or not. Our current belief is yes, we believe the Indian economy is growing quite strongly and in conjunction with that, the commercial vehicle market will continue to grow as well. I also believe, there are concerns with regard to Switch and the investors coming into Switch. I think it's important to note that, whilst many companies have started electric vehicle divisions, we are one of the few that have successfully executed new products and which are running well.
We have further 2,500 confirmed or in book of vehicles to deliver, and we are one of the few companies that are operating in multiple geographies from India, SAARC, Europe, U.K. We're very confident that we can build this business very robustly for the future. Finally, seeing the performance of the last financial year, we would like to emphasize that we remain very optimistic on our ability to perform equally well in the current year to grow our market share, and at the same time do it on a profitable basis with a strong EBITDA performance as well. Thank you very much once again for your interest. Shenu, anything else you would like to add?
Well, that's it, Dinesh. Thank you very much, everyone.
Thank you.
Thank you. On behalf of Motilal Oswal Financial Services Limited, thank you for this conference. Thank you for joining us. You may now disconnect your lines.