Ashok Leyland dips 4% on closing Pantnagar plant due to weak demand

Shares of Ashok Leyland dipped up to 4 per cent to trade at Rs 82.10 per share in the early morning deals on Tuesday after the company announced closure of its Pantnagar plant due to weak demand and outlook for the industry.

In a regulatory filing, the heavy vehicle manufacturer said that the plant will remain closed between July 16 and July 24.

At 9:50 am, the stock was trading 1.58 per cent lower at Rs 84.15 apiece as against a 0.29 per cent rise in the benchmark S&P BSE Sensex. The Nifty Auto index was down 0.43 per cent with Bajaj Auto, Mahindra and Mahindra, and TVS Motors slipping over 1 per cent each. Other counters like Eicher Motors, Bharat Forge, Motherson Sumi, Bosch, and MRF tryes were also down in the range of 0.02 per cent to 0.4 per cent.

Auto sales have been hit ever since the liquidty crisis marred the financial sector. Lack of demand due to illiquid market and weak consumption appetite led to steep fall in sales. According to vehicle sales data released by industry body Society of Indian Automobile Manufacturers (SIAM), domestic sales across passenger vehicles (PVs), commercial vehicles (CVs) as well as two- and three-wheelers fell 12 per cent year-on-year in June. The combined sales of all automobiles fell to 1.9 million units in June against 2. 2 million units a year ago.

While the industry body stood by its earlier forecast of 2-5 per cent growth for PVs in the ongoing fiscal year, the road ahead could be anything but smooth, it says.

According to a report by Edelweiss Securities, slowing income growth and Non-banking financial companies (NBFC) crisis, increased vehicle cost (and price) due to switch to Bharat Stage (BS)-VI fuel emission norms, stiff competition from growing organised pre-owned vehicle market, and decline in gross and earnings before interest, depreciation, and ammoratization (EBITDA) margins are some of the biggest factors affecting the industry.

Ashok Leyland Limited