Ashok Leyland Limited

Industrials — Farm & Heavy Construction Machinery · NSE

₹148.91+₹0.73 (+0.49%)

DalalBaazaar Score

59 / 100

🟡 Moderate

Verdict

CAUTION

Risk

High

Driven by high debt relative to equity, negative free cash flow.

In simple words: Strong business and financial position, with modest growth. Debt is the main factor to watch.

Decision support, not a buy or sell call.

As of 18 Oct 2026, 6:59 pm

Understanding the Business

Company site ↗

The 60-second version of Ashok Leyland Limited — what it does, how it earns, and who it competes with, before any of the numbers below.

What does this company do?

Ashok Leyland Limited, together with its subsidiaries, manufactures and sells commercial vehicles in India. It operates in Commercial Vehicle and Financial Service segments.

IndustryFarm & Heavy Construction Machinery

SectorIndustrials

Employees9,891

Annual revenue₹56,076 Cr

How does it make money?

Turns over ₹56,076 Cr a year. Of every ₹100 of sales, about ₹6 reaches shareholders as profit, with ₹22 left at the operating level before interest, tax and depreciation. Each of its 9,891 employees supports ₹5.67 Cr of revenue a year, the signature of a capital- or asset-led business.

Revenue / employee₹5.67 Cr

Who are its competitors?

The closest listed comparisons in its industry are MAHINDRA & MAHINDRA LTD, TATA MOTORS LIMITED, LARSEN & TOUBRO LTD.. These are the companies its valuation and returns are measured against elsewhere in this report.

Compared side by side in Peers ↓

What is its competitive advantage?Little sign of one

Returns on capital of 14.5% are at or below what the capital likely costs. That is the financial pattern of a business competing largely on price, where advantage has to come from execution rather than position.

Peer median ROE19.7%

What is the outlook?

28 analysts covering the stock expect revenue to grow about 9.5% and earnings to grow about 19.1% in the year to 2028. These are estimates by people who follow the company, not a forecast for the wider industry.

Est. revenue growth+9.5%

Est. earnings growth+19.1%

Analysts28

What has been driving growth?

Profit has moved mainly because margins changed, not because the business sold much more. Over 3 years revenue moved +35% while net margin moved +107% relative to itself. What this cannot tell you is which products, customers or geographies did the work — that lives in the segment disclosures of the annual report.

Revenue effect+35%

Margin effect+107%

DalalBaazaar Score

59/ 100

Moderate

Weighted across six categories. Every point is explained below.

✗ Debt/Equity of 3.45x is high — earnings must service borrowings before shareholders see anything
• Current ratio of 1.32 covers short-term liabilities, without much slack
✗ Free cash flow is negative — growth is being funded by borrowing or fresh equity
✗ Interest cover of only 2.1x — little room if profits dip
✗ Debt has grown 27.1% a year — worth checking what it bought

Quality vs. Valuation

Company Quality

61/ 100

Average

How good the business is, ignoring the share price entirely.

Valuation

63/ 100

Fair

What you are being asked to pay, ignoring how good the business is.

A reasonable business at a reasonable price — neither the quality nor the valuation stands out in either direction.

Historical Valuation

Current P/E

25.2x

3Y Median

29.9x

40 monthly readings · mean 33.8x · range 24.0x–61.1x

Sector Median

30.1x

median of 3 sector peers

🟢Current valuation is approximately 16% below its 3y median of 29.9x. Cheaper than its own history, which is worth a reason too: the market may be pricing in something the backward-looking numbers do not show.

🟢Against its sector it trades 16% below the peer median of 30.1x.

vs. its own history

Fair

29.9x median over 40 months · -16%

vs. sector peers

Fair

30.1x median of 3 peers · -16%

vs. generic bands

Fair

15x–35x

EV/EBITDA

11.5x

PEG

0.61

What's Good / What's Bad

🟢 What's Going Well3

Margins are improving
EBITDA margin is up from 14.0% to 22.5% over 3 years.
Return on equity is rising
ROE has improved from 14.5% to 24.4%.
Consistently profitable
Profitable in every one of the last 4 reported years.

🔴 What Needs Attention0

Nothing stands out as clearly deteriorating on the years of data available.

Red Flags

4 items require attention · 4 high

🔴Debt has risen sharplyFinancial
Total debt is up 105% over 3 years, from ₹31,161 Cr to ₹63,936 Cr.
🔴High leverageFinancial
Debt/Equity of 3.45x — earnings must service borrowings before shareholders see anything.
🔴Free cash flow negative for 4 yearsFinancial
The business has not covered its capital spending from operations for several years running, which has to be funded externally.
🔴Profit up while operating cash flow fallsFinancial
Reported profit rose but cash generated by operations declined — worth checking whether earnings are being supported by non-cash items or working capital.

Investment Thesis

🟢 Bull CaseWhat could make this work?

Margin expansion has further to run
EBITDA margin has risen from 14.0% to 22.5%. If that holds, profit compounds faster than sales and today's multiple looks cheaper in hindsight than it does now.
Earnings have proved durable
Profitable in every one of the last 4 reported years. Consistency lowers the risk that any single bad year is structural rather than cyclical.

🔴 Bear CaseWhat could go wrong?

The debt load needs earnings to hold up
Debt is 5.1x EBITDA. At that level a downturn in earnings turns a manageable balance sheet into a refinancing problem, and lenders get paid before shareholders.
Several serious flags at once
4 high-severity checks triggered. Individually each has an explanation; together they raise the chance that something structural is wrong rather than a one-off.

🟡 Key Things to WatchMeasurable tripwires, set against where this company stands today

1Revenue growth stays above 8% a year✓ 10.6% CAGR
Latest reported year was 11.6%. The bar is set below the established compounding rate, so ordinary variation does not trip it.
2EBITDA margin holds above 20%✓ 22.5%
Two points below today's level — enough room for noise, tight enough to catch real compression.
3Debt / EBITDA falls below 3x✗ 5.1x
Already stretched, so this is a reduction target rather than a level to hold. Around 3x is where lenders typically start attaching conditions.
4Free cash flow remains positive✗ -₹7,840 Cr
Profit that never becomes cash eventually stops being profit.
5Interest cover stays above 3x✗ 2.1x
How much operating profit can fall before interest stops being comfortably covered.

Investment Checklist

7 / 12 checks passed

✓ Strong return on equity (ROE ≥ 15%)
✗ Strong return on capital employed (ROCE ≥ 15%)
✗ Healthy net margin (≥ 10%)
✗ Generates positive free cash flow
✗ Manageable leverage (Debt/Equity < 1.0)
✓ Adequate short-term liquidity (Current Ratio ≥ 1.0)
✓ Revenue growing year-over-year
✓ Profit growing year-over-year
✓ Not trading at an extreme valuation (P/E < 40x)
✓ Not buying right at the 52-week high
✓ Analyst consensus isn't majority-sell
✗ Short-term technical trend isn't bearish

Price history

Quick Metrics

4 good · 4 neutral · 3 weak

Market Cap

₹87,468 Cr

Mid Cap

Mid-sized — more growth headroom, but sharper swings than large caps

P/E (Trailing)

25.2x

Fair

Fairly valued against the generic band

P/B Ratio

6.14x

Rich

Steep premium to book — needs high, durable returns to justify

EPS (TTM)

₹5.92

Profitable

Profitable on a per-share basis

ROE

24.4%

Strong

Strong capital efficiency

ROCE

14.5%

Moderate

Moderate return on the capital in the business

Debt/Equity

3.45x

High

High leverage

Revenue Growth (YoY)

11.6%

Healthy

Healthy top-line growth

Profit Growth (YoY)

1.0%

Modest

Slow profit growth

Dividend Yield

2.35%

Healthy

Meaningful cash return while you hold the stock

Free Cash Flow

-₹7,840 Cr

Cash burning

Spending more cash than the operations bring in

More Metrics

P/E (Forward)

18.5x

Improving

Below the trailing multiple — the street expects earnings to grow into the price

Operating Margin

19.6%

Good

Healthy core-business profitability

Net Margin

6.0%

Average

Average bottom-line conversion

Current Ratio

1.32

Comfortable

Healthy short-term liquidity

Beta (vs Nifty)

0.49

Defensive

Steadier than the market

52W Range Position

17%

Mid-range

Technical Snapshot

SMA 20 / SMA 50

152.9 / 164.0

Bearish alignment (short < long)

Price vs SMA 200

Below

Long-term downtrend

RSI (14)

34.2

Neutral momentum

Financial Trend (4-Year)

Metric	FY23	FY24	FY25	FY26	3Y CAGR
Revenue	₹41,488 Cr	₹45,517 Cr	₹48,342 Cr	₹56,076 Cr	+10.6%
EBITDA	₹5,812 Cr	₹8,602 Cr	₹10,177 Cr	₹12,614 Cr	+29.5%
EBITDA Margin	14.0%	18.9%	21.1%	22.5%	—
PAT (Net Profit)	₹1,239 Cr	₹2,484 Cr	₹3,107 Cr	₹3,471 Cr	+41.0%
EPS	₹2.11	₹4.23	₹5.28	₹5.91	+41.1%
ROE	14.5%	27.6%	25.4%	24.4%	—
ROCE	13.5%	17.3%	15.5%	14.5%	—
Total Debt	₹31,161 Cr	₹40,802 Cr	₹49,962 Cr	₹63,936 Cr	+27.1%
Free Cash Flow	-₹5,428 Cr	-₹7,392 Cr	-₹1,520 Cr	-₹7,840 Cr	—

🟢 Revenue has grown at 10.6% a year over 3 years.

🟢 EBITDA has grown at 29.5% a year over 3 years.

🟢 EBITDA Margin has risen from 14.0% to 22.5% over 3 years (+8.5 pts).

🟢 PAT (Net Profit) has grown at 41.0% a year over 3 years.

🟢 EPS has grown at 41.1% a year over 3 years.

🟢 ROE has risen from 14.5% to 24.4% over 3 years (+9.9 pts).

🟢 ROCE has risen from 13.5% to 14.5% over 3 years (+1.0 pts).

🔴 Total Debt has grown at 27.1% a year over 3 years.

Balance Sheet & Cash Flow — FY2026

Total Assets

₹1.01 L Cr

Total Liabilities

₹82,495 Cr

Cash & Equivalents

₹6,281 Cr

Operating Cash Flow

-₹4,895 Cr

Capex

-₹2,945 Cr

Shareholding (proxy)

Institutional Holding

31.5%

Insider Holding

36.4%

Corporate Actions

Next Earnings

19 Nov 2026

Dividend Rate

₹3.5

Ex-Dividend Date

03 Jun 2026

Analyst Consensus

Recommendations

21 Buy · 14 Hold · 1 Sell

Target Price (Mean)

₹185.74

+24.7% vs CMP

Target Range

₹152 – ₹240

Peer Comparison

Company	P/E	ROE
MAHINDRA & MAHINDRA LTD	17.8x	19.7%
TATA MOTORS LIMITED	37.1x	32.8%
LARSEN & TOUBRO LTD.	30.1x	15.2%

Recent News

2 mixed4 general

Ashok Leyland Ltd. Shareholding Pattern – Promoters, FIIs & DIIs

Value Research, 04 Sept

Stocks to buy: Nagaraj Shetti recommends Bank of Maharashtra, Ashok Leyland shares to buy in the short-term

Livemint, 27 Aug

Stock to buy today: Ashok Leyland (₹174) – BUY

BusinessLine, 08 Aug

Ashok Leyland shares rise 2% post Q1 results. What Citi and Nomura suggest

The Economic Times, 17 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Indian truckmaker Ashok Leyland's profit edges higher on sales growth, price hikes

Reuters, 14 Aug

Ashok Leyland Shares Rise 3%: Four Brokerages Hike Target After Q1; Margins In Focus

NDTV Profit, 17 AugPrice move

🟡Mixed / dependsA price move, which is not by itself a change in the business. Worth finding the cause before reading it as either good or bad.

Watch Items

Cross-check against the company's latest quarterly filing / investor presentation before acting.

DalalBaazaar Thesis

StrongGrowth · Profitability

MiddlingBusiness Quality · Valuation · Risk

WeakFinancial Health

Points for each in the Score ↑

Unremarkable in both directions

A reasonable business at a reasonable price. Nothing here is alarming and nothing is compelling, which usually means the decision rests on things this data cannot see — the industry's direction, management's intent, and what else is available to you. 4 high-severity red flags sit above this conclusion and should be read first.

3 of 5 tripwires tripped — Debt / EBITDA falls below 3x; Free cash flow remains positive; Interest cover stays above 3x · see Key things to watch ↑