Ashok Leyland announces potential cessation of UK manufacturing operations to focus on India – Here’s how this is positive for biz – Industry News

In the backdrop of continuing general economic uncertainty faced in both the UK and Europe, and slower than expected transition to EVs in public transport, Ashok Leyland has decided to cease Switch’s UK manufacturing and assembly operations. The company has begun employee consultations. Meanwhile, Switch India is performing well and is expected to deliver EBITDA break-even by FY25 and PAT break-even over next 4-6 quarters led by a healthy order backlog. As a result, management does not foresee any need for impairment of investments in Switch as the decline in value at the UK entity is more than offset by the increase in value at the India entity. In an analysis report, Motilal Oswal Financial Services (MOFSL) said, “This restructuring is positive for AL as the UK entity will no longer be earnings dilutive at a consolidated level. However, the recent increase in promoters’ pledge is likely to remain an overhang on the stock.”

After its investor call on Wednesday, Ashok Leyland announced that Switch UK will execute and complete all the orders on hand and will continue to provide aftermarket support for the existing vehicle parc. “The plan is to cater to the UK and Europe markets when market recovers, from Ashok Leyland’s alternate manufacturing sites in India and UAE. At the same time, the Switch Mobility Automotive Ltd, India (Switch India) is planning to double-down on the high-growth India EV market, which is poised to grow multi-fold in the next few years,” it said in a regulatory filing. 

A look at Switch UK’s financial status

Loss at Switch UK for FY25 is estimated at GBP20-25 million. Optare UK reported a loss of Rs 4.6 billion in FY24, with cumulative investments in the business amounting to Rs 21 billion as of FY24, along with a recently announced Rs 5 billion.  

Per data shared by the MOSFSL report, net debt at Switch UK currently stands at GBP80 million, but is due for repayment by FY29. “The equity infusion by AL of Rs 5 billion approved in Feb’25 will be partly used towards debt repayment and partly for closure-related expenses (estimated at GBP5-10 million). Management does not foresee any further fund requirement in either Switch UK or in India in the near future,” the brokerage firm said. 

How is Switch India doing?

Switch India, meanwhile, as reported in the MOFSL report, is expected to deliver Rs 9-10 billion in revenues in FY25E and is expected to be EBITDA positive in FY25E. “On the back of a strong order backlog of 1300 buses, management expects Switch India to treble volumes in this segment in FY26E. As a result, management expects Switch India to be break-even at PAT level over next 4-6 quarters,” said MOFSL.

Switch India will prioritize contracts through outright sales and will not engage in GCC contracts. Instead, all GCC contracts will be fulfilled by Ohm Mobility, which may require financial support at a later stage. “However, management does not foresee any need for impairment of investments in Switch as the decline in value at the UK entity is more than offset by the increase in value at the India entity. Management also indicated that it will pursue equity fund raising options only when valuations are favorable,” the brokerage firm said. 

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