Ashok Leyland slips after CARE revises outlook

Ashok Leyland submitted a report of receiving ratings from CARE Ratings. As a result of this, the stock of the company fell by around four per cent.

For Ashok Leyland’s long-term bank facilities such as term loan, CARE Ratings assigned CARE AA+ with a negative outlook. For general long/short-term bank facilities, the rating agency reaffirmed CARE AA+ and revised outlook from stable to negative.

The revision in the outlook was made on the unfavourable conditions currently existing in the commercial vehicle (CV) industry. As a result of various challenges to the industry such as slowdown in GDP growth, changes in axle load norms, which has resulted into a rise in capacity of existing vehicles, the expected transition from BS 4 to BS 6 norms and an expected increase in the prices of BS 6 models, the industry is expected to continue witnessing muted sales growth in Q4FY20 as well as Q1FY20. Additionally, the disruptions caused by the spread of Coronavirus may result in a subsequent drop in the company’s revenue. Ashok Leyland has the advantage of being a part of Hinduja Group and also has a strong brand image as well as wide distribution network. The rating agency in its report also mentioned that if the company shows a meaningful positive growth in the sales volume in a period of next six months, its outlook may be revised to stable.

Hence, on Wednesday, reacting to this development, the stock of the company was trading at Rs 34.20, down by 4.07 per cent or Rs 1.45 per share. The 52-week high is Rs 97.70 and 52-week low is Rs 33.70 on BSE.