Ashok Leyland Limited (NSE:ASHOKLEY) Q1 FY23 Earnings Concall dated Aug. 01, 2022
Corporate Participants:
Dheeraj Hinduja — Executive Chairman
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Analysts:
Raghunandhan NL — Emkay Global Financial Services — Analyst
Kapil Singh — Nomura Holdings — Analyst
Pramod Kumar — UBS Global — Analyst
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Gunjan Prithyani — Bank of America — Analyst
Amyn Pirani — JPMorgan — Analyst
Chirag Shah — Edelweiss Capital — Analyst
Joseph George — IIFL Securities Limited — Analyst
Saurabh — Ambit Capital — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q1 FY ’23 earnings conference call of Ashok Leyland, hosted by Emkay Global Financial Services. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Raghunandhan from Emkay Global Financial Services. Thank you, and over to you, sir.
Raghunandhan NL — Emkay Global Financial Services — Analyst
Good afternoon, everyone. On behalf of Emkay Global, we welcome you all for Ashok Leyland Q1 FY ’23 Earnings Conference Call. From the management team, we have Mr. Dheeraj Hinduja, Executive Chairman; Mr. Gopal Mahadevan, Whole-Time Director and Chief Financial Officer; Mr. Balaji K. M., Deputy Chief Financial Officer. We thank the management for providing us the opportunity.
We hand over the call to management for opening remarks that can be followed by Q&A session. Over to you, sir.
Dheeraj Hinduja — Executive Chairman
Good afternoon, ladies and gentlemen. This is Dheeraj Hinduja. It gives me immense pleasure to be in touch with you, and I thank you very much for the interest shown on Ashok Leyland. I would like to quickly run with you the Q1 performance, as well as some of our latest developments.
I’m extremely happy to share that Q1 FY ’23 continued to be good, aided by strong performance in domestic truck sales with a 31.1% market share. Since Q1 of last year was impacted by the pandemic, the growth percentages are higher in most of the areas than normal. In Q1, MHCV truck volumes have grown at almost 46% higher than the industry growth, resulting in Ashok Leyland market share improving to 31.1% as compared to 26.2% in Q1 last year. Sequentially, also in Q1, AL’s MHCV truck market share has grown by 50 basis points. Our market share has grown to 31.1% in Q1 from 30.6% in Q4.
EBITDA for Q1 was at INR320 crores, 4.4% as against the loss of INR340 crores, which was a minus 4.7% in Q1 last year. LCV, which was on a growth phase, has been impacted by semiconductor shortages, but our Q1 volumes were still higher than last year by 66%.
International operations sales have registered a 76% year-on-year growth in Q1. Q1 operating profit was at INR95 crores as against a loss of INR381 crores in the last year. Working capital was increased by about INR1,400 crores during the quarter due to increase in finished vehicles and production inventory. Consequently, our net debt has increased by about INR1,560 crores in this quarter. Debt equity is at 0.2 times versus 0.6 times during the same period last year.
During the quarter, we have launched two more tractor models 4225 with Bogie Suspension and 4825 with ASICs engine. So in parallel, exciting launches happened in AVTR 2620 and Ecomet 1815, expanding our range. I’m extremely confident that with these launches and the continued expansion of network, we will sustain the market share gains achieved in last three quarters.
Domestic CV industry volumes are on a recovery track as a result of gradual improvement in the macroeconomic environment and healthy demand from the end-user industry. Headwinds such as the hardening of interest rates, increasing commodity prices and elevated fuel price remains. Geopolitical aspects can also constrain the pace of recovery.
The domestic MHCV industry registered a healthy growth of 160% on a year-on-year basis in Q1 of FY ’23, aided by the low base of previous year, which has been impacted by the second wave of the pandemic. Meaningful recovery in volume was primarily in the truck segment, supported by demand from steel, cement and mining industries and pickup in economic activity. MHCV truck volume is set to grow by 15% to 20% in FY ’23 according to ICRA.
Passenger segment is expected to grow by 30% to 35% as demand continues to improve gradually with opening up of educational institutes and offices post the impact of the pandemic. LCV segment started its recovery before the MHCV segment, supported by demand from the agriculture and allied sectors.
Upstream and e-commerce since the start of the pandemic also improved the demand. This is expected to continue to support volume growth. LCV is expected to grow by 8% to 10% in FY ’23. This further demand growth, we are expecting pricing to become more rational, the softening of commodity prices, in particular, of steel should impact the margins positively in the coming quarters.
Fleet utilization levels are on the rise as freight volumes picked up, thereby easing cash flow pressure for the operators. Freight movement indicators covering ports, rail freight, FASTag, e-Way Bill volumes have also improved as economic activity picked up.
Ashok Leyland, even while growing market share sequentially has been raising prices owing to higher input costs. What is good to see is that retention of such increases is getting better. I must complement our MHCV team who has taken up a complete rationalization of our network, appointed new distributors where there are gaps to be filled and are also working to further improve dealer profitability, which is crucial. AVTR modular vehicles are doing very well and has raised the bar on industry performance. As volumes grow, I’m confident that we will see the benefits of modularity.
LCV, both the Dost and Bada Dost are exceptional vehicles and have been growing stronger by the day, and volumes are limited by availability of semiconductors. Both these products hold immense potential for exports and are a perfect fit in our addressable market.
Going forward, the growth drivers for the bus segment remained largely favorable as demand continued to improve gradually with opening up of educational institutes and offices post the impact of the pandemic waiving off. This will also add to our volumes and market share as Ashok Leyland is a leader in buses historically.
Aftermarket power solutions and international businesses continued to perform exceptionally well. We are also putting effort in reducing costs, both product costs, as well as overall cost.
Switch, which is a very important initiative for us, and I’m happy to say that with the progress made Switch is — Switch India is operational with its own dedicated team. We are raising statutory approvals for transferring the eMaaS business to OHM Global Mobility India. We are in discussion with investors to raise capital, both at Switch Mobility U.K., as well as in OHM Global Mobility India for the E-Mobility-as-a-Service. The discussions are progressing very well.
In line with our connection to the global climate promise, we set out to lead the environment, social and governance agenda by first setting up an ESG committee at the Board level, followed by setting up an internal framework and a structure to steer the company initiative in this year.
The AL ESG team in conjunction with the key leadership team has developed an ESG vision for the company, which goes to create and lead sustainable practices across environment, social and governance initiatives, delivering outstanding stakeholder value. Environment is a given, sustainability is a choice, we wish to lead sustainability through our ESG framework.
Finally, before I open the floor for questions, let me share the financials in brief. Revenue for Q1 at INR7,223 crores, which is 140% higher than Q1 of last year. EBITDA is at INR320 crores, 4.4% in Q1, up from a loss of INR140 crores, minus 4.7% in Q1 of last year. Profit after tax after exceptional for the quarter was at INR68 crores versus a loss of INR282 crores in Q1 of FY ’22. Operating working capital for Q1 was at a negative INR167 crores as against the negative of INR1,565 crores as of March ’22.
Increased activity levels have necessitated increased working capital during the quarter. Net debt was at INR2,282 crores in June ’22 as against INR720 crores in March ’22. Debt equity as at the end of the quarter was at 0.3 times. Capital expenditure for the quarter was at INR115 crores. Capex spend for the full year is estimated to be around INR750 crores.
I would now like to open up the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you. [Operator Instructions] The first question is from the line of Kapil Singh from Nomura Holdings. Please go ahead.
Kapil Singh — Nomura Holdings — Analyst
Hi, sir. Actually I had two questions. Firstly on the market share, we have seen a pretty significant improvement on a Y-o-Y basis. So if you could talk about some color as to what are the things that may have helped in gaining our market share significantly?
Dheeraj Hinduja — Executive Chairman
Firstly, I would say that our products are performing very well. And as I already mentioned, whether it’s in the MHCV — particularly in the MHCV side, our star product range both in tippers and in the multi-axle vehicles is doing very well. Also, we have been able to increase the network in the North and East, which has been a weaker territory for ourselves. And also, you would have noticed there has been a shift once again away from CNG ICV, which have become a very significant sector. So it still continues to be, but the shift towards diesel once again has definitely helped us as well.
Kapil Singh — Nomura Holdings — Analyst
Okay. Thank you. And second, on the cost side, I wanted to understand how much was the cost increase for the quarter and how much price increases we took? And as we look into the next quarter, are we actually seeing a cost reduction Y-o-Y or Q-o-Q? And if so, how much? Also, if you can update in July or in August, if you are taking any price increases?
Dheeraj Hinduja — Executive Chairman
We have, again, as I mentioned, we have been taking price increases. And especially the fuel price increases, which has softened, but the impact of those has not been — have not come through so far. The challenge has been to find the right equation because beyond the certain point freight rates have not increased substantially and it’s very difficult to pass on this commodity price increase on to the customer. So there have been tremendous cost reduction initiatives internally as well, and that continue for us. We have spoken previously of our value engineering initiatives.
Gopal, would you like to expand on this, please? Gopal?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Yes. Because I was speaking, yes, sorry. So essentially, Kapil, what has happened is that, steel prices, as you know, have gone up by approximately about INR5 to INR6 per kg across. I mean, not only for us, for the industry. These are settlement made not only by commercial vehicle manufacturers, but also by other automakers. So there has been that, so because of that you would have seen a price — I mean the cost increase going up.
What we have done is, while despite these challenges, we have grown the market share and we have also increased the prices. The price increases realization would be anywhere between 1.7% to 2%, which has been inuring over the quarter, so depending on the type of the vehicle. Like Chairman mentioned, we have done very well in MAVR, growth has been one of the highest. We have also done well in tippers. And even in ICV, of course the launch of the CNG vehicles, we have actually seen a jump in the ICV market share as well.
Going forward, we believe that steel prices should soften. We have seen that happening in Q2. We’ll have to wait for the settlements to happen. The only thing that will stand kind of — which can again increase steel prices would be if there is a removal of the export duty, which people are talking may happen in, say, end of Q3 or Q4. But otherwise, we are seeing that there is a certain amount of reduction in steel prices that is expected in Q2, and we will continue to raise prices. We are already doing that.
Back to you.
Kapil Singh — Nomura Holdings — Analyst
Thanks, sir. Just lastly, if you could share some update on Switch, we’ve been waiting for the fund raise or the deal for some time now. So what is the status? And if you could share an update over there as well?
Dheeraj Hinduja — Executive Chairman
Yes. I know that I have discussed this earlier as well on early occasions. And possibly, maybe we’ve not chose this as quickly as we can, because we wanted to make sure that we get the right valuation, and we get the right partner to come in with us as well. I believe that we are there now. We are working towards closure in the coming weeks. I don’t think we are too far, as you might have seen that the market for EVs on a global basis had softened quite a bit. But I’m glad to say that the manner in which Switch has been progressing, by having our products on the road, increasing the order book. I think investors do realize the real value that Switch as a company does bring in. So I do recognize, I’ve mentioned this earlier on our calls as well, but in my view, we are very close now in our finalization with the investors.
Kapil Singh — Nomura Holdings — Analyst
Okay. Thank you, sir. Wish you all the best.
Dheeraj Hinduja — Executive Chairman
Thank you.
Operator
[Operator Instructions] The next question is from the line of Pramod Kumar from UBS Global. Please go ahead.
Pramod Kumar — UBS Global — Analyst
Yes. Thanks a lot for the opportunity. My first question pertains to the other expenditure side. Last quarter, we had a fair bit of control on the other expenditure side, but we have seen some massive sales this quarter. So if you can just help us understand, Gopal, as to what happened here? And what could be more like a normalized level of other expenditure for you for the remainder of the year?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Thanks, Pramod. See basically, while — you said massive, I don’t think it’s been massive. Like we mentioned in the last quarter, Q4 typically, we also get benefits of some of the provisions that we make throughout the year. Like, for example, incentives or cost increases that we have to budget for. And then at the fourth quarter, there’s a lot of settlement of all of these things that happen. When that happens and then combined with the operating leverage that happens a percentage actually as a percentage to sale becomes lower.
The other thing which also results in cost increase. So this is one part. I mean we did have, for example, volume that discounts are not only material, on other things also come out in the fourth quarter, on other procurements, MRO and etc.
Now the second part of it is the inflation itself. You must remember that we are currently facing quite a bit of an inflation. So when you are looking at costs in the first quarter, a lot of these contracts that we have entered into for various things, including contract labor, third-party labor, not all of that comes in staff costs, right? A lot of that stuff comes in other expenditure because that’s a big massive chunk of expenditure. So when that happens, what happens is that you see the inflationary expense also of the cost coming in and resetting itself in Q1.
As we move forward, what we should be expecting is that there should be a slightly southern movement in terms of percentage to sale as far as the other expenditure is concerned. As the Chairman had mentioned, we — the team is working very hard to take costs out of all aspects of the P&L, including on distribution, on material, on improving productivity and also other expenses.
Pramod Kumar — UBS Global — Analyst
Thanks for that, Gopal. Second question is on the pricing and the competitiveness because there’s a evolving view that commodity prices have started to soften. So the CV industry should be able to see better pricing and better margins. But at the same time, we’ve seen even with the last two years plus of good demand or almost a pretty good demand in the last three quarters, the industry hasn’t benefited on the profitability side, even with the operating leverage benefits and the reason being competition.
So what are your thoughts, Dheeraj, on this, has the industry started getting some tailwinds from commodity? How do you see the net pricing and the net margin scenarios evolving, at the gross margin level, I’m not talking about the EBITDA margin, but more at the gross margin level?
And related to that is, whether — are you seeing any revival in demand from the small 1 to 10 truck operator kind of a category, because that could probably result in better pricing for you because the bidding scenario on those orders will not be bad as such. So if you can just help us understand the pricing and the gross margin scenario here?
Dheeraj Hinduja — Executive Chairman
Yes. Pramod, I think you’re — look, you are considerably right in terms of despite the softening on the commodity prices, competition does remain enhanced and there will always be that pressure in terms of how to sustain the market share, as well as continue to increase price to a level that gives us better gross margins as well.
I have said earlier that for us, we want to grow market share on a profitable basis. And that really comes about by delivering better products and better services. The modular platform has allowed us to do this. It does reduce the cost at the back-end substantially. We’re able to reduce our number of vendors as well. So although — we have to take it for granted, but whether it’s on the all segments and MHCV, LCV, bus side. Competition will always be there, but we are continuously, as Gopal explained, maintaining our prices and the softening of the commodity should help us.
And the product pool that we have, getting up to this 31% market share, it is not purely from a perspective of the market dynamics itself. There is a lot of customer pull on how they are perceiving our products and the value that it brings. Even the fuel performance on our BS-VI compared to the competition is showing much, much better results across the board.
So I think given all of this, it does allow us to price better and where we need to be more competitive, we will take those calls as well. But I think we, as a team, feel quite confident that going forward, the gross margin levels should improve for the company.
As far as the retail customers are concerned, there is an improvement that is seen as well, but a lot of the infrastructure projects that are happening on the roads and also when you look at the mine, bulk deals are happening still with the strategic buyers. So there is a slight upturn with retail in different, different segments. I mean, the e-commerce segment, the LCV segment is very much dominated predominantly by retail, but the higher-end products are more the fleet owners.
I hope I was able to answer that.
Pramod Kumar — UBS Global — Analyst
No, no, no, I think it’s great, Dheeraj. And just a follow-up on that. Do you see the structure changing ever because of the way the taxation norms have changed the entire fall out of De-Mon, GST, and the way the financing has evolved. So do you see that in the heavy tonnage category or the medium and heavy tonnage category, there will be any reversal of this trend of formalization of the industry and it’s becoming more of a B2B business with strategic players on the trucking — on the fleet side. Do you see this changing ever?
Dheeraj Hinduja — Executive Chairman
The trends, if you see historically in India as well, the retail segment does kick in, then it slows down as soon as the cycle turns. So there is a lot of movement. And a lot of the retailers prompted by when there are very attractive finance terms that are given as well. But if I look at the global theme and from that perspective, B2B, as the very heavy end, definitely, is a way forward, looking at the product cost itself, availability of drivers. So in the long run, the ratio in this heavy end, according to me will be more geared towards the larger fleet owners.
Pramod Kumar — UBS Global — Analyst
Thanks a lot, Dheeraj. Thank you, Gopal. Best of luck. Thank you.
Operator
Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Yes. A couple of questions from my side. One is with respect to the RM cost impact in 1Q. So, as we see the gross margins, they have corrected quite reasonably. But can you comment on what was the cost inflation on the commodity side in 1Q?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Jinesh, just like I had mentioned earlier, the steel price increases have been — had been at about INR4 to INR5 per kg. So you can do the math, that’s the base on which the cost inflation has happened. But of course, an entire vehicle is not screened, there are other aggregates, etc.
See, I think the whole thing is, we are — what we will have to do is, there are two or three good things that are happening. One is, it looks like — I mean, definitely in Q2 steel prices will soften, right. And hopefully, the export duty if it continues and it will continue to be at a softer range.
The second thing, good thing that is happening is there is a pull in the industry, now the TIV is actually growing pretty fast. You are seeing that like there’s a lot of investment-led growth, the government is actually kind of creating a demand for trucks. And the second most important thing is the bus demand is also reviving. You’re seeing opening up of all schools, colleges, intercity transport, etc., mofussil buses, etc.
The third bit of it is, of course, internal to the company, and there are two things that is happening. One is, as Chairman mentioned, our offerings have been so now appreciated that predominantly in all geographies as well as in all subsegments, if you take ICV, haulage, tipper, tractor and MAV, I think we have gained share, okay? So this is not just some mathematical thing that has happened.
The second bit of it is, of course, I think there are renewed programs that we are having currently all across the company for taking cost out methodically, which we have been doing over the last four to five years, and we’re getting better and better at it. And you would see the confluence of all of this. One, softening of raw material prices; two, increase in demand, because increase in TIV happening because of demand coming up. Three, the product performance has been getting better. We have made quite a few launches last quarter and the quarter before that, we introduced C&D, which has been well received. Of course, now the CNG arbitrage is going — is not as high as it was, but we will still continue to kind of introduce products in the ICV range where we are seeing growth. And fourth is the initiatives that we’re taking within the company itself. So, if you were to add up all of this, we do see a situation where we will continue to pursue growth in the domestic market. And secondly, also, we will continue to take out cost and try and grow profitably.
One more thing that I may add, and I’m sure Chairman may want to expand is the performance of the other businesses also. If you look at it, LCV would have done even better than what we wanted it to because there was a constraint in the semiconductor availability. That’s another constraint, which possibly will see going away over the next few quarters because very clearly, the demand for electronic items has come off quite post-COVID.
And then all our other businesses, including aftermarket have done very well. Exports has done — again, exports has posted a growth of nearly 75%. So that’s in terms of CV exports. So I think there’s a lot of positive things that are happening. So we are dewalletizing [phonetic] the company as well. So there’s — in terms of the composition of what’s happening in the company, a lot of things are hopefully falling in place.
Back to you.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Sure. And can you share how were discounts in this quarter, I believe they would be more or less flattish on a Q-on-Q basis and how they’re trending in — how did they trend in July and the price increase taken in July are robust so far?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
See, the discounts continue to be high. I mean, I won’t say the discounts are coming off, but what we are trying to do is, you see the industry is also moving it from a pure discounting to various offerings that we are doing. So we are now looking at — we are doing offering of extended warranty AMCs, right? So all of that is now becoming a buying full or an offer — is an offering that the customer is looking at very, very clearly.
As far as the July numbers are concerned, we’ll have to wait and watch. I’m not able to comment on it, but the discounts continue to be high. But what we are also looking at is the net price realization as I was stating, because what’s important is, am I netting more month-on-month or not and that factually we are. So our net price realizations are improving. And with the reduction in raw material prices, I think the margins should improve.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Sure. And lastly, can you talk about the Switch Mobility with respect to the order book and product pipeline, particularly for the Indian market?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
I’ll just quickly share the order book, but then I’ll hand it over to Chairman to kind of expand on this. We have roughly about 600 bus order in Switch India and that is already — we have that in BMTC, spread across BMTC, as well as DST and a couple of private orders. I think, company is doing well, product is getting well accepted, and we are doing most of this as E-Mobility-as-a-Service, which means we also operate it on the customer’s behalf. And the up-times are upwards of 98%, 99%. So customers are seeing the benefit of a credible OE like Ashok Leyland actually delivering services to them.
As far as Switch overall strategy is concerned, I think it would be most appropriate if our Chairman were to share it. Chairman, over to you.
Dheeraj Hinduja — Executive Chairman
So I think, Gopal, you mentioned in terms of the order book. The only thing I would emphasize is that we do participate in many other tenders as well, but we are participating at the price which we believe in the long run because we have to hold good for the next eight, 10 years, are going to be profitable contracts.
So at this point of time, what you see is the 600 vehicles. We also have quite a large interest and letter of — expression of interest from many customers for our LTVs, which we’re looking to introduce from Q4 of this financial year. So that’s those — and there are those which will get into the market on a very gradual basis from FY ’24, FY — Q4 of this financial year.
Jinesh Gandhi — Motilal Oswal Financial Services — Analyst
Got it. Great. Thanks and all the best.
Operator
The next question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.
Gunjan Prithyani — Bank of America — Analyst
Hi. Thanks for taking the questions. Just two questions. Firstly, on the wide basis that we’ve been calling out CNG and still more launches on LCV. Could you just give some more sense as to incrementally what are the product gaps, because CNG you’ve done some launches, with LCV we are still awaiting. There was supposed to be more product actions. So some color on incrementally, what kind of product action we could expect in the right spaces?
Dheeraj Hinduja — Executive Chairman
Well, on CNG, we had said on our last call, we’ve introduced the CNG in our ICV segment, and we are working to ensure that all products are available in a CNG fuel also during the course of this next eight, nine months. As far as the LCV is concerned, we, at this point of time, have the Dost, Bada Dost partner. And the Dost is already available in the CNG format. But as we look ahead, especially in the LCV, we are seeing a very strong trend from end customers to move towards an electric version in the light segment. So this is — this will move slowly, but that’s the movement, I think, the market will witness during the next two, three years.
Gunjan Prithyani — Bank of America — Analyst
Okay. Got it. Just a extension of this electric, two parts to it. One, on the bus side now, you’ve consciously not been very aggressive in some of the CSL orders where you didn’t see the viability. But could you give us a little bit color in terms of how should we be thinking about the industry? Because right now, it seems to be largely driven by STUs, but you have mentioned that we will see traction on the private side as well. So maybe some color on how the industry structure is and how you will address this opportunity by not competing aggressively in the STU space. And on the LCV, just the number — the semi shortage number, if you can help us, how much we are below the optimum monthly run rate that we can achieve due to the semi shortages?
Dheeraj Hinduja — Executive Chairman
Okay. So on the — let’s say, the moves in electric, on the passenger side. With, yes, the larger volumes are coming from STUs. And just to give a clear perception on this, we will be aggressive, but we will be aggressive in tenders and on routes where we believe that the ability to make money is going to be better. There is no point taking on contracts, which for eight, 10 years, will be running at a low. And I do believe that during the course of the next few months, positively a year, many of our competitors will come to a similar realization that it is much better to run these on a profitable manner.
But as far as on the private sector, a lot of the buses are used for staff transposition, whether it’s for — even Ashok Leyland uses buses for staff transposition, the BPO companies, IT companies and their own green program is shifting them to make sure that even that staff transportation should be done on a green basis. So we are seeing increasingly more interest from those customers and our first order for the private segment would be happening in the middle of August. I guess it’s an order for about 75 buses and we’ll start that delivery in the middle of August. But the interest is definitely growing in that segment as well.
Gunjan Prithyani — Bank of America — Analyst
Okay. And LCV production cut, I mean how much is the impact of –?
Dheeraj Hinduja — Executive Chairman
Gopal, I mean — according to me, from a ECU shortage during the last few months, we could have done anywhere between 500 to 1,000 vehicles extra based on what the market requirements could have been. Gopal, would you like to add to that?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
No, I think so. I think that number is right, anywhere between 500 to 1,000 numbers would have been possible there. So that shortage is there and we can’t help it. It depends on whom you are sourcing it from. And so each player has their supply chain constraints. But hopefully, all of this will go through like this month, again, the LCV volumes have gone up by about 7% or so, because we did see a little bit of ease on supply constraints.
So hopefully, things will keep getting better and better because, like Chairman mentioned, I mean, the performance of Dost and Bada Dost is exceptionally well. And it’s — and we are yet to go on a pan-India basis, that’s the other thing that all of us must realize. Today, most of the sales is happening maybe West and certain other parts of India. If we start going on a pan-India basis, this vehicle will truly Pan-India. It’s not that it’s not going on a pan-India basis, but truly, so the team is working on the distribution across the country. We are also seeing whether there are synergies between dealerships that we have across businesses and seeing how do we make the penetration even more on a product which is way, way better than what competition has to offer.
Gunjan Prithyani — Bank of America — Analyst
Well. Thank you so much.
Operator
Thank you. The next question is from the line of Amyn Pirani from JPMorgan. Please go ahead.
Amyn Pirani — JPMorgan — Analyst
Hi. Thanks for the opportunity. My question was regarding the pricing environment, obviously, you’ve spoken about it to some extent. But would it be right to say that for the last three to four months, the discounting pressure from competition in the market in general has been much lower and everybody has taken the perishable route and allowing prices to go up?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
I would say so because of the material cost increase, we have no other choice. See, you must remember, why is that, despite volume increases, there is a margin pressure, that’s because we need to catch up on the cost that has happened. One is between BS-IV to BS-VI and second one is the steel price increases. So I think with the demand coming up, we weren’t — the industry possibly was — some of the players were looking at customer acquisition through pricing alone. But in a situation where the demand starts to go up, then what happens is price is just one factor for decision-making. So hopefully, customers will see the total cost of operations, they will see the vehicle performance, the fuel consumption, drivability and so many other factors. So that these are again four to five years and sometimes 10 years these vehicles are headed. So I think we are going to see improvement in prices and especially so even in AL.
Amyn Pirani — JPMorgan — Analyst
Great. That’s helpful. And secondly, just on the financing business, if you could give some update as to how Hinduja Leyland Finance is doing? And any updates on the listing of the business and the deal that you had announced some time back? Thank you.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
I’ll maybe request Chairman to talk about status, and I’ll give some brief numbers on Hinduja Leyland Finance once he shares the details of it.
Dheeraj Hinduja — Executive Chairman
Yes. HLF has also been doing well. The industry — I mean the recovery of Ashok Leyland and the MHCV industry goes very well for them as well. The margins are improving. Where I would say the company has done exceptionally well is their housing finance business, which was started about five years ago now. So they have grown very rapidly in that segment and it has added as well. And as you know, the portfolio for Hinduja Leyland Finance is quite diverse. So we are doing two-wheelers, three-wheelers, tractors, commercial vehicles. And that’s, let’s say, spreading of risk across the board has improved. Our NIM is improving.
And Gopal, if you can give an update on the listing side.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Sure. So we are looking at options for this. So you will hear from us very quickly, I mean, shortly. We are looking at how to — we had announced the proposal, I think, about a couple of months back, so both the teams are working on that. We’ll have an update for you shortly on that.
As far as the overall consolidated numbers are concerned for HLFL, which includes Hinduja Leyland Finance and Hinduja Housing Finance, and of course, a very important business that is getting kind of nurtured between Ashok Leyland and Hinduja Leyland Finances that grow digital. But consolidated AUM is about INR30,720 crores. The company has done disbursements of INR3,484 crores. Income was INR800 crores and a PAT of INR97 crores, which is 12% and GNPA was 3.7%, NPA was 2.3%.
So the company is actually doing pretty well, continuously resetting the portfolio and some of the portfolios are doing extremely well. Some portfolios, of course, have some opportunities to get better. But truly diversified company, which helps. It’s not just an MNC financing company, it’s got off-road vehicles, it’s got loan against property in multiple portfolios.
Amyn Pirani — JPMorgan — Analyst
That’s helpful, sir. Just one last thing on that. Do you anticipate investing any money into Hinduja Leyland Finance this year, because we still don’t know the time lines of the reverse merger. So if you can help us understand on that, and that will be my last question. Thank you.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
See, even — see, there are two things. One, we don’t — we are not able to state now because it depends on the timing. Even if we have to make some investment, let’s assume, it’s not going to be significant. And thirdly, whatever investment that you have been making to Hinduja Leyland Finance has only been accretive finally to Ashok Leyland, because finally what do they do? We invest equity for actually growing the business. This is not for any other purpose. So the capital requirement, if any, that comes in, we would want to ensure that Hinduja Leyland Finance does not miss any step of business acquisition and growing the business for want of capital. But we’ve always been very — we have not done a huge investment in HLFL, so maybe INR100 crores, INR200 crores, but still very, very early for us to share anything at all.
Amyn Pirani — JPMorgan — Analyst
Great, sir. Thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Chirag Shah from Edelweiss Capital. Please go ahead.
Chirag Shah — Edelweiss Capital — Analyst
Yes. Hello. Thanks for the opportunity, sir. Si, two questions from my side. So first, on the gross margin, at the cost of repeating. So when we look at some of the peer site numbers that have come across, there seems to be slightly higher pressure on gross margin in the quarter. Now is it largely because of the lag effect of commodities, though it has more to do with the revenue mix also, if you can share some light — some break-up if possible? Also —
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Sorry, are you stating that — just to clarify for everyone’s benefit, including Chairman, are you stating that our gross margins are better or –? I didn’t understand it.
Chirag Shah — Edelweiss Capital — Analyst
No, the sequential — the pressure seems to be higher when we compare to the peer site. See, I understand sir, it could be purely sequential or seasonal quarterly variations. So, is that the reason or there is something in the revenue mix, which is taking it slightly lower in absolute term, as well as when you compare to the industry peers? So that was first question.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Chirag, if I may just kind of take this one. You see, basically, it’s — when you look at peer site, there are only or two, with whom you are public domain information, point number one. The second one is, the raw material — and you have information on raw material as a percentage of revenues. See, the mix will continue to — the absolute ratio of raw material to revenues will depend on the level of in-sourcing and outsourcing that happens, right? So there’s a vast difference. So it’s not an apple-to-apple comparison.
Having said that, if you’ve seen raw material as a percentage to sale, what is happening is that you have — we have seen an increase. We have seen an increase on steel prices. And that is one of the reasons why you’re seeing raw material as a percentage to sale actually going up.
And the second reason also is the mix, as you mentioned. We have grown in ICV now. In terms of margins, ICV cannot be as high as, say, a heavy — see a 15, 16 ton or a 20-ton truck cannot be as profitable as in terms of percentages, as I say, 40 ton or 49 tonner. So, as in this business, as the size of the vehicles start to grow, the profitability per unit also gets better. But having said that, let me not leave you with the impression that we have not been growing in here. Like I mentioned, we have been growing predominantly in all geographies and all segments. But these are the two main reasons why we have seen the raw material as a percentage to sale actually going up marginally sequentially.
Chirag Shah — Edelweiss Capital — Analyst
So this is helpful, sir. Sir, second question was on the dealer profitability you indicated in the opening comments. Sir, is it more incremental and ongoing thing or there is some — because we had done a reasonable structural look at the dealership, the way they function a few years back. So is there something of similar nature you are looking at? And if some of the areas where if you would like to highlight what we are looking at? Because I understand that dealers are reasonably efficient –?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
You see, one of the things is, we don’t keep pushing. See, one of the most important things that our dealers appreciate from Ashok Leyland, and I’ll quickly hand it over to Chairman also, is we don’t keep pushing inventory into their system. So for them what happens is, they are — they don’t have the pressure of having to take vehicles and then having — getting stuck.
The second part of it is, dealer profitability is something which is very core to us in Leyland. So for us, the partnership of — I mean, the profitability of partners is equally important, if not more. And there is a lot of focus on improving dealer viability where we have seen that some of the dealers have not been able to get the volumes that are required, we’re trying to help them to realign some of the geographies.
We are also looking at some of the — where some dealers are underperforming. It’s not that there was any constraints. In those cases, I think there has also been a refresh of the entire dealership that has happened quite a bit over the last six months. And that is why you’re actually seeing the growth in the market share as well. Of course, apart from the great — the customers’ acceptance of products. But I have said this, I would now hand it over to Chairman to actually expand on this.
Dheeraj Hinduja — Executive Chairman
Sorry, I didn’t catch the question initially, but Gopal, you’ve elaborated quite extensively on the dealers. Is there any specific elements that still requires clarification?
Chirag Shah — Edelweiss Capital — Analyst
No, sir, this is helpful. Thank you very much and all the best.
Dheeraj Hinduja — Executive Chairman
Okay. Thank you.
Operator
Thank you. The next question is from the line of Joseph George from IIFL Securities Limited. Please go ahead.
Joseph George — IIFL Securities Limited — Analyst
Thank you for the opportunity. I just have one question. So when we look at the current TIV, so if you look at quarterly volumes and adjusted for seasonality, we note that it is fairly close to the peak TIV, if I recall correctly, it was about 3.90 lakhs, close to 4 lakhs. And current volumes adjusted for seasonality would be 3.4 lakhs, 3.5 lakhs. So despite a large part of normalization of volume, we are seeing that discounts are significantly high, which is counterintuitive, because typically good volumes come with lower discounts. And in that context, when you look at what your peak margins can be when volumes completely go back to previous highs, maybe say in FY ’24, do you think you can reach the 11 to 12 kind of percent EBITDA margin that you have reached in the previous cycles?
Dheeraj Hinduja — Executive Chairman
I would say that one of the things we do need to take into account is that as we have gone through these emission warrants, there has been a cost escalation as a result of those Switch, as we have not been able to pass on substantially onto the market. But I feel quite comfortable in saying that an EBITDA of 11%, 12% or let’s say, plus 10%, possibly 11% is where we, as an industry, should offer it because there needs to be efficiency internally within the company.
So even if we are not able to price at the level due to competition, where we should be, we are definitely working on our internal efficiency with many cost reduction initiatives to try and see how we get to better EBITDA level.
Gopal, would you like to add anything?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
No, I think you’ve stated that, and all I can just add is, internally, we are also pushing to ensure that we not only grow but grow profitably and with all the strategies that —
Operator
Ladies and gentlemen, I’m sorry, we have lost the connection of Mr. Gopal Mahadevan, I’ll quickly connect them. Give me a moment. In the meanwhile, I would request Mr. Hinduja to continue with the answer.
Dheeraj Hinduja — Executive Chairman
Yes. I think as Gopal was saying, the internal efficiencies what we are focused upon and the last two quarters, the growth that we see in market share, I would like to reemphasize, a lot of it has to do around the product itself and the performance of the product, the performance of the engine. So if we can keep going on as the customers are becoming more sophisticated, looking at the total cost of ownership as opposed to that immediate point of price when they initially purchased, I think we are set up very well.
Operator
Sorry to interrupt, sir. We have the line of Mr. Gopal Mahadevan connected now.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Yes. Thank you. I got cut, sorry. Go ahead, please.
Dheeraj Hinduja — Executive Chairman
So I hope I’ve responded to your question.
Joseph George — IIFL Securities Limited — Analyst
Yes sir, that’s all I had.
Operator
Thank you. The next question is from the line of Saurabh from Ambit Capital.
Saurabh — Ambit Capital — Analyst
Sir, can you please throw some light on the exceptional item that we’ve seen in the accounts this quarter, like the discontinued products for the LCV division and, more importantly, regarding the expected outflow due to the accidental damage?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
See, that is — the discontinued operations are nothing but a quarterly charge that happens on account of the merger of the LCV business with Ashok Leyland. So this is a very minor charge that happens every quarter, it’s an accounting thing which will run through a couple of years. I don’t know the exact time, but this is a chart that makes you come in, because basically the businesses have been merged, all the three LCV companies have been merged. What was the second part — second bit, please?
Saurabh — Ambit Capital — Analyst
Regarding the expected outflow due to the accidental damage, which is appearing in the consolidated accounts?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
No, that is nothing, but I think it pertains to Optare switch where there was a fire and so there is an insurance claim that is pending, but I think the Switch management has conservatively taken a charge of that. Balaji, is there anything else to add?
Okay. So we can go ahead on that basis, yes. Next question, please.
Saurabh — Ambit Capital — Analyst
Yes. And sir, basically at the cost of repetition, regarding the other expenses. Sir, when I was going through the previous trend, so normally what we’re seeing is that in the first quarter, other expenses have been normally lower as compared to the fourth quarter by approximately 10%, 15%. But in the first quarter, we’ve seen on the contrary, some rise as a rainfall. So just wanted to understand if there were any one-offs in the quarter? Or have the expenses actually gone up, the S&D or the marketing expenses?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
No, let me again explain this. I mean it’s a — see, last quarter was a little different in the sense, and I had mentioned it in the call as well that we were able to handle quite a bit of reductions in various input services that we had taken. The second one was there are certain reversals of expenditure that we take throughout the year, not because of anything, it’s we’ll have to wait. I mean we have to wait for the end of the year for the actual performance to happen. So like, for example, incentives, sales incentives. Other one is, say, for example, some of the provisions that we make on employee costs, etc., depending on the actual performance of the company. And then like I mentioned to you, the other aspect which we are kind of missing out is unlike in the previous years, this is quite a high inflation year and so you have to — we have to reset some of the contracts that we have entered into effective 1st of April. So you’ve seen the cost buildup.
What I can only share at the moment, and this is not an — we can’t tell it with accuracy, but we believe that as the year moves on, we will see a kind of a gradual tapering off also of the expenditure as a percentage to sale. And as the year moves on, you would see that happening.
Saurabh — Ambit Capital — Analyst
So if I’ve got it right, correct, so basically it’s the same expenses, but they have gone up, and there are no any one-offs in this quarter, right?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
No, no, there are no one-offs in this quarter. There’s nothing exceptional, huge hit or anything of that nature, nothing, if it was, we would have shared it with you.
Saurabh — Ambit Capital — Analyst
Right. And lastly, on the passenger vehicle — passenger MHCV business. So basically, we’ve seen that it has been the biggest laggard in terms of recovery, right? So what are your readings from the market in terms of demand outlook? Also, this pace has historically been largely a three peer game, right? But the gradual shift towards e-buses, what kind of disruption you’re looking at? Any color on those?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Chairman, would you want to answer that? Or should I take it?
Dheeraj Hinduja — Executive Chairman
So, I mean, as I mentioned at the start of the call, you’re looking at — based on ICRA, this segment should see a growth of anywhere between 30% to 35%. Demand is coming back right from school buses to SPUs, from the private segment. And you’re right, competition has increased. There are more entrants in this segment as well. But luckily, we have very strong relationships with a lot of the SPUs, they’ve seen the performance of the product, their people — their is trained in their depots to deal with our products pretty well. So we do feel that we can continue our dominance within this segment. And the challenge always is to make sure that we have new and newer products coming up in this segment.
As far as the EV segment is concerned, it is still a smaller number, although when we hear about the tenders, whether it’s 2,000, 4,000, but those are all to be delivered over a period of time. So in the immediate sense, diesel will continue to be the top priority for this segment. But we are seeing growth in EVs. Actually seeing growth faster than many other geographies, which is very encouraging in terms of the government initiative to push the green agenda. And I can assure you, we’ve been number one when it comes to buses and we would like to continue that whether in whichever fuel types it could be, diesel, electric, and going forward, CNG, etc. So we are quite comfortable and confident in this.
Saurabh — Ambit Capital — Analyst
Got it. And Gopal, lastly on a data point if you can help me out here. What would be the spares mix and Q1 spares revenue? That’s it from my side.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Sorry, what would be, I didn’t understand.
Saurabh — Ambit Capital — Analyst
What would be the spares mix in the total revenue and revenue share mix as a percentage and the revenue, absolute revenue? If you could share.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Yes. So spares was about 8% of the overall revenue. So the total revenue was INR7,223 crores.
Saurabh — Ambit Capital — Analyst
Okay. And it has increased Q-o-Q?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Q-o-Q, the spares revenue that is you’re talking, Q-o-Q as in sequential? Or is it —
Saurabh — Ambit Capital — Analyst
Sequential.
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
Sequential, it is — it would be marginally lower versus Q1.
Saurabh — Ambit Capital — Analyst
Okay. Got it. Thank you.
Operator
Thank you. Ladies and gentlemen, due to time constraint, that was the last question for today. I now hand the conference over to the management for closing comments.
Dheeraj Hinduja — Executive Chairman
I would just like to thank everyone once again for participating and for your interest. I hope you do see continued growth in this industry. Even if you look at the GDP analysis, which is estimated anywhere between 6%, 6.5%, 7% growth, with that growth rate, we believe that this segment should see a continuation of the upward trend that we’ve witnessed over the last few quarters. And for us at Ashok Leyland, the important aspect is to make sure that our customers receive the best products and they receive the best service. Our subsidiaries like Hinduja Leyland Finance are performing well. Switch as a company, both in U.K., and in India and expanding into Europe is also moving at the pace and plans that we have for us. And we continue to be quite optimistic about the next few quarters. We do realize there are headwinds, there is inflationary pressures, interest rate hikes, and conflicts between Russia-Ukraine. But if the government growth plans continue, then we are quite optimistic about Ashok Leyland’s performance as well. Thank you.
Gopal, would you like to add anything?
Gopal Mahadevan — Whole-Time Director and Chief Financial Officer
No. Thank you, Chairman. I think nothing more. Thank you very much for the interest in Ashok Leyland all of you, a very healthy and attending today in the call. Thank you.
Operator
[Operator Closing Remarks]
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