Ashok Leyland stock drops nearly 5% as promoter pledges shares, UK plant shutdown looms

Ashok Leyland shares witnessed a sharp decline of nearly 5 per cent in early trading on March 27, driven by three key developments: a substantial promoter share pledge, the potential shutdown of its UK manufacturing unit, and broader market concerns over the newly announced US auto tariffs.

Promoter pledges over Rs 6,400 crore worth of shares

One of Ashok Leyland’s promoters, Hinduja Automotive, pledged close to 30 per cent of its holdings, a stake valued at over Rs 6,400 crore at the current market price. As of December 31, 2024, Hinduja Automotive held a 35 per cent stake in the company. The pledge raised investor concerns over potential liquidity pressures, triggering selling pressure in the stock.

Switch Mobility unit in the UK faces closure

Ashok Leyland announced that its electric bus subsidiary, Switch Mobility, may shut down one of its manufacturing and assembly units in the UK. The decision is attributed to economic uncertainties and a slower-than-expected transition to electric vehicles (EVs) in public transport across the UK and Europe. The Sherburn plant in North Yorkshire contributed a mere 0.6 per cent to Ashok Leyland’s overall sales in FY23 but posted losses of around 20-21 million pounds ($26-27 million) this year. The company has made it clear that it does not intend to inject further capital into Switch UK.

US auto tariffs weigh on sentiment

US President Donald Trump’s announcement of a 25 per cent tariff on imported automobiles and specific auto parts added to the negative sentiment in the sector. Although Ashok Leyland does not have direct exposure to the US market, the tariff news rattled the global auto sector, leading to cautious trading in auto stocks.

Brokerage views and stock outlook

Despite the recent setbacks, some analysts see a silver lining. Morgan Stanley stated that the company’s decision to shift its EV focus back to India could be beneficial in the long term, improving cost efficiencies and reducing cash burn. The brokerage assigned an ‘Overweight’ rating with a target price of Rs 284. Meanwhile, ICICI Securities maintained an ‘Add’ rating, setting a price target of Rs 250.

As of 10:30 AM, Ashok Leyland shares were trading at Rs 211.80, down 1.4 per cent, with 91 lakh shares changing hands. Investors remain cautious amid the evolving developments, awaiting further clarity on the company’s future strategies.