Ashok Leyland share price trades volatile on promoter pledge, auto stocks crash; what should investors do?

Ashok Leyland share price experienced heightened volatility in morning trade on the BSE on Thursday, March 27, driven by multiple factors, including promoters creating a pledge, US President Donald Trump's announcement of a 25 per cent tariff on auto imports, and the potential shutdown of UK manufacturing operations by its step-down subsidiary, Switch Mobility. Ashok Leyland's share price opened at ₹206 against its previous close of ₹214.95 and dropped nearly 5 per cent to an intraday low of ₹205.05. However, the stock pared losses significantly. Around 11:05 AM, the automobile stock was 0.63 per cent down at ₹213.60.

Ashok Leyland promoter creates a pledge

In a regulatory filing on March 26, Ashok Leyland stated that Hinduja Automotive had pledged 30 crore shares of Ashok Leyland with lenders.

The automaker company disclosed a note from the trusteeship service provider and onshore security agent, Catalyst Trusteeship, confirming that Hinduja Automotive Limited had pledged shares of Ashok Leyland in its favour, with Catalyst Trusteeship as the pledgee.

"A facility agreement dated 24 March 2025 has been entered into between Hinduja Automotive Limited (borrower) and certain lenders. Hinduja Automotive holds 1,01,94,28,678 equity shares, constituting 35.01 per cent of the issued and paid-up share capital of Ashok Leyland. A pledge has been created by the borrower over 30,00,00,000 shares, constituting 10.21 per cent of the issued and paid-up share capital of Ashok Leyland," said the regulatory filing.

Auto stocks crash on Trump's tariff fears

Most auto stocks, including Tata Motors, Ashok Leyland and Samvardhana Motherson International, suffered losses of up to 7 per cent after Trump signalled he will be implementing a 25 percent tariff on auto imports.

The Nifty auto index fell over 2 per cent in morning trade but cut it losses as the day progressed. Around 10:30 AM, the index was 0.85 per cent down. Equity benchmark Nifty 50 was 0.53 per cent up at that time.

Subsidiary Switch UK considers ceasing UK manufacturing operations

In a separate exchange filing on March 26, Ashok Leyland said Switch Mobility Limited, UK, a step-down subsidiary of the company that manufactures electric buses and has a presence across the UK and Europe, is considering the potential ceasing of UK manufacturing operations due to continuing general economic uncertainty in Europe and a lower-than-expected transition to EVs in public transport.

"In the wake of continuing general economic uncertainty faced in both the UK and Europe, and slower than expected transition to EVs in public transport, the board of directors of Switch Mobility Limited UK today approved the commencement of consultation process with the employees, which could potentially lead to cessation of its manufacturing and assembly activities at the Sherburn facility," said the company on March 26.

The company added 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 European markets when the market recovers from Ashok Leyland’s alternate manufacturing sites in India and UAE. At the same time, 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," said the company.

Ashok Leyland stock: What should investors do?

Experts are largely positive about Ashok Leyland stock. They believe the restructuring of Switch UK is positive for Ashok Leyland, as it will no longer be earnings-dilutive at a consolidated level.

"Post restructuring, Switch UK will cease to be earnings dilutive at a consolidated level, which is a key positive for Ashok Leyland. Also, neither of the Switch entities is expected to need any funding support in the near term. However, the recent increase in promoter pledge is likely to remain an overhang on the stock," said brokerage firm Motilal Oswal Financial Services.

Motilal has a buy call on the stock with a target price of ₹255, implying a 19 per cent upside potential from the stock's March 26 close of ₹214.95 on the BSE.

Brokerage firm InCred Equities has an add call on the stock with a target price of ₹265, implying a 23 per cent upside potential.

InCred pointed out that Ashok Leyland remains the leader in the e-LCV (electric light commercial vehicle) market, holding an over 80 per cent share in the 2-3.5T segment.

The brokerage firm highlighted that Ashok Leyland expects 50-80 per cent volume growth in FY26. According to InCred, its management indicates that there is no immediate need to make provision. It will look for value creation in India operations to help cover investment losses in the UK.

While fundamental experts appear positive about the stock, technical experts advise investors to wait for a daily breakout above ₹222 to initiate fresh longs.

Jigar S. Patel, Senior Manager of Equity Research at Anand Rathi Share and Stock Brokers, underscored Ashok Leyland stock is currently in a sideways trend, trading between S3 and R3 Camarilla pivots.

"A wait and watch approach is advisable for now. A fresh breakout can only be confirmed if the stock closes above ₹222 on a daily basis, signalling potential upward momentum. Until then, cautious observation is key, avoiding premature entry into the stock," said Patel.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.