With the strong revival in the automobile sector and the economy, commercial vehicles segment has started garnering strong attention. In this, Ashok Leyland is being looked at closely. On the one hand there is the strong presence in this segment and along with Tata Motors garners around 87% of the market-share in commercial vehicles segment. Moreover, lessons learnt from the previous cyclical upheavals has prompted the management to derisk its operations and ramp up its non-cyclical business, comprising buses, defence and spares, exports and industrial/marine engines. The non-cyclical businesses now contributed around 50% to revenues in 2008-09. The passenger bus segment contributing around 18% to the company?s revenues is set to grow as demand grows. Under the JNNURM scheme, the Centre has issued orders for more than 12,000 buses. The company has leadership presence in the medium to heavy commercial passenger segment, with a 54.6% share in 12 tonne plus segment. Analysts reckon that the company is better-placed to pass-on any sharp increase in raw material prices; and has already passed on 1.5% pricing increase in October 2009. The demand uptick would see its operating margins grow from below 4% levels to 11% in the next two years. Much of it will come from the benefit from fiscal incentives at its Uttaranchal plant, where it would have no excise duty within the state; zero income tax on profits from the plant and the savings would be around Rs 60,000 per vehicle. The concern would arise from its ability to mange inventories and also its working capital. Also the slowdown of construction activity and overall gloom in West Asia will also have to be managed. Exports had declined 15.5% in 2008-09 and the West Asia contributes to around 37% of total exports. Analysts expect the aggressive reduction in inventory and implementation of cash-&-carry system for dealers after the June quarter in 2009-10 has helped release around Rs700 crore worth working capital for the company. The strengthening of its captive financing arm is expected to support the company as 90% of the vehicles are sold through financing.