Refused to commit on zone wise dealer count.

Starting with exports for tractors, it has been a very strong performance; in the first four months, there is a 63.5% growth. Can you talk about what is helping the strong exports? How do you see the outlook for this year?

Yes, thanks, Raghu. This is Bharat Madan. So, I think if you look at the numbers, the last year our base was very low on export in this first three months. That is why you are seeing almost 80% growth coming in. But if you look at the numbers now, we have stabilized export at about 500-600 tractors per month. So, we expect similar momentum will continue in the balance of the year. So, it indicated we will be looking at 25%-30% growth this year and the total export volume over last year. But now, since the base will also keep on improving for the last year numbers, so maybe the growth rate will be slightly lower as you would have noticed in the month of July also. But we expect the momentum will be there and will continue to be in this range of 500-600 tractors each month.

And which markets are doing well, sir?

So, major exports are to the European market only. Most of the compact tractors are being dispatched to Europe. But obviously, we are catering to more than 80 countries in export and obviously, the numbers will continue to be there. But the major volume is still coming from European market.

On the UP plant construction and land acquisition, if you can give some updates, what is happening there, do you think that this calendar year, we would get the land and commence the construction? And are you seeing any delays happening on the regulatory side?

Yes, there have been certain delays with the UP government because we have been in constant touch with them. I think there has been some delay in acquiring the land from the farmers. So, still I think from the land parcel which we are interested in, some portion of that land is still to be acquired from the farmers. So, the government is committing they will be able to complete the requisition within the next one month or so. I think once the acquisition is completed by them, then our process will start. So, to your question, yes, we expect we should be able to close it. So, I do not know whether this calendar year, but definitely within this fiscal year, the acquisition should get completed.

To Neeraj, sir, on the new products, you have a very strong pipeline. Promaxx, Farmtrac has done initially well and also you have the Kubota MU, the Powertrac Paddy Specialist, and I think even the Promaxx second phase to come by end of the year. If you can talk about how do you expect these products to help in terms of positioning of Escorts, the market share potential, and especially in the south region where Paddy Specialist tractors, how they can strengthen the position there?

Yes. Hi, Raghu, this is Neeraj this side. Yes, so you have rightly said, the new products are actually helping us grow, because the industry growth actually to a very large extent is not favorable from EKL's perspective. So, Promaxx phase one is doing well. And in whatever states that we have introduced, Farmtrac market share has grown. Though it is early days yet, and the growths are marginal, but we are seeing positive trends. Also, now, with the very recent introduction of Kubota, and the Wetland series, by the end of Quarter 2 or early Quarter 3, in Powertrac, we should see some positivity in the southern markets or the eastern part of the country where the paddy is there. So, we can see some positive results starting Quarter 4, but next financial year would actually be the game-changer in these markets.

I was trying to understand that we have a adverse regional mix. Can the new products offset that for us? And say, H2, do you expect to grow in line with industry on all India basis?

Yes, you are right. So, the Kubota introduction, as well as the Powertrac, Wetland series, they will, to some extent, help in bridging this industry gap, that deviation is there. And also, next year, a couple of other launches will be introduced, are planned actually, as you have already mentioned, Promaxx phase two, and also Wetland phase two. So, I think the pipeline is very strong, and we should see our market share growing in our erstwhile weak markets.

Bharat sir, we have started off on a good margin trajectory in Q1. So, given the focus on margins, the synergy benefits, how do you see the broad range of markets for FY26?

So, in the first quarter, the commodity prices were soft for the tractor industry. So, we do not see much impact really coming in from the inflation perspective. But now, of late, we have seen the metal prices started hardening. So, that impact will start getting visible now from Q2 onwards. So, I think overall, our guidance for full year will still remain in the range of around 12%-12.5% sort of margin for the overall business.

What percentage of export revenue is routed to Kubota Network? And what is our target of export revenue as a percentage of total revenue by FY27?

I think as Prateek mentioned in the opening comments, in the first quarter, 52% of the exports happened to Kubota Network and we expect the number will only keep on improving as we move forward in the future. I think overall, right now, our total export revenue is quite low; it is about 5-6% only for the total top line. But our mid-term business target for next 4-5 years is to take it to about 15% level.

My second question is regarding the UP plant. When can we expect the phase one of the production to commence in the UP plant?

See, right now, we are still waiting for the land acquisition process to be completed, where the government is delayed now on that project by almost six months. So, they have not been able to complete the land acquisition from the farmers. I think once they complete the acquisition, then our process will start, which will include all testing for soil, water, environment testing and all other formalities. So, we expect within this fiscal year, we should be able to complete the land acquisition and from next fiscal year, we can start working on the construction of the facility.

Can you just update what kind of a tractor industry growth expected for this year from earlier guidance of mid to high single digit? And with the second half, particularly the base catching up, will it be still a positive trajectory or do you see it flatten out in the second half, sir?

Hi, Mumuksh. So, we stick to our earlier guidance of mid to high single digit growth for the entire year. Last year, the base was very high. So, in H2, the industry growth last year was close to about 15%. So, this continuous growth in H2 might not be there. It will actually depend on how the sowing season performs. So, the tractor season this year actually starts from August instead of September, and hopefully, the entire season would be over by the end of October. So, post the season, actual picture will emerge on how the industry will actually end for the current fiscal year.

And how is the dealer inventory now? And for this year, what kind of dealer expansion plan from the 1,600 currently, sir?

So, the dealer inventory is currently between four to five weeks for all the brands put together. And yes, we have a network expansion plan. So, we are looking at white spaces for all the three brands individually and working on them. So, yes, over the next three to four months, the dealer count should also improve significantly, primarily in the white spaces.

Sir, on the export side, how has been the initial response in the new markets like Mexico, Southeast Asia and Africa, sir?

These are not the new market for us. We were already exporting to Mexico. The only thing is the change which has happened is the integration of the channel with Kubota network. So, earlier we were exporting directly under Farmtrac brand name and we had our own channel, but now we are synergizing the channel and integrating. And if one of the distributors is strong, whether it is from Farmtrac or Kubota, then we are continuing with the same distributor under that brand name. So, the markets are already open. So, Mexico, we are exporting, South Africa, Europe, Sri Lanka, all these markets, we are already exporting now. So, the numbers will start improving, I think, as we move forward.

And sir, how was the input commodity cost movement for this quarter and what is outlook for next quarter, sir?

See, we get the impact of the commodity prices only with the lag of a quarter. So, the last quarter was soft. So, we saw some deflationary trend actually on the commodity side, especially for the tractor industry. Even though the steel price has started moving up, construction equipment did have some impact. But now, this quarter, in the Q2, we are seeing the negative impact will be there on tractor margins too. There is some increase in cost, which we have seen happening on the metal side, which will likely impact the margin in this quarter. So, let us see. But it is nothing significant as of now, which we can really see as threatening as we have seen in maybe two years ago. So, that sort of inflation is not there. There will be less than 1% impact actually.

First is on the channel expansion. Can you comment on network expansion of Kubota in North India and Escorts in South India? And how is it working with existing Escorts and Kubota dealer in the respective regions?

Hi, Vipul. This is Neeraj again. So, yes, we are working on the three brands, Powertrac, Farmtrac and Kubota. So, I will take a couple of minutes to explain. Powertrac to a very large extent is a pan-India brand. We do have white spaces in the south and some states in the eastern part. Kubota and Farmtrac to a very large extent are very regional-specific and the focus at the moment is on both these brands to expand the reach. So, currently, the integration is not there full hog. We are thinking of integrating on how the Kubota dealers in south can be integrated with either the Powertrac or the Farmtrac brand and vice versa in the north. So, we have initiated that and working on a pilot on that integration.

What is your marketing strategy for these brands like for Farmtrac in south and for Kubota in North India? Tractor being a mature industry, it is tough to crack market share of another player in a particular market. What is your marketing strategy for these two brands when you are opening a new dealership or trying to merge a dealership over there?

Vipul, your understanding is very right. So, the focus is on strengthening our weaker markets, not necessarily with all the brands put together. So, as I have mentioned to an earlier question, the introduction of new products will strengthen our reach and help us in appointment of dealers in our white spaces. So, it is absolutely not necessary for us, for example, to appoint Farmtrac dealers in the southern part of the country. Strengthening Kubota dealers, appointing Kubota dealers as well as Powertrac dealers in south, that is an example I am giving, will help us grow market share overall for EKL. So, it is absolutely not mandatory for us and we are not thinking of growing all the three brands in the entire country. So, depending on the suitability of the product with the application and the past presence of that particular product, we are expanding our channel.

On the discount. So, right now, the base was low for first half and in second half the base is catching up. So, how are we seeing discounts from that perspective, are you saying the industry might go with higher discounts in second half to maintain the growth momentum? What is your view on the discounts going forward and any color on current discounts?

So, Vipul, the discounts are not basis the industry growth or de-growth. These are seasonal. So, when the peak seasons come in, customers actually expect discounts and almost all manufacturers going for slightly higher discounts. Our strategy would be to be competitive in the market and if needed, the discounts would be there. But the higher discounts primarily to look at industry growth or de-growth are not there. It is primarily season specific. Discounts are given during the season and then those discounts are reduced once the season gets over.

My question is basically from the previous participant on the farm implements thing. So, at present, are we outsourcing this or we are making it in-house?

No, we are only buying it from third-party. So, the large part is actually imported from Kubota. With the harvesters and transplanters, we are importing from Kubota from Thailand, Japan and China. So, only the implement part, the rotavators, etc., that we are sourcing locally, the boom sprayers, baler, etc., they are all being sourced locally through the third-party arrangement. We are not making anything in-house right now.

Just if you can help us with the annual revenue number for this farm implements?

I think last year was about Rs.600 odd crores. So, we expect the number will be probably growing this year. We are seeing a good growth coming in from the back of this demand, the harvesters in the southern and eastern markets.

On the construction equipment business. Just a clarification. So, this time, we have sold older emission stocks at lower rates, right?

No. Since the emission norm came into play from 1st of January this year, so most of the manufacturers were carrying bulk inventory from last calendar year. So, they had built inventory in anticipation till 31st December. So, the major production actually happened in that period. And in this period of January to June, the production volumes have been quite low for the new emission inventory. So, most of the manufacturers have been liquidating the old emission. Because of that, the overhead absorption has been very low on this lower production. So, that is the reason which has impacted the margin. And also, 30th June was the last date for liquidating most of this inventory, so, which is also some of the reasons for impacting the margin in this quarter. But we expect, I think, once the demand picks up going forward from next quarter, the volumes will start improving, both on production and sales front.

And sir, on the construction equipment margin, any steps we are taking to bring back the EBIT margin to 10%-11% range?

So, I think on a full year basis, we should be in same margin level, I think, what we had last year. This quarter, like you said, since this was a temporary impact of cut down on the production and also liquidation of inventory, the impact came. I think the second half normally the demand is good for the construction equipment space. So, we should be back to the similar margin in the second half of this year.

And sir, my second clarification is on the other income. So, increase in other income was largely due to the M2M gains, right?

So, it is a mix of two elements. One, the overall treasury surplus has increased because of this money flowing in from the sale of railway business. So, we got those funds. So, this is a higher corpus we had. So, that also led to the increase in other income. And second obviously was the mark-to-market improvement because of interest rate cuts which RBI did. So, the impact of both combined is reflected in the other income.

And sir, what is the CAPEX outlook for this fiscal?

So, like we mentioned last time also, it is still in the range of Rs.350-400 crores, which is the organic one, other than the investment which will do for the acquisition of land for Greenfield plant.

So, my first question is on market share for this. Despite launching new products, of course, it is in a very initial stage. Our market share continues to slide. So, is it related to the market competition or anything to do with the inventory correction? And similarly, inventory is now also as indicated by Neeraj around four and a half weeks compared to industry inventory would be somewhere 47-48 days. So, we are much better off. So, now onwards, where do you see market share bottoming out?

So, hi, Mitul. Neeraj this side. So, you have spoken of the product introductions. So, the product introduction happened in the fourth quarter which was the Promaxx series. And as I have mentioned in my earlier comments, Farmtrac market share is gradually increasing. As regards to Kubota and Powertrac, there is no as such new product introduced in the past. This month only we have introduced Kubota, the 42 HP series and certain changes in the higher HP ones. And as mentioned earlier, the Wetland series is planned for introduction in September end, early October. So, the results of that we will actually see coming in from Quarter 4 as well as in the next year. As regards to the market share, yes, the market share has to a certain extent declined. Apart from various other factors, one of the key reasons is the industry swing. The industry swing has actually impacted severely the market share of EKL. The contribution of the EKL stronger markets to a very large extent has come down by about 5%-6%, which has actually impacted the market share. But having said that, I think this swing of industry should taper down in the coming months because industry growth started happening from September last year onwards and we should definitely see improvement in growth in market share in the ensuing quarters.

As you said rightly, last year September onwards, industry started growing and particularly from October onwards, it was a very high growth from South and West. So, now October onwards, probably this disparity between South and West and the other regions may not be there. So, considering that, second half, how one should look at compared to first half for the industry in terms of the regional growth, sir?

So, see, you rightly said, Mitul, because H2 last year was a 15% growth. So, this year, it will probably be a very marginal single-digit growth, or it might even remain at par. So, if it remains at par also, we are looking at a 4%-5% growth for the entire year. So, I think this disparity to a very large extent should tone down starting September and October. What has actually happened is now the industry, because of certain subsidies and other things, has started growing substantially in the eastern part of the country. So, that is another concern for us, but we are working on that. But I think this disparity, which is continuing for the past 10 or 11 months now, should subside as we enter into September and October.

Last question is on construction equipment side. As you highlighted, there was a inventory correction because of this emission norm and our production and dispatches were lower in terms of wholesale. So, can you give roughly a ballpark number between retail versus wholesale for the quarter for us or for industry? And where do you see that QoQ improvement for construction equipment in Q2 and Q3?

Yes. Hi, Mitul, Sanjeev Bajaj this side. So, for our business, largely, it is a retail-backed business. So, our numbers on wholesale and retail do not differ much and our channel inventory is also less than 30-days normally, and we try to always maintain that. It could be occasionally just start of the season, dealers might take a few machines extra, but generally, we try to maintain that in the 20 to 25 days kind of an inventory for the dealers. So, our retail numbers are similar to our billing numbers. Last year also, full year, it was neck-to-neck and this year also, we want to maintain it that way only.

On the export side, I do read some of the European markets stepping up now. So, can you just talk about the opportunity there, what is it that we are trying to do along with Kubota in the European markets?

So, Gunjan, as I mentioned, most of our exports are happening to European market only, and there we are seeing a good order inflow coming in from Kubota network. So, we expect the numbers should keep improving month-on-month as we enter those markets.

On the component side, there is this mention of warehousing, which has already begun in India for the Kubota global supply chain. Can you share more on this like, what is it the revenue contribution if at all coming in last year or this quarter and how should we think about that ramp up coming through on the supply chain servicing from India?

I think last year was close to Rs.100-150 crores of revenue and this year, we are looking at about Rs.250 crores of revenue coming from component exports. So, I think still it is a work-in process. So, I think we are still working on developing more vendor base, who can cater to this business. But as of now, the development is slow, because like I said, on the margin side, the major change will happen once your localization happens. Because just by doing a trading activity through vendors will not really give that sort of margin. So, that is why the major push has not been there so far. But obviously, the parallel team is working on developing the vendor base and the numbers will again keep improving year-on-year.

So, on this, I assume there is not much margin at the moment?

Yes, this is essentially a pass-through mechanism right now. We are sourcing from vendors and just trading in and supplying to Kubota. So, unless we start making certain components, which is a plan, where the margins will be better and comparable to the normal margins which allow to an unrelated entity. So, I think it will take some time. We are doing some manufacturing locally right now, but there is not much.

On TREM V, any update, because now we are getting closer to the timelines for implementation, right, so, what is the conversation, what are we expecting on the regulation to come through?

So, I think from the Tractor Manufacturing Association side, they had a meeting with the Ministry of Road and Transport and they already given their proposal. So, I think the proposal given was that from 25 to 50 HP segment, there should not be any change in the emission norm immediately. And on the balance segment, they can still explore if they can do those changes and move to TREM V. Now, issue is the ministry had indicated they will come up with the final decision on this. They are expecting middle of this month actually. So, once you get clarity on that, maybe we will have a better picture with us. But chances are 25 to 50 HP may get exempted or deferred.

Okay. I mean, those are the sort of conversations. I mean, government is open to deferring it out is the industry understanding, right?

Yes, that is right.

First one was in the last quarter, 70% of exports was routed through Kubota market. However, this quarter, as you mentioned, it was 52%. Is there any change that you can mention?

No, it depends on the order inflows because we also have been exporting to other markets where Kubota network is not existing. They were our earlier distributors, which we continue to export. So, it all depends on the network and the order intake you get from various countries. So, it can vary. But the larger part is still going to the Kubota network.

Sir, my question was regarding the sales growth year-on-year, which we are planning or targeting to achieve by FY26?

So, Vaishnavi, currently, our volumes with respect to last year are more or less at par. So, the thought is that in the coming months, we will actually grow in line with the industry or outgrow the industry marginally, depending on how the industry performs from a regional perspective. So, the intent is for the FY26, we end at a higher volume growth with respect to last year.

Maybe partly repetitive, but regarding the medium-term 15% target for export, are there any specific initiatives that you are taking for this?

Yes, so as we mentioned, I think there are multiple levers which we are deploying now. One, obviously is the export of the finished products which we are doing from India. As we mentioned, the numbers of export to Kubota is continuously increasing and that will continue to happen in the future too. The second, as we talked about is the component sourcing from India, which is also getting increased as the vendor base gets established there. And third is the service export which we will be doing, which essentially is setting up the shared services for them in India, both for R&D as well as for ID services. There also, the work has started and already the billing has started. So, there also we see a good opportunity in the next 4-5 years, the numbers will improve. So, all these will lead to going back to the number what we talked about, 15% of the top line which is the target which we intend to achieve through combination of these.

I just had a clarification that you now mentioned that 20% of your agri-machinery revenues are non-tractor, right? Is it possible to get a rough breakup of what is it from, let's say, engine, implements, spares, just rough idea would help because I think these are all revenue lines which are growing faster, I would think?

Spares and lubricants which is the larger part there. Then, the agri-solutions which is farm equipment bit and the engine is still the smaller part. So, all these three combined to give out 18-20%.

So, spares would be what, 10-12%?

Yes, roughly 10% you can say.

And engine would be a low single digit?

Yes, engine is still low, and the numbers were not very high there. So, I think last year we did about 20,000 engines and probably similar. Last year, there was a change of emission norms, a lot of pre-buying happened in the first quarter last year. So, this year, post emission norm changes, the demand slightly slowed down because the cost increases. But yes, it will remain in the similar range this year.

I am just trying to understand, spares would grow in sync with how the tractor business is growing. Implements is where the growth outlook is strong given we are adding new products with Kubota's help. And engine, is this something which is sizable or this is external, I mean, who is the customer base here?

So, in engine, there are two segments. One is the power segment, where engines are used for generators. So, the OEMs who make generators use our engines for making those gensets. The second segment is the OEM segment. So, like Kubota is the largest supplier of engines to the industrial equipment sector. So, that is the segment where they use engines of Kubota in India and also of Escorts in certain construction equipment machinery OEMs, who use those engines. So, both these segments, I would say 50-50 today is the overall volume. And Marine is another one. So, in Marine also, like for powering those power boards, so these engines get used. So, marine is another category where the engines go.

I was going through the presentation. You have 1,600 dealers now with Kubota also coming in. So, should not your access to the southern markets and all get slightly better so that you can have your market share improve now, like with the new products and everything in place?

So, hi, Amit ji. This is Neeraj Mehra this side. So, yes, you are very right. With the 1,600 dealers in place, our volume will actually improve as we said in our earlier comments. We are introducing a south special series in Powertrac in the last week of September or early October. So, that should actually help Powertrac. Currently, in the Powertrac and Farmtrac series, the product range suitable for paddy applications was an issue. With this range coming in and with a substantial number of dealers being there, we should see the volumes and market share growing.