Thank you. Good evening, everyone.

On behalf of PhillipCapital India, I welcome you all to Escorts Kubota Q4 and FY '26 Earnings Conference Call. I take this opportunity to welcome the management team from Escorts Kubota Limited.

Today, we have with us Mr. Bharat Madan, Whole-Time Director and Chief Financial Officer; Mr.

Neeraj Mehra, Chief Officer of Tractor Business Division; Mr. Sanjeev Bajaj, Chief Officer of Construction Equipment Business Division; Mr.

Rajan Chugh, Chief Officer of Tractor Kubota Brand and Agri Solutions Business; Mr. Sanjeev Garg, Head of Finance and CPMO; and Mr.

Prateek Singhal, Investor Relations and ESG. Before we start, I would like to add that some of the statements made by the company in today's call will be forward-looking in nature and are subject to risk as outlined in the annual report and investor releases of the company.

Now I hand over to the management for their opening remarks. Thank you, and over to you, Prateek.

Thank you, Amit. Good evening, everyone, and thank you all for joining us today.

During the quarter, India's macroeconomic environment remained broadly supportive, marked by moderate inflation, a softer interest rate outlook, and positive sentiment across both rural and urban markets. However, global geopolitical developments, particularly the ongoing conflict in the West Asia, continued to pose challenges, resulting in higher input and logistics costs due to disruption in global shipping routes.

Additionally, the depreciation of the Indian rupee against the US dollar further escalated cost pressure. In this operating environment, our focus remained firmly on delivering profitable growth and disciplined cost management.

We remain confident in the underlying demand fundamentals of our core business in the near term and will continue to focus on driving operational efficiencies and prudent capital allocation to create long-term value for all our stakeholders. We trust you had an opportunity to see the results and the earning presentation uploaded to the stock exchanges.

Let us now walk you through our key financial highlights of the company's standalone financial performance for the quarter ended March 2026. Operating revenue from continuing operations at ₹2,950.7 crores, up by 21.4% year-on-year.

EBITDA at ₹386 crores, up by 31.8% year-on-year. The EBITDA margin in Q4 at 13.1%, up by 103 basis points YoY.

PBT from continuing operation before exceptional item at ₹433.8 crores, up by 21.1% year-on-year. Net profit, PAT from continuing operations, stood at ₹324.8 crores, up by 29.6% YoY.

Please note that Q4 of the previous year include an adverse impact of ₹27.1 crores on the account of impairment of the investment in an overseas subsidiary and a joint venture in India. Excluding this one-time impact, net profit grew by 20% YoY.

EPS from continuing operation at ₹29.52 as compared to ₹22.79 YoY. Reported PAT, including discontinued operation, up by 9.2% YoY.

Some highlights of our standalone financial performance for the year ended March 2026 are as follows: Highest-ever operating revenue from continuing operations at ₹11,472.8 crores, up by 12.6% YoY. Highest-ever tractor volume at 133,670 units, up by 15.7% YoY.

Construction equipment volume came at 5,794 units. Highest-ever EBITDA at ₹1,513 crores, up by 28.5% YoY.

Margin at 13.2%, up by 163 basis points YoY. PBT before exceptional item from continuing operation at ₹1,805.5 crores, highest ever, up by 32.1% YoY.

Highest-ever net profit after tax from continuing operation at ₹1,380.9 crores, up by 24.4%, as against ₹1,110 crores in the previous fiscal. Earning per share from continuing operation at ₹125.52, up for the year by 24.3%, as against ₹100.96 in the previous fiscal.

The Board has recommended final dividend of 330% for the financial year 2026, equivalent to ₹33 per share. With the special dividend of ₹18 per share already paid, the total payout for FY '26 will be ₹51 per share for a face value of ₹10 each, an increase of 82% compared to the previous year.

Payout ratio, excluding profit for exceptional items, is at 26.3%. PAT including discontinued operation at ₹2,408.6 crores.

On consolidated basis, company financial performance for the year ended March 2026 are as follows: Revenue from continuing operations at ₹11,540.3 crores, up 12.7% year-on-year. EBITDA at ₹1,496.4 crores, with a margin of 13%, up by 159 basis points YoY.

Reported net profit from continuing operations at ₹1,366.4 crores, up 21.6% YoY. Net profit, including discontinued operation and exceptional item, at ₹2,394.1 crores YoY.

Moving on to segment business performance, in FY '26, the domestic tractor industry grew by 23.4% year-on-year, reaching an all-time high of 11.6 lakh units compared to 9.4 lakh units in FY '25. This robust industry growth was supported by healthy rural sentiment, supported by strong farm income, favorable and well-distributed monsoon along with adequate water reservoir, strong crop production and higher MSPs, minimum support price, reduction in GST rate, accelerated pace of farm mechanization driven by government initiative and state-level subsidy program.

Beyond near-term driver, long-term fundamentals for the tractor industry remain strong: low mechanization penetration relative to global benchmark, rising rural wages, labor shortage during peak agricultural season, and the increased need for time-efficient farming practice continue to underpin sustainable demand for tractor and farm machinery. Our domestic tractor volume at 126,994 units, highest ever, up by 14.9% YoY.

As compared to the industry, our performance was moderated by regional demand variation. Growth in North and the Central region, our strong markets, was around 17%, whereas other regions witnessed a growth closer to 30%.

Additionally, the limited availability of certain key new models introduced during the year impacted our ability to fully capitalize on demand. During FY '26, we placed strong emphasis on executing excellence with a clear focus on improving retail conversion, expanding market reach, and enhanced on-ground responsiveness.

A key pillar of this effort was the deepening our financial partnerships as well as launch of our captive finance business. We strengthened engagement with both national and regional financiers, reducing approval turnaround time at the dealership level and introduced more customized financing solution aligned to specific customer profile.

These initiatives support higher retail throughput and improved conversion across market. We strengthened our dealer engagement and capability building through sharper retail monitoring, targeted training program for new product platforms, focused incentive structure during peak demand period, and close collaboration on inventory and supply planning.

These actions enhanced dealer confidence, improved product availability in key micromarkets, and enabled us to manage regional demand variation more effectively. FY '26 marked a significant year in our product journey with a comprehensive product portfolio refresh aligned to evolving customer need, crop-specific application, and regional requirement.

Key launches during the year strengthened our presence across core, premium, and application-specific segments, receiving encouraging market response. We continue to invest in innovation, platform renewal, and fast go-to-market cycle, with several new product introduction planned for FY '27, reinforcing our commitment to sustained growth and market competitiveness.

Looking ahead, we expect the current industry momentum to sustain in the near term. However, geopolitical developments, potential supply chain disruption, and rising input costs could moderate farmer affordability and sentiments in the short term.

Additionally, evolving weather pattern, particularly emerging El Niño signals, will remain a key monitorable influencing future demand trend. On export front, the tractor industry in FY '26 was at 105,000 tractors, up by 7% as compared to 98,800 tractors in FY '25.

Our export volume stood at 6,676 tractors, up by 33.8% as against 4,991 tractors in the previous year. Sales through Kubota global channel account for approximately 60% of the total export.

Non-tractor revenue comprising agri solutions business, engine business, and the service and spare part business in FY '26 constitute 18% of agri machinery segment revenue as against 20% in the previous year. During the year, under agri solutions, we introduced next-gen KA6 and KA9 ride-on transplanter, engineered in Japan, which deliver higher productivity, superior planting precision, and improved operator comfort.

These models are well aligned with the accelerated shift towards farm mechanization driven by labor shortage and government support, particularly across Asia, and benefit from global trend showing strong adoption of mechanized transplanting for improved efficiencies and yield. Going forward, we remain focused on expanding our advanced agri mechanization portfolio, leveraging Japanese engineering to bring differentiated productivity-enhanced solution to the market.

Agri machinery product segment revenue for the year ended FY '26 at ₹9,709.6 crores, up by 15.8% as against ₹8,447.2 crores in the previous year. EBIT margin for the agri machinery business were up by 190 basis points at 12.6% as against 10.7% in the previous year, led by easing material costs, better operating leverage, and cost control measures.

Coming on to the construction equipment business, in FY '26 was a year of transition for the construction equipment, by a combination of extended monsoon, slower project mobilization during the first half, and a broader normalization in demand following the early surge. As a result, served industry volume across crane, backhoe loader, mini excavator, and compactor was declined by around 7-odd percent YoY, mainly led by 13% decline in the crane segment, 10% in the backhoe loader segment, while mini excavator and compactor grew by 38% and 5%, respectively.

Our construction equipment volume stood at 5,794 machines, down 10.6% year-on-year. Throughout the year, we remained firmly focused on long-term competitiveness, operational discipline, and protecting the strength of our franchise while continuing to invest selectively in the capability critical for future growth.

As the year progressed, industry conditions improved sequentially, the extent of degrowth moderated throughout the first three quarters, ending the year with the growth resuming in Q4 FY '26. During the quarter, the served industry in Q4 grew by 4-odd percent, while our volume increased by around 9% YoY to 1,877 machines, allowing us to perform better as compared to industry and gain market share.

This performance was supported by improved execution, better channel throughput, and gradual stabilization in demand environment. Construction equipment segment revenue for the quarter came at ₹556.5 crores, up by 22.6% YoY.

EBITDA margin came at 12.7%, up by 386 basis points YoY, led by operating leverage, improved cost discipline, and more favorable product mix. During the year, we continued our strength, our construction equipment focus, and we introduced Kubota KU26 mini excavator operating advanced precision and compact performance for urban and confined space projects.

We also showcased Hydra 15 Mining, BLX 75 backhoe loader, and also showcased the concept line of Hydra 72 crane, representing a significant step in the high-reach lifting with new 72-foot boom and enhanced safety system. These product actions reaffirmed our long-term commitment to engineering in-depth.

Looking ahead, we believe the fundamental drivers of the construction equipment industry remain intact: continuous emphasis on the public infrastructure development, improving visibility on project awarding, and increased focus on urban infrastructure, mining, and industrial activity provide a supportive medium-term demand backdrop. Additionally, evolving geopolitical developments are reinforcing the importance of the domestic infrastructure creation and supply chain resilience, which should structurally benefit the sector over time.

At the same time, we remain mindful that the geopolitical uncertainty may lead to a temporary supply chain disruption, volatility in the input cost, and potential pressure on the pace of the government capital expenditure. We will continue to closely monitor these external risks while maintaining flexibility in operation and cost structure.

Now we'll request the moderator to open the floor for the Q&A.

Yeah. Hi, thanks for taking my question.

My first question is on the industry growth outlook. You did mention a couple of things that the momentum is sustaining, but the external risks are there.

How are you internally planning for fiscal '27 for the tractor industry growth? There are a bunch of new products that you've launched in the last couple of quarters.

Can you also talk us through, a bit more on those products and how they can just, they can sort of help strengthen the market share, market share improvement going forward?

Hi Gunjan, good evening. This is Neeraj this side.

As already mentioned in the opening comments, we expect the industry to taper down over the next few months. The overall guidance for fiscal year '27 is kind of a flattish industry, 2%, 3% up, 2%, 3% down.

That is what currently we are looking at. Overall, from the tractor business perspective, I think we're very confident.

Over the last few months, there have been product launches across the three brands, and few other launches are planned over the next three, four months. Plus, we have utilized last year in taking certain corrective actions and developing the channel.

Both from the channel perspective as well as on the product side, we are well placed. Certain product gaps have been covered.

Financial year '27, from a market share perspective and volume perspective, looks pretty positive, irrespective of the outlook of the industry.

Okay. It's fair to assume that we're confident of a positive growth irrespective of whether industry is a mild dip as well?

Absolutely, absolutely. The products will actually help us tremendously.

There were major product gaps. I had spoken in the last call also, we have introduced the paddy special tractors for the southern market, which was a major gap.

It's early days yet, but the bleed in south in terms of market share has started to drop. This year we intend to see, or we will see, a gradual increase in market share in these markets.

Plus, it will be not prudent for me to speak on the new product launches, but certain other product gaps we intend to cover over the next three to four months. We are actually pretty confident from the new product perspective side.

Got it. Can you also talk a bit about specifically on the Kubota brand scale-up that was anticipated in terms of expanding the geo-reach, trying to reconfigure the products so that pricing is more suitable for Indian market?

Where are we on that journey as far as the Kubota brand goes?

Rajan sir, can you answer?

Yes, sure. Thanks for the question.

On Kubota brand, we have both agri solutions and tractors. We kind of position ourselves there.

In terms of tractors, when we talk, you're right, we've had some gaps and this year we are poised to launch multiple products to plug some of those gaps, and quite upbeat about improving position in the market with the Kubota brand. As well as, like Prateek mentioned earlier, on agri solutions, last two years we've been launching newer products, newer technologies, and this year as well we are planning to expand our portfolio in harvesting segment as well as planting segment.

Both in coming quarter and little later part of the year, we have quite a robust pipeline of products getting introduced this year.

Got it. My last question is on the margin performance.

It clearly seems a bit underwhelming when I look at the quarter-on-quarter EBIT margin decline. Can you give us some color on what's really happened in this quarter and how should we think directionally, because I'm assuming a lot of cost pressure from steel hasn't showed up in this quarter, right?

What explains the performance in this quarter and a bit more color on the outlook for next year?

Gunjan, obviously, some pressure had come on the inflation side, but it's not much in this quarter as you mentioned. I think most of it will happen in the coming quarters.

It's mostly issue on the mix side, where the new product sale actually had gone up. There's also some increase in the non-tractor revenue which slightly was up.

There the margins are lower compared to the tractor business. That's why year-on-year if you see there is a marginal dip, which is not significant.

I think it's more or less 1% dip if you compare year-on-year on the EBIT margins for agri business. Though compared to the Q3, obviously Q3 was the operating leverage, the volume was way higher, and which is normally the case.

Going forward, we do see pressure will be there on the commodity side because you're still getting a lot of request from suppliers for the passing on of input cost increases, and our procurement team is still in discussion to finalize those numbers. I'm sure it's going to be significant in the coming two quarters.

We will have to wait and watch and see how this geopolitical situation really emerges and how much is we are able to pass on to the market.

On a full-year basis, can we keep it flattish or do you see that there's probably some hit on a full-year basis?

Depends, there are certain costs which are going to be permanent, especially their cost related to energy and manpower. As in Haryana, the minimum wages have been increased by almost 35% for contract labors, and in UP also where our larger vendor base is situated, there also the costs have gone up by almost 20% to 23%.

This is something which, obviously, will be a permanent increase. This is also going to impact our margin a bit.

Even though on the commodity side we expect even if there's a temporary increase, it will come back, hopefully, once the situation improves. The process costs which are getting passed on, especially on the energy side or on the manpower side, these probably will not come back.

As we had taken marginal price increase in the last month and in this month, in April, to tackle some of those cost increases. Again, we'll have to really see.

Our effort will be to maintain the margin on a full-year basis, but obviously it's too, too early to talk about that unless we know how the geopolitical situation really emerges.

Got it. Thank you so much.

I'll join back the queue.

Good evening, team, and thank you for the detailed opening remarks. Firstly, to Neeraj sir, can you talk about the region-wise performance, which regions should be relative outperformers or underperformers in FY '27, and how will that be beneficial for Escorts?

Hi Raghu. Thank you for the question.

First on financial year '26. If you see the industry growth in the northern and the central part of the country in the last fiscal, as also mentioned by Prateek, was close to 16%, 17%, which are our stronger areas.

In the western part and in the southern part of the country otherwise, the overall growth was about 30%. West was to a very large extent driven by subsidies.

We feel that financial year '27, from an industry perspective, should be to a certain extent good from EKL's perspective, because the growth in the last fiscal has not been in line with the overall growth of the industry in the northern and the central part of the country. To answer specifically to your question, I think overall, as we have mentioned, a flattish outlook, or a marginal 2%, 3% growth for financial year '27, the major hit will actually come in terms of industry in the western part and the southern part of the country.

North should be more or less stable, or low growth kind of a scenario. That is on the regional outlook.

Noted, sir. The new products plus the favorable regional outlook, both should be positive for Escorts in growing volume and gaining market share for FY '27.

We are confident on that, Raghu.

Thank you, sir. My second question is to Rajan sir.

Sir, the non-tractor share in agri segment is a meaningful part. Can you indicate what kind of a growth you expect in farm implements in FY '27 or the next two, three years due to rising mechanization?

Also for the Kubota, under the Kubota brand, tractors were expected with Escorts engines. When is this expected to happen?

Thanks, Raghu. This is Rajan here.

Your first question on the agri mechanization farm machinery other than tractors, so as we've also talked about, in past three years, we've been growing pretty robust 35% plus kind of a CAGR. We continue to look at this segment at least in 20% plus kind of for next three years outlook, largely because the kind of product pipeline we have and the channel we are expanding.

Also the newer products which we'll be introducing every year. We kind of consolidating our position in harvesting segment, which is second to tractors when it comes to mechanization, both in terms of volume and size of the market.

Now coming to tractors, I won't want to talk about specific timeline on localization, but we continue to improve and introduce newer products. This year we almost planned about eight or nine newer products with three or four new segments will be covering when it comes to tractors.

Similarly, next year also we have a decent pipeline of products coming in to fill the gap and improve our position in tractors. We are kind of increasing or improving our localization of components and products in India in both segments, machinery and tractors.

Thank you.

Thank you, Rajan sir. Lastly, to Bharat sir, you indicated about the commodity inflation.

Approximately how much is the commodity impact expected in the near term as a percentage of sales? How much price hike was taken in April?

Would it be around ₹10,000 per unit, and how much more is required?

The commodity right now, like you mentioned, is still not finalized because it's still negotiation happening by the procurement team with all the suppliers. The indication we are getting is varying because depends on commodity to commodity, like tire suppliers are asking for 15%, 20% hike, steel is already gone up by 7%, 8%, which we've seen in the construction equipment space.

The base metal, both copper, aluminum, everywhere we're seeing the similar double-digit pressure. Then there are process costs.

We don't know where it will really end, but I think our feeling is it will be somewhere 5%, 6% sort of cost increase can happen. Now question is how much we will pass it on now or how it will be passed on in next quarter to the supplier, and how much of this can be further passed on to the market, to customers.

Like you mentioned, we had taken about 1.5% sort of price increase in April across various brands on tractor side and also on construction equipment side. This is not really sufficient to take care of any of these price increases.

We are still talking to many other players and also suppliers to see how much because there are many costs which are one-time impact. These are not a recurring sort of cost.

There are costs in terms of like someone not getting LPG supplies, they are paying higher prices to get those continued supplies so that the supply chain is not disrupted. These are one-off costs which probably can be negotiated and amortized over the longer period of time rather than taking in one quarter.

That's something is too early to talk about. We'll obviously try to minimize the impact and it will not be different from what maybe the others in the auto industry will really pass on.

Noted, sir. Just a clarification, 5%, 6% would be as a percentage of revenue or the increase in RM basket?

Revenue. RM is much higher, because all metals, base metal everywhere is double-digit sort of inflation.

Lastly, capex and investments expected for FY '27, sir?

Capex, normal capex is in the range of ₹350, ₹400 crores only. Last year also I think we spent about ₹311 crores on total capex, that's a cash flow.

Greenfield will be additional, because

the greenfield is going to be a larger investment, which we expect should be, I think this year will be only about roughly ₹500 crores somewhere around that. This will include your land development, boundary, etc.

The land initial payment we already made and balance payment will happen probably within this quarter.

Investment into captive finance division, how much has it been so far and how much more is required? Sorry, that's the last question.

Far we had invested ₹200 crores in the capital and additional approval was taken for additional ₹500 crores. Obviously, we are injecting as and when they need it.

By the year this year-end, we expect maybe additional ₹300 crores will go, and balance ₹200 will go next year. This obviously depends on the portfolio and how much AUM they are able to maintain and grow.

Many thanks, sir. I'll fall back to the queue.

Hi. Thanks for taking my question.

The first one is with regard to the tractor industry outlook. When you are talking about a flattish or 2%, 3%, what is the type of quarterly volatility you are looking at and what's the exit type of considering it's a high base in the second half?

Hi, Neeraj again this side. See, last year the overall growth was 23%, but quarter one, the growth was very subdued.

It was about 9%. I think we will see a growth in this year, sorry, in this quarter, and then this growth will to a certain extent taper down.

H2 would be a substantial negative growth because the base is very, very high. Also the impact of the monsoons, wherein the forecast has been a subnormal monsoon this year.

The impact will also come in H2. H2 would probably be a substantial degrowth basis these reasons.

H1 should be at par kind of a scenario.

In that context, the FY '28, again it will be a challenging to turn around from a negative growth second half into a positive territory, or you feel it will all again depend on the monsoons?

See, Pramod, the tractor industry has been kind of cyclical. If you look at the industry over the last 8 years, leaving aside the last year, it has been alternated in a growth and a degrowth.

One year it grows, the next year it degrows, then it grows, it degrows. Over the last 8 years or 9 years, that has been the cycle.

Yes, the growth has been higher than the degrowth of the previous year. It's very early to comment on financial year '28, but financial year '27, even after our guidance of a flattish kind of industry, would still be a very, very high base of 11.6, 11.5, 11.75 lakh industry.

That is the scenario. It's very early to comment on financial year '28, but it's nothing new.

It's a cyclical industry and that has been the norm over the last 8 years, except the last year, which has been an exception.

Sure. Second, with regard to considering that there are a series of new products which are coming in and you are replacing the old one, wanted to get some thoughts in terms of how is your R&D spend has changed post Kubota coming on board and what is the extent of help you are getting from the global partner or it's all developed still from the Indian context?

See,

the major capex which increases on the product side only. I think out of ₹300, ₹350 crores, majority of this will go on the product development side.

Even last year I think almost ₹200 crores would have been spent on the product development, and next year also will be ₹200 to ₹250 crores will continue to be spent on this. As I think we mentioned, the pipeline of product portfolio is quite strong and new launches will happen across all brands across both the businesses.

Obviously, these spends will continue.

Any hand-holding by Kubota here or it's predominantly done from the Indian R&D itself?

There are certain projects which are totally done locally, especially in our own platform, our own brand. There are certain projects which are running jointly with Kubota R&D team and they are also helping us like this paddy special tractor.

Their involvement was also there because Kubota is specialist in the paddy tractors, their team also is involved. Any product development happening on the Kubota brand, obviously their team is equally involved.

In agri solution, they are equally involved. It's a mixed development.

Depending on which product, which platform we are working on and then accordingly both the teams contribute.

Sure. Thanks and all the best.

Good evening, sir. My question is, what percentage of global Kubota sourcing will shift to India by FY '30?

We don't know how much of their global sourcing will shift, but obviously our plan is good. I think by FY '30, last year was not very high, I think there's some new production which was supposed to start did not start because of some quality issues.

That was delayed. Now I think we've started exporting in the last quarter there.

We expect anyway between maybe ₹500 to ₹1,000 crores sort of numbers should happen by FY '30 on component exports from India.

Sir. Where will ROIC improvement come from?

Will it from margins, or capital allocation, or asset turns?

Sorry, what will come from?

ROIC improvement. It was discussed in

ROIC? Okay.

No. It will be essentially the operating leverage, which will be at play, and also the cost effort because the company is working on cost rationalization equally, both on the productivity improvement, efficiency improvement on the shop floor.

We have introduced Kubota Production System on the line and that is going to help in further improving productivity and improve quality. I think all these factors will lead to gradual improvement in the cost structure.

We are also looking at rationalizing multiple product platforms, reduce our supply chain complexity.

I think all these parameters will help us in reducing costs and improving our margins and reducing capital, too, both on inventory side as well as on the supplier too.

Sir. That's all from my side.

Hello?

Yeah. Thank you for the opportunity.

I would like to know the results have been quite good for this year and a base created for the current year is quite high. Next year it is definitely likely to be a flattish year for the tractors.

Construction equipment and earlier we had the railways. Now the railways we have divested of the business and we have the money sitting in the balance sheet now.

The construction equipment last year was underperformer because of the various reasons. What is the outlook for the construction equipment going forward?

Because last year our capacity utilization has been only 47%. It had affected.

Now the mini excavators, which you were quite bullish last time also, whether this cranes and mini excavators are likely to do well in the current year?

Hi Sameer. Sanjeev Bajaj this side.

I hope audible? Yeah.

Yeah.

Two parts of your question. First is last year has been little subdued.

Yes, we've seen some difficult times in the last year as far as the overall industry is concerned, both overall construction equipment industry as well as our sub-served industry has gone through some tough time last year. Having said so, it is compared to a base which was much higher.

Last to last year, the base was also very high. Now what is our anticipation of the industry is that this year had there not been these West Asia crisis challenges and supply chain issues, we would have seen some growing demand in this quarter itself.

The signs of that could be seen in the last quarter of last financial year, while the first three quarters were very, very low, but in the last quarter actually industry picked up, came up to the last year's level. We could have continued with that growth, but in the short run, we see there will be little bit of challenge because of these uncertainties of macro factors which are playing right now.

Over a longer period in 2 to 3 years' time, we see there is turnaround just round the corner, because we believe that the capex which the government is every year committing, that capex will as it gets invested, it will bring a lot of growth for the overall industry. The focus on infrastructure and the focus on speeding up the projects, the focus on the quality of the projects and thereby moving to higher technologies of production, higher technologies of construction, that focus is clearly visible.

We believe that in the product categories where we are, those are direct beneficiaries of all the investments on the infrastructure which is going to happen. We believe that till the next Lok Sabha elections, there is a huge pipeline of infrastructure development which government is planning to do.

It is only at the right time those funds have to flow to the market that the results will be visible in the industry numbers also. In the short run, we see there will be some challenge in terms of the raw material cost, which, of course, every manufacturer will try to pass it on to the customer and therefore it might dampen the demand a little bit.

If this gets sorted out in next 1, 1.5 quarter, then I think we are looking at a phase of a big turnaround after that. H2

H2 is likely to be better?

It is likely to be better. Of course, the uncertainty of macro factors is not purely within the industry control.

Looking at the current situation, if things settle down in next 1 or 2 months, I think post monsoon we should see a big turnaround in the industry. That is the confidence of every manufacturer which we talk to.

Second part of your question was on cranes and mini excavators. In both the segments, our market share growth is visible even in the last year where the industry was going down.

We have gained 2.7% market share in cranes and also we've maintained our number one position in the country in mini excavators. From these two, although the industry size for mini excavator is still very small, but we are looking at year 2030, 2031 where industry size is expected to go to 3x of what it is today.

We are definitely going to get benefited in the medium to longer term by maintaining a good portfolio of products as well as maintaining a good position in the market.

Is there an export potential for these mini excavators and the cranes, etc., because when domestic market is weak, maybe because of the Kubota channels, etc., are we planning to do anything on that export front?

Yeah. Not for mini excavators per se, because today whatever mini excavators we are selling, it is currently fully imported from Japan.

Kubota channel, other countries' Kubota channel also buys from Japan or Thailand. Unless until we start manufacturing in India, which will probably happen once we have the new plant ready, then that could be planned.

Then probably there will be a case of exporting from India at a better price controls. That is about the mini excavators.

On cranes, there are few countries who use this type of cranes, largely Africa and Southeast Asia and SAARC countries. Those are the countries where we are definitely exporting and we are continuously increasing our channel distribution presence there.

We are making a good progress in that. Our export used to be about 3%, 3.5% of total revenue.

It is moving upward of 5% to 6% now, and we expect this to grow to 10% by 2030. This will continue to be our focus area.

Okay. Now my next question is to Mr.

Madan. It is regarding the cash on the balance sheet which we are currently having, including the current investments, of ₹6,000-odd crores.

Last year we had some ₹3,500 crores. Now this year it seems in the balance sheet we have about ₹7,000 crores of cash.

Now as the capex is not likely to be very high of about just ₹400-odd crores, and the capacity utilization current year quite comfortable, it doesn't warrant any big expansion at this point. What are the plans to utilize this big amount which you are having available with us?

If you've been following our company, we have made the announcement for investing in the greenfield facility, which we just mentioned. We in the process of acquiring the land and initial payment has been made.

The investment we have earmarked for Phase 1 in that project itself is more than ₹2,000 crores. Then this is only Phase 1, the expansion will happen.

Overall plan, I think, over the next 7 to 10 years will be to spend more than ₹5,000 crores on this greenfield project. This will include both tractor as well as construction equipment and maybe going forward, even the agri solution will also get added to this.

Obviously, we have plans to do this. In addition, there's also going to be the investment in the captive finance company.

Initially we mentioned ₹700 crores of capital has been earmarked for finance company and we invested so far only ₹200 crores. Balance ₹500 crores will get invested over the next 12 months or so.

Obviously, there are plans to do that. There'll be certain cash which will remain on the balance sheet for future growth and expansion requirements, too.

We don't think there's a liquidity which is more than required. We think there are enough requirement from the business growth perspective, which will warrant this liquidity to remain on the balance sheet.

Achha,

over a period of two, three years it will be utilized fully? Hello?

It may or may not be fully utilized, but there is certain surplus which will obviously keep with the company for future growth. It will never be zero.

Okay. That's good.

We are having net cash. That is always a better way instead of going for the debt, because that puts pressure.

Okay. Thank you, and all the best.

Thank you.

Hi. My question is with respect to the captive NBFC.

You alluded that we'll be only ₹500 crores of capital into NBFC, but any aspiration with respect to how much the loan size is likely to be by the year-end?

Sorry, how much loan?

The loan book size is expected to be and leverage that we are planning up to? Yeah.

As I mentioned, we'll keep putting the capital based on the loans book size only. We are not going to give the capital in advance to them.

As and when their portfolio increases, we'll keep on investing. Our approval from the board is to invest up to ₹700 crores of capital, and so far we've done ₹200 crores investment into that entity.

The portfolio is already more than ₹100 crores today as of end of March. Obviously, the portfolio is growing as they are expanding the reach in various states and more dealers are getting onboarded.

The business will increase. As and when the requirement comes in, we will keep putting the capital up to that level.

Obviously, beyond that, then we'll look at the leverage opportunities for that.

Yeah. We'll be funding it full ₹700 crores and only then go after leveraging it?

Yeah. Initially up to ₹700 crores of capital will be funded by us.

So ₹200 has already been invested, ₹500 more will go in next 12 to 15 months.

Got it. With respect to this model, what are the ROE aspirations that we have with respect to the captive NBFC?

See, the long term you should look at, most of the captive finance companies, the long-term ROE will be somewhere between 1.5% to 2%. The basic purpose of captive finance is to help the main business in growing market share and increasing the volume.

That is the primary objective. It's not that we will be going non-captive and focus more on the profitability.

At the same time, we don't want to be in a losing proposition, business has to be sustainable. It should be reasonable return and at the same time also help the main business to grow.

Okay. Understood.

Thank you.

Good evening, sir, and thanks for the opportunity. Sir, you mentioned about the industry growth being flattish for the full year and significantly negative for the second half of the year.

My request is if you can also elaborate in terms of, one reason you said about the high base, but if you can also elaborate on your view on the monsoon and El Niño effect and subsequent effect on the rural purchasing power because of that?

Hi Mr. Kedia.

Neeraj this side, hi. I had mentioned this earlier.

Overall, the primary reason would be the high base. Apart from that, the forecast of monsoons and the impact of El Niño.

El Niño impact, to a certain extent currently what we see is that it'll impact to a certain extent the probability is about 70%, 65% to 70%. Plus, if you see the reservoir levels currently, the rains that had to happen in Q4 of the last fiscal, the January, February, March period, the rains were also much lower than what they normally are.

The reservoir levels are lesser or the levels are lower than last year or for the last 10-year average as well. The rainfall plus we are looking at increase in the commodity prices, as has been mentioned throughout the call today.

All these facts, one of the reasons for growth of the industry last year was the GST impact, which came in September and after which the industry grew exponentially. If the increase comes into effect in this year, of course, the purchasing power or the benefit of the GST is likely to go away.

All these things, the below normal rainfall, the El Niño impact, the high base, the commodity price increase, all these are actually going to have a kind of a negative impact in H2. That is why I had mentioned that H1 would be a gain with respect to last year, but H2 would be a drop with respect to last year industry.

Got it, sir. My only request was while the answer is quite comprehensive, what I was trying to understand is that there are two effects which are playing out simultaneously here.

One, a very high base effect in the second half, and two, an incremental negative impact due to two reasons: one is the higher price of the material due to higher commodity prices, and also due to bad monsoon and low reservoir level, as you're saying. Is it possible by any reason to understand which effect will be playing by what percentage?

Let's say if the base effect would have been a normalized year, would you still be negative in that sense because of the monsoon effect?

It's too early to talk about this really right now, because we can't say with precision how much will be the impact of each variable. There are too many variables right now into play.

No one knows what will happen. We're only assuming a flat industry, which we think will be very good, because industry was at a peak last year.

If you are able to sustain that even this year in spite of so much of headwinds, I think it'll be a great achievement for the industry to really work on that. Luckily, for this, the emission norms have been deferred, so that was one negative impact which was at play, which will not happen.

It will only come into play for lower horsepower tractor, which is less than 25 horsepower from 1st of October. There also industry has about 9 months' time to continue to sell the old inventory.

Really this year will not have very much impact on that. Really how the monsoon distribution happens, which pockets get impacted, what sort of geopolitical situation emerges, how much sort of cost pressure will come in future, very difficult to predict at this point in time.

I think our initial assumption is if it's the flattest industry, which is what we're assuming, or it may be plus/minus 2%, 3% here and there, I think it'll be a good scenario to play out in this year.

If you have to call out for H1 of fiscal '28, would you guide a moderate for H1 of fiscal '28 as well because of the aftereffects of H2?

It's too early to talk about FY '28, but long-term industry growth projections have been CAGR of 6%, 7%, 8%. We think in the long term, that will continue, because the industry has done that sort of performance in the last few years and last few decades.

Long-term, obviously the growth momentum will continue. Because your emission norm changes is only happen right now from 1st April '28 onward.

Obviously '28 should be a reasonably good year, but again it'll depend how the monsoon happens, what sort of water reservoir levels are there in the beginning of FY '28 and in the second half of that year.

Sir, one more point. How much financing and interest rate plays a part in the buying decision of the farmers?

70% sale for us is on financing only. Without financing, the sale will not happen.

Retail is dependent to a large extent on this financing availability.

Okay. Helpful.

Thank you.

Thank you, ladies and gentlemen, for being present on this call. For any feedback or queries, feel free to write into us at [email protected].

Thank you very much, and have a good evening. Thank you.