Ladies and gentlemen, good day and welcome to Escorts Kubota Limited Q1 FY 2026 Earnings Conference Call hosted by ICICI Securities Limited. As a reminder, all participants' lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand over the conference to Mr. Vivek Kumar from ICICI Securities. Thank you, and over to you, sir.
Thank you, Pari. Good evening. On behalf of ICICI Securities Limited, I welcome you all for Escorts Kubota Limited Q1 FY 2024 Earnings Conference Call. I also take this opportunity to welcome the management team from the company today. We have with us Mr. Bharat Madan, Full Time Director and Chief Financial Officer, Mr. Neeraj Mehra, Chief Officer, Tractor Business Division, Mr. Sanjeev Bajaj, Chief Officer, Construction Equipment Business Division, Mr. Sanjeev Garg, Head, Finance and Tax, and Mr. Prateek Singhal, Investor Relations and ESG. We'll start the call with brief opening remarks from the management followed by Q& A. Before we start, I would also 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 risks as outlined in the annual report and investor releases of the company.
Over to the management now for their opening remarks. Thank you.
Thank you, Vivek. Good evening everyone and thank you all for joining us today. Few highlights of the company's standalone financial performance for the quarter ended June 2025 are as follows. Operating revenue from continuing operation at INR 2,483.4 crore. EBITDA at INR 325 crore, up by 2.6% YoY. The EBITDA margin in Q1 now stands at 13.1%, up 69 basis points YoY. PBT before exceptional items from continuing operation at INR 417.9 crore, up by 19.3% YoY. During the quarter there was an exceptional gain of INR 76 crore on account of sale of land and building of agricultural machinery spare part business division. Net profit from continuing operation at INR 372.6 crore, up by 40.0% YoY. During the quarter the railway equipment business divestment was concluded and the income of INR 1,601.7 crore net of transaction cost from the divestment has been accounted for in the financial statement.
Under discontinued operations, net profit including discontinued operation at INR 1,400.2 crore. EPS stands at INR 127.29 as compared to INR 27.63 YoY. On consolidated basis, Company financial performance for the quarter ended June 2025 is as follows. Revenue from continuing operation at INR 2,500.1 crore. EBITDA at INR 321.4 crore with margin of 12.9%, up 16 basis points Year on Year. Net profit from continuing operations at INR 369.5 crore. Net profit including discontinued operation at INR 1,397.1 crore. Moving on to the segmental business performance starting with agricultural machinery business. On tractor business in Q1 FY 2026 the total tractor industry volume domestic plus export was at 3.11 lakh tractors, up by 8.7% against corresponding quarter last year. Our total volume was at 30,581 tractors as against 30,370 tractors in the corresponding quarter previous year.
On the domestic front, the tractor industry in Q1 FY 2026 was at 2.86 lakh tractors, up by 9.2% against the corresponding quarter last fiscal. Industry in North and Central region showed a slight growth of 0.5% while the rest of the country experienced a substantial growth of 19.3%. This has impacted our domestic volume with our domestic volume at 28,848 tractors as compared to 29,409 tractors in the corresponding quarter last year. Continuing with our strategy to offer innovative products during the last quarter, we launched Promax in F5 in Powertech brands resulting in an increase of our Farmtrac market share in most of the states where it was introduced covering nearly 70% of the industry. Recently we have launched Kubota MU series under Kubota brand in 41 HP -50 HP category. Powered by advanced and efficient KQ4P engine, the MU4201 incorporates balancer shaft technology delivering superior comfort and smooth performance.
The impact of this launch will be visible in the next quarter. Going forward, we will be launching the Wetland series in the coming quarters under Powertrac brand. These product launches across all brands are expected to drive market share growth with the full year impact becoming clearly visible in the next financial year. Looking ahead, with timely and widespread above normal monsoon rain and improved reservoir levels, rural sentiment remains positive and farmer cash flows are strengthening. We remain optimistic about sustained growth in the tractor industry and expect the current momentum to continue to the later part of the current fiscal. On the export front, the tractor industry in Q1 FY 2026 at 25,300 tractors was up by 2.7% as against 24,600 tractors in the corresponding quarter. Our export volume came at 1,733 tractors, up by 80.3% against 961 tractors in the corresponding quarter.
During the quarter, sales through Kubota Global Network accounted for approximately 52% of the total export. Non-tractor revenue comprising agri solution business, engine business, and service and spare part business in Q1 FY 2026 constituted 18% of the agri- machinery segment revenue against 19% in the corresponding and the sequential quarter. Agri- machinery product segment revenue came at INR 2,181.5 crore at a rate INR 2,171.7 crore in the corresponding quarter. EBIT margin for the agri- machinery business was up by 92 basis points at 12.6% as against 11.7% in the corresponding quarter led by softening in the material cost. Coming on to the construction equipment business, in Q1 FY 2026, served industry volume comprising crane, backloader, mini excavator, and compactor was down approximately 14% as against corresponding quarter last year. This growth was primarily driven by the crane industry which was down approximately 29% as compared to the corresponding quarter.
Our total volume for construction equipment business was at 1,055 machines as against 1,382 machines in the corresponding quarter. Our grain segment outperformed the industry, resulting in a market share gain of roughly 150 basis points to 41% as compared to the corresponding quarter, and mini excavator gained strong traction with a market share increase of around 600+ basis points YoY, reaching 19% in the quarter. Construction equipment segment revenue came at INR 301.5 crore as against INR 380.6 crore in the corresponding quarter. EBIT margin for the quarter ended June 2025 for the construction equipment came at 5.8% as against 10.3% in the corresponding quarter. This was adversely impacted due to clearance of inventory of old emission norm product and transition to new emission norm compliant product as our commitment to innovation and focus on introducing new product. Recently, we have launched Hydra 12 pick and carry crane.
This model features advanced hydraulics and a powerful engine to deliver optimal performance. With this initiative, control and enhanced safety features, the Hydra 12 is designed to offer superior efficiency and reliability, making it a pick of choice for operators across diversified job sites. The construction equipment market is facing challenges due to decreased construction activities during the monsoon season. Project delays and a slow sale caused by high per product pricing for line changes in the emission norm. However, with the government allocating a larger budget for CapEx expenditure this year, we anticipate an increase in infrastructure projects which could lead to a boost in demand for construction equipment after the monsoon season. We expect to see improvement in the demand during the second half of the current financial year 2026.
Moving on to the railway equipment business, the discontinued operation during the quarter ended June 2025, the company transferred the railway equipment business to Sona BLW Precision Forgings Limited upon completion of the conditions specified in the business transfer agreement effective from 1st June, 2025. The profit after tax from the sale of railway equipment business at INR 1,004.4 crore has been accounted for in the financial statement as income from discontinued operation. Now I will request the moderator to open the floor for the Q& A.
Thank you very much. We will now begin the question- and- answer session. Anyone who wishes to ask a question may press Star and one on their touchstone phone. If you wish to remove yourself from t he question queue, you may press Star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Raghunandhan NI from Nuvama Research. Please go ahead.
Thank you sir for the opportunity. Sir, 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?
Yeah, thanks. This is Bharat Madan. If you look at the numbers, the last year our base was very low on export in this first three months. That's why you're seeing almost 80% growth coming in. If you look at the numbers now, we have stabilized export at about 500-600 tractors per month. Expect the similar momentum will continue in the balance of the year. It indicated we'll be looking at 25%-30% growth this year in the total export volume over last year. Now, since the base will also keep on improving for the last year numbers, maybe the growth rate will be slightly lower as you notice in the month of July also. We expect the number now, momentum will be there and will continue to be in this range of 500-600 tractors each month.
Which markets are doing well?
Sir, major exports are the European market only because most of the complex factors are being dispatched to Europe. Obviously, we are catering to more than 80 countries in export and hopefully the numbers will continue to be there. The major volume is still coming from the European market.
Thank you for that, sir. There are 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? Are you seeing any delays happening on the regulatory side?
There have been certain delays with the UP government because we have been in constant touch with them. I think there was some delay in acquiring the land from the farmers. Still, from the land parcel which we are interested in, some portion of that land is still to be acquired from the farmers. The government is committing they'll be able to complete their acquisition within the next one month or so. I think once the acquisition is completed by them, then our process will start. To your question, yes, we expect we should be able to close it. I don't know whether this calendar year, but definitely within this fiscal year the acquisition should get completed.
Got it, sir. Thanks for that. Sir. On the new products you have a very strong pipeline. Promax Farmtrac has done initially well and also you have the Kubota MU, the Powertrac paddy specialist and I think even the Promax 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 you know in the south region where the paddy specialist tractors, how they can strengthen the position there. Thank you.
Yeah, hi Raghu, this is Neeraj this side. 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 Escorts Kubota Limited's perspective. Promax Phase I 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 and we are seeing positive trends. Also now with the very recent introduction of Kubota and the Wetland series, by the end of quarter two or early quarter three in Powertrac, we should see some positivity in the southern markets or the eastern part of the country where the paddy is there. We can see some positive results starting quarter four. Next year, next financial year would actually be the game changer in these markets.
Got it, sir. I was trying to understand that we have an adverse regional mix. Can the new products offset that for us, and in H2, do you expect to grow in line with industry on an all-India basis?
Yes, you are right. The Kubota introduction as well as the Pathrak wetland series will to some extent help in bridging this industry gap, that deviation is there. Next year a couple of other launches are planned, actually, as you've already mentioned, Promax Phase II and also Wetland Phase II. I think the pipeline is very strong and we should see our market share growing in our erstwhile weak markets.
Thank you very much, sir. Sir, we have started off on a good margin trajectory in Q1. Given the focus on margins, the synergy benefits, how do you see the broad range of markets for FY 2026? That's the last question from my end.
In the first quarter the commodity prices were soft for the tractor industry. We don't see much impact really coming in from the inflation perspective. Now lately we're seeing the metal prices started hardening. That impact will start getting visible now from Q2 onwards. I think overall our guidance for full year will still remain in the range of, you know, around 22.5% sort of margin for overall business.
Thank you very much, sir. I'll fall back to the queue.
Thank you. The next question is from the line of Vaishnavi from Craving Alpha Wealth Fund. Please go ahead.
Good afternoon, sir. Thank you for this opportunity. I have just two questions to ask. The first one is related to exports. What percentage of export revenue is earned to Kubota Network? What is our target of export? The percentage of total revenue by FY 2027.
As Prateek mentioned in the opening comments, in the first quarter 52% of the exports happened through the Kubota Network. We expect the number will only keep on improving as we move forward into the future. Overall, right now our total export revenue is quite low. It's about 5%- 6% only for the total top line. Our midterm business target for the next four to five years is to take it to about the 15% level.
Can you please repeat the number again? 15%, 16%?
Right now it's 5%- 6%, but going forward in the midterm business plan our target is to take it to 15% level.
Okay sir, my second question is regarding the UP plant. When can we expect the Phase I of the production to commence in the UP plant?
See, right now we are still waiting for the land acquisition process to be completed with the government i t is delayed now on that project by almost six months. 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 of the formalities. We expect within this fiscal year we should be able to complete the land acquisition. From next fiscal year we can start working on the construction of the facility.
Okay, thank you sir.
Thank you. The next question is from the line of Mumuksh Mandalesa from Anand Rathi Institutional Equities. Please go ahead.
Yeah, thank you so much for the opportunity, sir. Sir, can you just update what kind of a tactical industry growth expected for this year from earlier guidance from 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 flattening out i n the second half, s ir?
Hi. We stick to our earlier guidance of mid to high single digit growth for the entire year. Last year the base was very high. In H2 the industry growth last year was close to about 15%. This continuous growth in H2 might not be there. It will actually depend on how the ensuing season performs. 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. Post the season, an actual picture will emerge on how the industry will actually end for the current fiscal year.
Got it, sir. How would this delay inventory now and for this year? What kind of dealer expansion plan from 1,600 currently, sir?
The dealer inventory is currently between four to five weeks for all the brands put together. Yes, we have a network expansion plan. We're looking at white spaces for all the three brands individually and working on them. Over the next three to four months, the dealer count should also improve significantly, primarily in the white spaces.
Got it, sir. How has been the particular Kubot Brand doing over last four months? If you indicate what kind o f growth we have seen there. How is the profitability of the Kubota business?
Yeah, I think overall if you look at the numbers since we got three brands, so Powertrain, Farmtrac, and Kubota. In the last few months, the Kubota brand has not done well in the south and western markets. We're seeing some drop which has happened because the product introduction there was delayed. I think the last product introduction they had was about three years ago. That led to some issues with the channel. Now we have introduced the new product, now upgraded product as well as the new model which will help them in growing the volume. We expect at least in the next quarter and going forward the things. Will start improving for go-to brand.
I think as far as margins is concerned, as we mentioned to you, since the localization is still some time away, even though we started working on some of the parameters for certain equipment, mainly the engine localization is still some time away. Till the time we do that, the margins will continue to be under pressure under Kubota brand name. If you look at the margins without Kubota brand, I think we are in line with the historical averages. What is COD used to have?
Got it 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 markets 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. Earlier we were exporting directly under Farmtrac brand name and we had our own channel. Now we are synergizing the channel and integrating, and wherever one of the distributors is strong, whether it's from Farmtrac or Kubota, then we are continuing with the same distributor under that brand name. The markets are already open.
From Mexico we are exporting to South Africa, Europe, Sri Lanka. All these markets we're already exporting now. The numbers will start improving, I think, as we move forward with the new products coming for export market too, which is catering to specific markets. They will see the improvement will happen in the overall numbers. That is one segment where we see the continuous improvement will be there on the export.
Got it. Sir, how was the input commodity cost movement for this quarter and what is the outlook for next quarter?
Sir, we get the impact of the commodity prices only with the lag of a quarter. The last quarter was soft, so we saw some deflationary trend actually on the commodity side, especially for the factory industry, even though the steel price has started moving up. Construction equipment did have some impact. Now this quarter in Q2 we are seeing the negative impact will be there on tractor margins too. There's some increase in cost which we've seen happening on the metal side, which will likely impact the margin in this quarter. Let's see. It's nothing significant as of now which we can really see as threatening as we saw maybe two years ago. That sort of information is not there, will be less than 1% in fact actually.
Got it sir. Thank you so much for the opportunity.
Thank you. Before we take the next question, we would like to remind participants you may press Star and one to ask a question. The next question is from the line of Vipul Agrawal from HSBC. Please go ahead.
Thank you for taking my question. A couple of questions. 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. Yes, we're working on both, or rather three brands: Power Track, Farmtrac, and Kubota. I'll take a couple of minutes to explain. Power Track, 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 region specific, and the focus at the moment is on both these brands to expand the reach. Currently, the integration is not there full hog; we're thinking of integrating on how the Kubota dealers in south can be integrated with either the Power Track or the Farmtrac brand, and vice versa in the north. We have initiated that and are working on a pilot on that integration.
Understood, sir. Just trying to understand what is the marketing strategy for these brands, like for Farmtrac in South and for Kubota in North India. Because as per my understanding, it is very tough to enter into tractors, being a mature industry. It is tough to crack market share of another player in a particular market or, I would say, in a particular village. That is what my understanding is. What is your marketing strategy for these two brands when you are opening a new dealership or trying to merge your dealership over there
Your understanding is very right. The focus is on strengthening our weaker markets, not necessarily with all the brands put together. As I have mentioned earlier in response to an earlier question, the introduction of new products will strengthen our reach and help us in appointment of dealers in our white spaces. It's 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 the south, that's an example I'm giving, will help us grow market share overall for EKL . It's absolutely not mandatory for us, and we're not thinking of growing all the three brands in the entire country. Depending on the suitability of the product with the application and the past presence of that particular product, we are expanding our channel.
Sure, thanks. Thank you for that, sir. My second question is on the discount. Right now, like mentioned, first half was the base was low for first half, and in second half the base is catching up. How are we seeing discount from that perspective? Are you seeing the industry might go with higher discounts to maintain the growth momentum, or maybe monsoon has been pretty good? Demand is expected to remain quiet only in second half as well. What's your view on the discount going forward, and any color on current discounts?
The discounts are not basis the industry growth or degrowth. These are seasonal. 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. The discounts, higher discounts primarily to look at the industry growth or degrowth are not there. It's primarily season specific discounts are given during the season and then those discounts are reduced once the season gets over.
My last question is on the farm implements. How are you seeing the penetration going over there? It has been slower than expected. What we were talking about like five years back, seven years back. It has been slow. It's far slower than what we expected. How do you see automation happening in the implement side of the pump aggregator business? That's my last question.
I think the long- term trend obviously is that what we are seeing will merely follow what you're seeing in the developed countries. Gradually, things should start, you know, looking up there. In fact, if you look at our number also, like I said, in the farm segment in agricultural machinery also, a significant portion really comes from the farm equipment. Now for us, after this merger of JVs, obviously, like you mentioned, SIL is only about, you know, 20% of the total industry by value for the tractor industry, which is represented by farm equipment, and most of this is still with the smaller non-OEM players, you know, who dominate this industry. I think for the OEMs to come into play with a large number, I think still it's going to take some time.
We've not really seen a major change happening there in the last few years, but we expect the long-term trend probably will be there only. Obviously, it has to follow a lot of other reforms from the government side on the land and labor, so that is still to happen. Once the reforms happen, then maybe the land consolidation will become, the goal will improve. That will lead to your demand for the farm equipment too. I think in the short- term, we don't see that happening with the way the government is today, and the last attempt, what is done by the government, which was not very successful. Hopefully, in the long run, I think the reforms will happen, which can lead to demand coming up.
Thank you, sir. Thanks a lot for the answer.
Thank you. The next question is from the line of Amit Hiranandani from Philip Capital. Please go ahead.
Yes sir. Thanks for the opportunity sir. First of all, congrats for the good margin performance. My question is basically from the p revious participant on the farm implements thing. At present, are we outsourcing this or are we making it in house?
No, we are only buying it from third party. The large part is actually imported from Kubota, with the harvesters and transplanters we are importing from Kubota from Thailand and Japan, and China. Only the implement part, the rotovator, etc., that we are sourcing locally, the boom sprayers, baler, etc., they are all being sourced locally. The third party arrangement, we're not making anything at all for it.
Right. If you can help us w ith the annual revenue number for this f arm implements.
I think last year was about INR 600 crore, so we expect the number will be probably growing this year, seeing a good growth coming in on the back of this demand. The harvesters in the southern and eastern markets.
Right. Second question is on the construction equipment business. Just a clarification, please correct me. This time we have sold old emission stocks at lower rates, right?
No. All manufacturers, since the emission norm came into play from January this year , were carrying bulk inventory from last year, from the last calendar year. They had built inventory in anticipation till 31st December . The major production actually happened in that period. In this period of January to June, the production volumes have been quite low for the new emission inventory. Most of the manufacturers have been equating the old emission because of that your overhead absorption has been very low on this lower production. That is the reason which has impacted the margin. Also, June 30 was the last date for liquidating most of this inventory, which is also another reason for impacting the margin in this quarter. We expect, once your demand picks up going forward from next quarter, volumes will start improving both on production and sales.
Right, right. On the construction equipment margin, any steps we are taking to bring back the EBITDA margin to 10%-11% range.
I think on a full year basis we should be in the same margin level as 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, then paid came. I think the second half, normally the demand is good for the construction equipment space, so we expect we should be back to the similar margin in the second half of this year.
Right. For my second clarification on the other income, the increase in other income was largely due to the M2M gains, right.
It's a mix of two elements. One, the overall trading 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. That also led to the increase in other income, and secondly was the mark to market improvement because the interest rate cut we did. The impact of both combined is reflected in the other income.
Right. What is the CapEx outlook for this fiscal?
Like we mentioned last time also, it's still in the range of INR 350-INR 400 crore, which is the organic one, other than the investment which we'll do for the acquisition of land for the greenfield.
Thank you for this last question. Presently your current dealer count is 1,600, right? C an you give a break of. Like basically zone wise east, west, north and south?
We don't have the ready number, but we can ask the Investor Relations team. They will share it with you region wise.
Thank you sir, all the best. Thank you so much.
Thank you sir.
Thank you. The next question is from the line of Mitul Shah from DAM Capital. Please go ahead.
Yes sir, thank you for the opportunity and congratulations on a very strong operating performance, and my apology for outside disturbances, I am traveling. My first question is on market share for this. Despite launching new products, of course a very initial state, our market share continues to slide. Is it related to the market competition or anything to do with the inventory correction? Similarly, inventory is now also as indicated by nearly around four and a half weeks, compared to industry inventory which would be somewhere 47 days, 48 days, so we are much better off. Now onwards, where do you see market share bottoming out?
Hi, Mithul. Neeraj is this side. You spoken of the product introductions. The product introduction happened in the fourth quarter of, yeah, which was the Promax series, and as I mentioned in my earlier comments, I'm trying market share t hey're gradually going smoke. Yes, we have Promax.
Sorry to interrupt. I would like to request you to please mute your handset while the management is answering.
Thank you. As regards to Kubota and Power Track, 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. As mentioned earlier, the Wetland series is planned for introduction in September and early October. The results of that we will actually see coming in from quarter four 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 a ctually impacted the market share. Having said that, I think this string of the industry should taper down in the coming months because the industry growth started happening from September last year onwards, and we should definitely see improvement and a 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. Now, October onwards, probably this disparity between south and other region or west and other regions may not be there. That is also quite positive as we also got impacted because of the regional disparity in growth. Considering that, second half, how one should look at compared to first half for the industry in terms of the, as we know, it would be like flat to marginal growth. Disparity wise, what is your view on the regional growth, sir?
You rightly said, Mitul, because H2 last year was a 15% growth. This year it will probably be a very marginal single-digit growth or it might even remain at par. If it remains at par also, we are looking at a 4%-5% growth for the entire year. I think this disparity, 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. That is another concern for us, but we are working on that. 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 on construction equipment side, as you highlighted, there was an inventory correction because of this emission norm and our production and dispatches were lower. In terms of wholesale, can you give roughly ballpark number between retail versus wholesale for the quarter for us or for industry? Where do you see that Q- on- Q improvement for construction equipment in Q2 and Q3? That's the last question. Thanks.
Yeah. Hi, this side. For our business largely it is the retail backed business. Our numbers on wholesale and retail do not differ much. Our channel inventory is also less than 30 days normally. We try to always maintain that. It could be occasionally just start of the season, dealers might pick a few machines extra. Generally we try to maintain that in the 20- 25 days kind of an inventory for the dealer.
For our retail numbers are similar to our billing number. Last year also full year it was neck to neck and this year also we want to maintain it that way only.
Thanks sir.
Thank you. The next question is from the line of Gunjan from Bank of America. Please go ahead.
Hi, thanks for taking my question. Just a couple of follow ups. On the export side, I do read, you know, some of the European markets stepping up now. Can you just talk about the opportunity there? You know, what is it that we're trying to do along with Kubota in the European markets?
As we mentioned, most of our exports is happening to European market only. There we're seeing a good order inflow coming in from Kubota Network. We expect the numbers should keep improving month on month as we enter those markets.
Okay, got it. Maybe, you know, when I look at the export business, I think there were two or three parts to it. One was like we'll continue to grow on the, you know, the emerging markets or Mexico, etc., which you were already working on. When Kubota comes in, U.S. and Europe were going to be the largest markets. Now if you were to just sort of lay the opportunity, I know a lot of it will unfold over a period of time when the engine plant comes, etc., but what is really the sort of, you know, three to four year target that we're looking at on the exports right now? I mean I understand that engine tar needs to commission but any broad, broad, you know, targets around that.
As I mentioned, our midterm plan was to take the exports to somewhere around 15% of our total revenue. Obviously, in export license is also better. In the third city today, last year we did about 5,500 tractors and this year is looking at 25%-30% increase. I think we expect the similar numbers of growth will continue in the next three, four years. The opportunity will continue to be there. There's a plan from Kubota side also to make India a production base for certain products. Obviously, that will materialize only when your greenfield facility gets set up. There's still some time away. I think in the long-term we expect the number will continue to look better. It can anywhere be 20,000- 30,000 tractors in the long run.
Okay, got it. On the component side, there's this mention of warehousing which has already begun in India for the Kubota Global Network supply chain. Can you share more on this? What is the revenue contribution, if at all, coming in last year or this quarter? How should we think about that ramp up coming through on the supply chain servicing from India?
I think last year was close to INR 100 crore, INR 150 crore revenue, and this year we're looking at about INR 250 crore of revenue coming from component exports. I think still it's a work in process. We are still working on developing more vendor base who can cater to, you know, this business. 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. That's where the major push has not been there so far. Obviously, the parallel team is working on developing the vendor base, and the numbers will again keep improving year on year.
Okay, on this I assume there's not much margin at the moment.
This is essentially a pass through mechanism right now is sourcing from vendors and just trading in and supplying to Kubota. Unless we start making certain components, which is a plan where the margins will be better and comparable to the normal margins, you know, which will have to be to an unrelated entity. That still, I think it'll take some time. We are doing some manufacturing locally right now, but it's not much.
Okay, got it. Last question. Trem V, any update? Because now we are getting closer to the timelines for implementation, right? What's the conversation? What are we expecting on the regulation to come through?
I think from the tractor manufacturer association side, they had a meeting with the Ministry of Road and Transport and they already given their proposal. I think the proposal given was that from 25 HP- 50 HP segment there should not be any change in the emission norm immediately, and on the ballot segment they can still explore if they can do those changes and move to Trem V. My issue is the Ministry had indicated they will come up with the final decision on this maybe in this month. They're expecting middle of this month at least. Once you get a clarity on that, maybe we'll have a better picture with us. Chances are 25 HP-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?
Yeah, that's right.
Okay, got it. Thank you. I'll join back. Thank you.
Thank you. The next question is from the line of Vaishnavi from Craving Alpha Wealth Fund. Please go ahead.
Thank you for the opportunity again, sir, I have pretty polar questions. First one was of course last quarter a s 70% of export was routed through to break the 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 Global Network is not existing. They were earlier distributed, which will continue to export. It all depends on the network and the order intake you get from various, you know, countries. It can vary. In the larger part, this is still going to the Kubota Network.
Second question was on sales year over year. If you can give us some target that you're planning to achieve for FY 2026.
Sorry, can you repeat your question? It was not very clear.
Am I audible, sir?
Yes, please. Yes, please go ahead.
My question is regarding the sales. Source year on year, which we are p lanning or targeting to achieve by FY 2026.
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. The intent is for the financial year 2026 we end at a higher volume growth with respect to last year.
Okay. Thank you, sir.
Thank you. The next question is from the line of Vishakha Maliwal from ICICI Securities Limited. Please go ahead.
Hi..Thank you for taking the question. Partly repetitive, but regarding the medium term 15% target for export a re there any specific initiatives that are baking for this?
Okay, yeah, so as we mentioned, I think there are both. 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 future too. The second, as we talked about, is the component sourcing from India, you know, which is also greatly getting increased as the vendor base is established there. Third is a service export which we'll be doing, you know, which essentially is setting up the shared services for them in India both for R&D as well as for IT services. They are also, you know, the work has started and already the billing has started. There also we see a good opportunity in the next, you know, four to five years the numbers will improve.
All these will lead to, you know, going back to the number what we talked about, you know, so 15% of top line, which is the target which we intend to achieve through combination of these.
Okay, thank you sir.
Thank you. Ladies and gentlemen, the next question is from the line of Gunjan, Bank of America. Please go ahead.
Thanks for taking my question again. 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, pairs. Just rough idea would help because I think these are all revenue lines which are growing faster, I would think.
The largest one is the spare parts, their space, and lubricants, which is the largest part there. The aggregate solution, which is form equipped in bit, and the engine is still the smaller part. All these three are the kind of combined to give what in 20%.
Spares would be what, 10%, 12%?
Yeah, roughly 10%.
Okay, engine would be low single- digit.
Yeah, engine is still low. Industrial numbers were not very high there. I think last year we did about 20,000 engines and probably will be similar. Last year there was a change of emission norms. A lot of pre buying happened in the first quarter last year. This year post emission norm changes the demand slightly slowed down because the cost increases. Yes, it will remain in The similar range this year and the spares would.
I mean I'm 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're adding new products with Kubota's help, and engine is there. Is this something which is sizable or is this external? I mean, who's the customer base here?
In engine there are two segments. One is the power segment. You know these engines are used for generators. The OEMs who make generators use our engines for making those gen sets. The second segment is the OEM segment. Like you know Kubota is the largest supplier of engines to the industrial equipment sector. There is a segment where they use engines of Kubota in India and also of Escorts in certain construction equipment machinery OEMs. We use those engines. Both these segments are almost, I'll say, 50/ 50 today, I mean just over volume.
Okay, got it. Thank you so much.
Marine is another one. In marine also, like powering those power boats, these engines get used. Marine is another category where the engines go.
Okay, got it. Thank you.
Thank you. A reminder to participants, if you wish to ask a question, you may press Star and one on your touchstone phone. The next question is from the line of Amit Goel from Rare Enterprise. Please go ahead.
Yeah, Bharat. Hi Bharat. You might have answered this question earlier, but I was just wondering one thing. I was going through the presentation. You have 1,600 dealers now with Kubota also coming in. Shouldn't your access to the southern m arkets and all get slightly better so that we can have your market share improves now like with the new products and everything in place.
So. Hi Amitji, this is Neeraj Mehra. Dusai. Yes, you're very right. With the 1,600 dealers in place, our volume should actually match earlier comments. We are introducing a South special series in Powertrac in the last week of September or early October. That should actually help Powertrac. Currently, in the Powertrac and Soundtrack 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.
Okay, thank you so much and all the very best.
Thank you.
Thank you, ladies and gentlemen. That was the last question for today. I now hand over the conference to Mr. Prateek Singhal for closing comments. Thank you.
Thank you, ladies and gentlemen, for being present on this call. For any feedback or queries, feel free to write to us at investor.relation@escortskubota.com. Thank you very much and have a good evening.
Thank you. On behalf of ICICI Securities Limited, this concludes this conference. Thank you for joining us. You may now disconnect your line.