Ladies and gentlemen, good day and welcome to the Q1 FY 2027 earnings conference call of Escorts Kubota Limited, hosted by Motilal Oswal Financial Services Limited. As a reminder, all participant lines will be in a 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 the conference over to Mr. Aniket Mhatre from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.
Thank you, Palak. Good evening, everyone. On behalf of Motilal Oswal Financial Services Limited, I welcome you all for the Escorts Kubota Q1 FY 2027 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, Tractor Business Division, Farmtrac and Powertrac brands. Mr. Sanjeev Bajaj, Chief Officer, Construction Equipment Business Division. Mr. Rajan Chugh, Chief Officer, Tractor Kubota brand and Agri Solutions Business Division. 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 risks as outlined in the annual report and investor releases of the company.
Now I hand it over to the management for the opening remarks. Thank you.
Thank you, Aniket. Good evening, everyone. Thank you all for joining us today. During the quarter, India's macroeconomic environment remained largely supportive. Favorable rabi harvests, increased grain procurement by the government, and positive farmer sentiment continued to support demand fundamental across the tractor industry. Rural demand also remained resilient, contributing to a stable consumption environment. At the same time, geopolitical uncertainties in West Asia continued to disrupt supply chains and freight markets. Shipping disruption and the depreciation of the Indian rupee against the U.S. dollar increased commodity, logistics, and imported component costs. Despite these headwinds, we remain focused on supply chain continuity, disciplined cost management, and profitable growth. With that context, let me turn to our performance for the quarter ended June 2025. Starting with the standalone financial performance. Operating revenue from the continuing operation at INR 3,178.9 crore, up by 28% year-on-year.
EBITDA at INR 355.4 crore, up by 9.4% YoY. EBITDA margin in Q1 at 11.2% as compared to 13.1% in the corresponding quarter. Margin during the quarter was adversely impacted by commodity cost inflation driven by geopolitical tension and related supply chain disruption. PBT from continuing operation before exceptional item at INR 493.8 crore, up by 18.2% YoY, highest ever in Q1. Net profits from continuing operations stood at INR 387.3 crore, up by 4% YoY. Please note that Q1 of the previous fiscal included exceptional gain from the sale of land and building accounting of INR 76 crore. Excluding this, net profit grew by 26% YoY. EPS from continuing operation at INR 35.2 as compared to INR 33.87 YoY. Also note that Q1 FY 2026 reported PAT includes the RED business divestment impact. Therefore, the reported PAT for Q1 FY 2027 is not directly comparable on the year-on-year basis.
On a consolidated basis, company financial performance for the quarter ended June 2026 as follows. Revenue from continuing operation at INR 3,207.6 crore, up by 28.3% year-on-year. EBITDA at INR 354.5 crore, up by 10.3% YoY. Reported net profit from continuing operations at INR 385.9 crore, up by 4.5% year-on-year. Moving on to the segmental business performance. Following the strong industry performance in FY 2026, the domestic tractor industry maintained its growth momentum in Q1 FY 2027, achieving a record high first quarter volume of approximately 3.39 lakh tractors. Demand was supported by healthy farmer cash flow, favorable crop economics, adequate reservoir levels, and continued government support towards agriculture and rural development. These factors, coupled with positive rural sentiment, helped sustain robust demand across key agriculture markets.
Our domestic tractor sales stood at 35,457 tractors, highest ever in Q1 volume for the company, registering a growth of 22.9% year-on-year and as compared to industry growth of 18.6% YoY. This translates into 36 basis point gain in share of market during the quarter. The improvement was driven by combined impact of our ongoing initiative across product portfolio enhancement, channel effectiveness, and retail execution. In addition, regional demand dynamics were relatively favorable, with our key markets north and center grew by around 22%, as compared to 15.4% growth in the other markets. We remain focused on further strengthening our market position through disciplined execution, deeper customer engagement, and continuing enhancement of our go-to-market capabilities. From a product standpoint, our product refresh initiative continued to see encouraging customer response.
The Shaurya series under Powertrac launch for the southern market in late Q4 FY 2026 is gaining traction and supporting market share gain across key southern geographies. During the quarter, we further strengthened our portfolio with expansion of the Digitrac range under the Powertrac brand and the NeoStar series under the Kubota brand, enhancing our presence across customer segments and application. Going forward, we have multiple product launches planned over the coming months to further strengthen our competitiveness across core, premium, and application-specific markets. On the export front, the tractor industry exported 29,778 tractors in Q1 FY 2027, up by 17.7% as against 25,307 tractors in Q1 of the corresponding quarter. Industry export was largely concentrated in the greater than 40 HP segment, which grew around 30% in the market where our presence remains limited.
Whereas our key export segment of less than 40 HP, basically a compact tractor, witnessed a decline of about 8% and vessel availability challenges due to geopolitical situation impacted shipment during the quarter. As a result, our export volumes stood at 1,405 tractors as compared to 1,733 tractors in Q1 FY 2026. Sales to Kubota global network account for approximately 61% of our export volume. We continue to work closely with Kubota to strengthen our export portfolio and expand our presence across target international markets. Looking ahead, the underlying demand environment for the tractor industry remains supportive. However, monsoon distribution and festive seasonal demand, especially against the high base of the last year, will be the key monitorable in the coming months. We also continue to closely track geopolitical development and commodity cost trend, while remaining cautiously optimistic on the industry outlook.
Non-tractor revenue comprising agri solution business, engine business, and spare and service part business in Q1 constitute 19% of the agri machinery segment revenue as compared to 18% in the corresponding quarter. Agri machinery product segment revenue came at INR 2,766.5 crore, up by 26.8% as against INR 2,181.5 crore in the previous year. EBIT margin for the agri machinery business division came at 10.8% as against 12.6% in the corresponding quarter, adversely impacted by commodity cost inflation. Moving on to the construction equipment business. In Q1 FY 2027, the farm industry volume across crane, backhoe loader, mini excavator, compactor grew by approximately 23% YoY. This growth was primarily driven by the crane industry, which recorded a strong 46% YoY growth as compared to the corresponding quarter last year. Our construction equipment business total volume came at 1,344 machines, up by 27.4% as compared to 1,055 machines in the corresponding quarter last year.
Construction equipment segment revenue came at INR 419.6 crore, up by 39.2% as against 5.8% in the corresponding quarter, adversely impacted due to commodity cost inflation. There is a short-term challenge related to inflation due to West Asia crisis, however, the sustained demand is expected to help normalize the business health. Industry underlying fundamentals remain encouraging with the continued government focus on infrastructure creation, increasing investment in urban development, industrial projects, and improved visibility on project awards provide a supportive medium-term demand environment. We remain watchful of the potential geopolitical challenges, we believe the sector is well positioned for the sustained growth and will continue to maintain operational flexibility to respond effectively to evolving market conditions. 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 please press star and one on their touchtone telephone. If you wish to remove yourself from the 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 Gunjan from Bank of America. Please proceed with your question.
Yeah, hi. Thanks for taking my question. My first question is on the industry outlook. It does seem like when we did the call last time, we did call out some decline in the industry for fiscal 2027. Going by the sort of trend that we are seeing with every passing month, do you think that there is an upside risk to the numbers that we've given out? If you can give us a little bit more color on what are you seeing on ground. Is there any change in sentiment that you're seeing on the ground in terms of the inquiries for getting into the festive months as well?
Hi, Gunjan. Neeraj this side. Hope you're doing well. Yes, you are absolutely right. We see an upside in the last quarter and also in July. Just a slight correction, Gunjan. In our last guidance, we had not said a negative outlook. We had said a plus minus 2%-3% variation. We were looking at a very marginal kind of a growth. The last quarter, and especially the last 45-50 days have been very positive. As already mentioned in Prateek's opening comments, the overall sentiment is positive. Various factors are there, and Prateek has already mentioned, so I'll not repeat those factors. Yes, we are looking at a much better outlook
For the current fiscal year as we go forward. It will not be very prudent for me to estimate at a quarterly level or a monthly level because of the shift of seasons and high base and GST last year. Yes, currently we are looking at a mid-single-digit growth for the financial year. That is our current take as of now.
Any regional divergence that you are seeing because, of course, Western South did very well last year. Prateek did mention that your stronger markets seem to be recovering more. If you can give a little bit more color on where you see higher growth in terms of regional mix as well in fiscal 2027.
Overall the industry has grown across the country. Yes, it has grown slightly better in our stronger markets than the overall all India growth. South, which has traditionally been our weak geography, the industry growth has been highest over there. In South, the industry growth has been close to 33%, whereas in quarter one, the overall growth was 19%. As again, Prateek mentioned, a lot of input actions that are in terms of products and in terms of channel have actually helped us grow. Overall, there has been a growth. Major growth is in South and then in the northern and the central part of the country.
When you say mid-single digit, we still stick with the point that we will gain market share, growth for Escorts should be higher than the mid-single digit that we are anticipating for the industry. That's the way we should think about it, right?
Absolutely.
Second question, I think more to Bharat, sir, on the margins. Can you give us a bit more color on what was the cost headwind that we saw in this quarter from the metal basket, and how should we think about it going into the second quarter as well? Plus, if you can give us some thought process on how we are looking to navigate it in terms of price action, cost reduction. Some color on how do we think about margin and the cost headwind.
Yeah, good evening. This is Bharat Madan. I think as we have mentioned in the last call, we were facing the commodity inflation pressures in the first quarter because of the geopolitical situation. We have faced close to about, I would say about 5% sort of cost impact on the tractor business side. More or less 1% of that is coming because of this minimum wages for the contractor labor, which has gone up in Haryana, which is unique to us. If you remove that impact, all India industry level may still be about 400 basis points, an increase which has happened on the commodity side. Obviously, part of it got offset with the operating leverage, the revenue growth was very good. 23% revenue growth has happened on the tractor business.
Also one pricing piece we had taken in the month of April, which is about 1%-1.5% sort of range, which also to some extent was able to offset this. Having said that, the commodity pressure on metal and rubber is still continuing, so there may still be some more cost increase which will happen in Q2. We are contemplating how to pass it on. The discussions are happening. The quantum is not yet finalized. We are also watching the industry. For the growth in the industry was very good, so no one want to take a call in terms of touching the prices at this point in time when you are growing at double-digit.
Going forward, when you are looking at the base is already very high and when the demand slowly will start getting impacted, may not see the similar growth level. Obviously, the cost pressure will not be able to absorb, it will get passed on. We will have to see how much will it get passed on. We are not formed up yet, but yes, it will happen sometime in this quarter itself.
How much more cost pressure is there to be seen in Q2? Like any number. You gave 5% last time, that was pretty useful, but is it similar magnitude, much lesser? Any number that you can-
Much lesser because 5% is still continuing. On top of that, we are talking about another 1.5%-2% sort of pressure which will be there. We expect this will be a temporary phenomenon. Maybe, I think, from Q4 you will see maybe some reversal may start happening. As of now, it's very difficult to predict the geopolitical situation because every day it is changing. We are hoping it will start getting reversal in the Q4.
Got it. Thank you so much. I'll join back with you.
Thank you, ma'am. The next question is on the line of Raghunandhan from Nuvama Research. Please proceed with your question.
Thank you, sir, for the opportunity, and thanks for the detailed opening remarks. In opening remarks, Prateek spoke about Shaurya model and how the model has helped in market share gains in South region. My question was, can you talk of the feedback for the other new products like Promaxx, Digitrac, and Kubota MU, and which products are helping in terms of volumes and market share gains? I see that there are gains even in the North region. If you can throw some color. Thank you.
Hi, Raghu. Neeraj this side. Yes, overall, the growth has been possible because of these new launches. Shaurya was primarily for the southern market, and you would have seen that we have consistently grown post the launch of Shaurya, and it's not only restricted to a product portfolio introduction. There are a couple of other actions as well. Apart from that, if you remember, last year we had introduced Promaxx, and that has actually helped us tremendously. Promaxx actually now contributes over 20%-22% of the overall Farmtrac sales. With Promaxx, we had been able to cater to the four-wheel segment substantially, and that has helped us grow the Farmtrac brand across the country. As regards to Digitrac was as it is in the market, but we expanded the portfolio. We brought in a 4x4 model.
What it has done actually is that it has massively impacted volumes and market share across the PT states. Digitrac, as of now, contributes close to about 23%-25% of the total Powertrac portfolio. All these products have actually helped us tremendously. There remains a small gap in the Powertrac portfolio in terms of four-wheel drive segment, which we intend to cover over the next few months. That is on the Powertrac and Farmtrac front. I will let Rajan talk about the new launch of Kubota.
Yeah, thanks. Thanks, Raghu. In Kubota brand, we had introduced a series last year, a fresh series last year, that started to help us expand our footprint. Largely, Kubota has had strongholds in western, southern, and eastern part of India. Despite not as much growth in western part of India, we have been able to expand our footprint with the newer products launched this year as well as last year in Kubota brand. It has also helped us improve our situation in northern-southern markets. There are more products kind of lined up this year as well within Kubota brand, we should start to see improvement there as well. Thank you.
Thank you, Rajan Sir and Neeraj Sir. Can you also talk about what are the white spaces in the product portfolio which you want to address? I understand four-wheel drive was one space which you alluded to. Apart from that, is there any white space which is high volume and there is a need for you to address that and come out with new products?
First, talking on the Powertrac and the Farmtrac side. On the Farmtrac side, the portfolio to a very large extent, covers over 80% of the applications used in the country. Close to 85%. In Farmtrac, there is not much of a concern. There is never 100% coverage on the portfolio vis-a-vis applications. As I already mentioned, with respect to Powertrac, yes, a major gap is in the 35 HP-50 HP segment in the four-wheel drive. The four-wheel drive market is actually growing across the country, and there are certain states, if you look at our overall performance at a state level, there are certain states which are highly driven by the four-wheel segment. There we have not done well. That is one major gap on the Powertrac side. On the Kubota side, Rajan will update you.
Thanks. On Kubota, largely we have been focused on 20 HP - 30 HP niche, orchard and compact segment, and also 41 HP- 50 HP segment. We have seen over a period, the share of industry has swinged towards that segment more and more. Largely, we are focused in expanding our presence in these two segments, which contribute almost 77%- 78% of the industry. For now, we want to continue to focus on those segments. There are segments over 50 HP, those are marginal or not as big. For now, we want to stay focused and increase our presence in these segments. Thank you.
Thank you, sir. Just a clarification. How much would be the share of four-wheel drive for the tractor industry as of now?
You see, overall, four-wheel drive is actually taken in two parts. One is the four-wheel drive, which is used primarily in the smaller segment, in the orchard segment. The other one is other than the orchard segment. Primarily starting from 35 HP- 38 HP segment and going beyond the 50 HP segment. It is actually steadily growing. There is no clear-cut data as such for this particular segment. But because of our volumes growing tremendously post the introduction of Promaxx, we see the growth of 4x4 segment at a much higher level than the normal industry growth. It will be very, not right on my part to exactly, when there's no clear-cut data available, but the way the 4x4 markets are moving, the growth in 4x4 segment is actually higher than the industry growth.
Noted, sir. Very helpful. I'll fall back to the queue. Thank you.
Thank you, sir. Ladies and gentlemen, to ask a question, please press star one now. Participants who wish to ask questions may please press star one at this time. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference call, please limit your question to two per participant. The next question is on the line of Preet from InCred AMC. Please proceed with your question.
Thank you for the opportunity, sir. First question is on the line of construction equipment. How much has been the price hike you have taken in cranes and other pre-regulation until now? If you could bifurcate this, how much was for emission norms last year, and how much for the commodity cost hike, which has been happening over the last two, three quarters?
Hi, Sanjeev Bajaj this side. I'll try to respond to this question in two parts. Most of the emission norm related price increases were pushed in the last year, except for few models, like backhoe loader and compactor. There we are yet to introduce BS5 model. Those are getting introduced from September onwards. That pricing for those models will be done at that time. The impact of emission norms was in two different segments. There were products which were moving from BS3 straight away to BS5, where the impact was about 6%-7%. Products which were moving from BS4 to BS5, the impact was about 3.5%-4%, 4%-4.5%. That was passed on in the last January 2025. After that, those prices got stabilized somewhere around middle of the year.
The old stock was exhausted by most of the manufacturers, and that got passed on. The second phase of price increase, normally we do once a year price increase in January, and that is the industry practice also. We've been able to pass on prices even after the war started, therefore the cost escalation caused that to take multiple price increases in small trend all through in the first half so far. Price increase so far has been roughly about 5%, including the price increase which we have taken in the month of January. Having said that, there is also adjustment of channel discounts which have been done. Effectively, it is roughly about 6%, which has been passed on to the market.
Thank you so much, sir. That was helpful. Another on the same lines. What kind of growth do we expect in our cranes business for this year? This will lead by how much would be industry growth and how much would be market share increase, and what would be the growth drivers for the same?
Yeah. Right now the industry is showing positive signs despite of the fact that the price increases have been taken by all manufacturers. The demand is good, and there is also a demand from the corporate sector because the project execution speed is what they are focusing on. Especially on the higher tonnage segment and higher capacity segment cranes, the demand is relatively stable. We believe that, if I compare Q1 over last year Q1, then last year Q1 was a little subdued because of BS5 introduction, so it is not a right comparison to make. In quarter one this year, the growth is roughly about 45% over last year same quarter. From a normal quarter, if it was not 2025 subdued volume, then the growth would have been somewhere around 20%, which we feel that is sustainable.
Except for this quarter where the rains have been quite good, which is good for agri sector but not so good for construction equipment sector. This quarter, we believe that it is going to impact construction activities a little bit. Overall for the end of the year, we are looking at anywhere between 12%-15% kind of overall growth for the whole year.
Is it industry or our growth?
I am talking about industry growth. From the market share perspective, last year there was a gain of about 2.7% in the market share for us, we will continue to be aggressive in this segment. Also we will be supported with some new models which we are introducing later in this year from October onwards. We believe that will give us traction both in terms of specific applications as well as some entry-level products also.
Sure, sir. Thank you. Sir, are we seeing any pushback from the customer due to multiple price hike like you mentioned, 6%- 7% last year and 6%- 7% this year, total cranes you would have taken 15%- 16% price hike. Are we seeing any postponement of purchase for this year, or is there because lot of price hike would have happened in the month of May and June. Is this 12%-15% number, shall we consider as a conservative or somewhat aggressive kind of number? If you could give some highlight on this.
Currently, there is a pushback from the customer to the tune of they're taking longer time to decide and it is taking a deeper negotiation to fetch those prices. At the same time as the demand is up. I think the demand is going to be a big leveler for this. We believe that in next quarter or so, in quarter two, the prices would stabilize. If the demand continues from the projects, I think this growth is possible.
Sure, sir. Thank you so much. That was helpful. I will join back in the queue.
Thank you, sir. The next question is from the line of Lakshminarayanan from Tunga Advisors LLP. Please proceed with your question.
Yeah. Thank you. My question is regarding your non-agricultural business. There has been a strong-
Sorry to interrupt, sir. The line for the management-
Hello?
-seems to have disconnect. Please wait while we reconnect them.
Okay.
Ladies and gentlemen, the line for the management has been reconnected. Thank you, and over to you, Lakshminarayanan, sir.
Thank you. My question is regarding the construction equipment growth. There has been a significant industry growth, and you have also exceeded growth in general, right? Can you just explain to me what has led to this strong growth? Was it some kind of a base effect or there are certain interference which you did positively, or how do you think about this part of the business for the rest of the year?
Thank you, Mr. Lakshminarayanan. As I said, the growth looks to be very high when we compare last year's same quarter. Part of it is because of the lower base of last year. That was at the time when every manufacturer was trying to push BS5 product, which was again, a cost-escalated product for the customer. Also there was a little bit of apprehension on the new technology which has been introduced. Overall, the growth looks very high. Even if you compare it to the normal quarter, which was, say, FY 2025 quarter, same quarter, then again, there is a growth over that also. The real reason of growth is primarily because there is a clear push from the government in terms of completion of the project.
Last financial year, the rate at which roads were constructed was almost half of what it was in year 2024 and 2025. There is a renewed focus by the government to push these infrastructure projects. There have been a few developments happening in various states, like Andhra is doing lot of development after introduction of new government and also new capital city being made. Bengal has recently seen new development starting, there is also a good traction on projects like solar power and metro rails in various cities. This demand currently looks real. Only thing is the percentage of growth looks a little higher because the last year base was low.
Got it. What kind of growth industry you think would actually achieve for the current year in the construction equipment?
We are anticipating anywhere around 12%-15% overall, in which there will be high growth for mini excavators and cranes. We believe that backhoe loaders will grow at about 5%-7%, and compactors also will grow at about 5%-6%.
Got it, sir. Thank you. I'll get back in queue.
Thank you, sir. The next question is from the line of Vikram Damani from Damani Family Office. Please proceed with your question.
Hi. Good evening. Am I audible?
Yes, we can hear you.
Yes, sir.
Hi. Thank you. Just a few questions. First is, I think we've done pretty well to gain our market share and beat the market, especially when the southern market has grown the strongest. Can you all give us the sense of the market share that we had previously in the southern markets versus now?
Yeah. Hi, Vikram. This is Neeraj Mehra this side.
Hi.
Overall, in South, we have gained close to about 0.6% in quarter one. Our market share from a three-brand perspective is around 6%. We've gained about 0.5 percentage point over there.
Do we expect this trajectory to continue in terms of gaining market share?
Yes. It will, because of the two primary reasons. One is in terms of the new products. One is Shaurya, the other one is the Digitrac series, and there is a third series, the 4x4 series, which we intend to launch over a period of time. Also what has actually happened is with the introduction of these kinds of products. We are able to now fill our white spaces in terms of network. Our channel strength is increasing every month. Both these aspects are actually helping us grow.
Excellent. Good to know. The finance business, how are we doing there? How much have we disbursed? What is the status?
In captive finance company, Vikram, we have now hit a penetration level of close to 10%-12% in the first quarter. July, obviously, we did better. We almost hit 15% +. Wherever we introduced that captive finance, which is in limited states right now, currently there were over 250 dealers which have been onboarded on this platform, where this is the penetration we're talking about, and gradually we're expanding now. Intend to open some other southern state also this year to support this new product launches and grow the business there.
Excellent. Are we seeing a better or a increased market share of sales wherever we've introduced the finance channel?
That is the idea. Wherever a weak and a poultry market exists, where we had difficulties, obviously that's where the captive finance will help. Obviously, in the stronger market, the financing is not an issue. For volume and scale perspective, we need to present across all segments. That's the only way you can actually gain. Our idea is, again, if 20%-25% of the volume leads to a delta increase in the overall numbers, that should help in gaining market share.
Excellent. Thank you. As far as exports are concerned, we've spoken a little bit about the tractor sales. Can you throw some light on the other products, the spare parts, components? How are we doing so far this year, and what's the outlook for the rest of the year, and maybe for FY 2028? If you can throw some light on that.
This quarter was more or less flat quarter, not much really had happened this quarter. I think as we move forward, we expect the growth will happen. I think next year we're predicting very good growth in the component export. That should start showing the numbers. Another two years, I'll be looking at almost more than doubling our numbers for value terms. We'll start seeing the result now the next two years' time there.
When you said doubling that from our current base, and how much is that?
Last year, I think we did about INR 160 crore-INR 170 crore in terms of overall numbers. This year so far, first quarter was more or less flat. In the second half, we expect the pickup will start happening.
Then grow from there. Excellent. Thank you so much. One last question. We have cash surplus of almost INR 10,000 crore. Our CapEx requirements are nowhere sort of close to that, plus we are generating cash every year. Given the change in the buyback rules, could we expect something along those lines? I know your dividend payouts have done sort of [YoY] increased nicely. Anything to sort of watch out for there?
See, if you look at our overall shareholding structure, the promoters collectively hold about 68% +. There's some non-promoter, non-public shareholding, which is IAP, et cetera. It's about 70% is already there. The scope for further buyback is very limited.
Okay.
You can't go beyond 5% if you are to continue to be listed. Yes, possibility definitely exists, but this is one of our capital allocation strategy going forward. Obviously the both promoter need to align to make it happen. With this new rules, obviously this will help.
Yep.
If really it comes to that, definitely it doesn't help the promoters. It's good for the public.
Yep.
If the promoters also need to participate in this, there will be an issue. Idea is to increase the promoter holding, obviously they need to align on this.
Excellent. All the best, and see you all soon. Thank you. Bye-bye.
Thank you.
Thank you, sir. The next question is from the line of Shagun from Anand Rathi. Please proceed with your question.
Yeah. Hello, am I audible?
Yes, Shagun. Go ahead.
Yes, ma'am.
Yeah, thank you for this opportunity. Just wanted to talk about the demand. It's been quite good across the country, but it seems like in Gujarat and UP, a significant pull has been due to subsidies. If you could just shed some light on what the demand would look like because of these subsidies, and if there's any numbers to how much could we expect the demand pull to be because of these subsidies.
Hi, Shagun. Neeraj this side again. Shagun, the industry is grown pan-India, right? Yes, the subsidy impact has been there only in Gujarat, and the subsidy impact is not there in UP. UP is a organic growth. Now coming to Gujarat, now in Gujarat, this was no special one-off subsidy. The government every year gives a subsidy. The only difference is in terms of timing and in terms of the quantum of units that they give. Yes, subsidy has actually helped in the growth of Gujarat market. In terms of UP, because I'm talking of these two states because you specifically mentioned these two states, UP is an organic growth and it's not to do anything with the subsidy.
Okay. Second thing, you mentioned that the cumulative price hike since January has been about 6%. What was the price hike in Q1 exactly? If there is a number as to how much price hikes would be there in the coming quarters, any specific number we could get?
Shagun, the 6% price hike was mentioned by Mr. Bajaj, for the construction equipment. We've not mentioned anything.
Okay
Yes, Mr. Madan mentioned about a 1.5% price hike in the tractors in Q1, in April that we had taken. As we go forward, yes, there will be a price hike, but the quantum and the date we've yet to finalize.
Okay. That would be all from my side. Thank you.
Thank you.
Thank you, ma'am. Ladies and gentlemen, to ask a question, please press star and one now. Participants who wish to ask questions may please press star and one at this time. The next question is on the line of Aniket from Motilal Oswal Financial Services. Please proceed with your question.
Hi. Thank you, management team. You mentioned the fact that costs will further increase in Q2. Just wanted to understand how much of a price hike would be needed further to sort of offset this cost increase.
Aniket, first of all, we've not decided the quantum of price increase, and price increase will not compensate for the entire material cost increases. The expectation is after three, four months when the situation stabilizes, the prices will come back. Whatever price will get passed on will be something which will be of permanent nature, but there will not be a rollback of that pricing piece. Obviously, the pricing piece which will be taken will be something which will continue in future. That's why you're looking at a short-term phenomenon of three, four months. No one will take price increase only for three, four months and disturb the market. Whatever we do, maybe some quantum will be there, but we don't know right now, obviously, the quantum which will be really passed on, but it's not going to cover the entire cost increase definitely.
Sure. Got that. Just could you talk about the inventory level situation with dealers right now, sir? Are we at normal or how is the inventory situation for us and for the industry at the moment?
Again, difficult to comment on the industry, from our channel perspective, we are relatively at a comfortable level. You can look at about a 30-day inventory with our dealers. As we go forward into the season, this might see a change.
Sure. Incrementally, my sense is they would look to sort of push stock into the system for the festive, right?
I'll not say push stock into the system. I'll articulate it as build stock.
Sure. Yeah.
To build stock for the season because you see agri seasons are very cyclic. You have very big lows also and very big highs. It's a crest and a trough kind of a situation. Yes, this time the season is a bit delayed. It actually starts from October. Yes, we will build stocks as we get closer to the season.
Sure. Sir, you alluded to the domestic industry outlook. Could you also help us understand how we look at exports outlook for this year and the next year, given that Q1 has not panned out well so far? How should we expect the balance fiscal as also FY 2028 for us?
This year, FY 2027, we expect the export to be more or less flattish in nature. Although Q1 has been down, but we think we'll be able to make it back in the balance three quarters. The overall volumes will be flat in FY 2027, but FY 2028, we're looking at a good growth coming in. We expect the North American market may start opening up by that time. If we start exporting there, the numbers will do very well. We'll see good growth coming in over there.
Fair enough. Any CapEx guidance for this year, sir?
This year, CapEx was divided into two categories. One is for the greenfield project, especially for the land acquisition. We expect it to be about INR 450 crore-INR 500 crore which will get spent on this land. Land is already allotted now. We already made the payment there. Some development work will start happening now. We expect the groundbreaking for this plot to happen sometime this month. The normal CapEx will be somewhere around INR 350 crore-INR 400 crore. Overall, you can say about INR 850 crore-INR 900 crore worth of CapEx for this year, including greenfield investment is liable.
Fair to assume it will remain similar for FY 2028, isn't it?
FY 2028 will depend on the plan for greenfield. If we have expedite construction, then maybe the spend will be more because your overall CapEx for greenfield is INR 2,000 crore. Depending on the demand scenario, if the demand continues to be good, then probably we'll have to pre-book some of the CapEx on greenfield. It'll be too early for us to comment right now on that. Normal CapEx will remain in this range of INR 350 crore-INR 400 crore.
Sure. Just one final question, sir. On the captive financing bit, by when do we expect to cover all our dealers pan-India?
Maybe by FY 2028. By FY 2027, we expect almost 40%-50% dealership will get covered. By FY 2028, then we'll go pan-India.
Perfect. That's it from my end, sir. Thank you and all the best.
Thank you.
Thank you, sir. As there are no further questions from the participants, I now hand the conference over to Mr. Prateek, sir, for closing comments.
Thank you, ladies and gentlemen, for being present on this call. For any feedback or query, please feel free to write in to us at investorrelations@escortskubota.com. Thank you very much and have a good evening.
Thank you, sir. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.
Thank you.