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Informist, Monday, Feb. 10, 2025

--Escorts Kubota: Reduced tractors channel inventory with dealers in Oct-Dec 

--CONTEXT: Escorts Kubota mgmt comments in post-earnings analyst concall 

--Escorts Kubota: Tractors inventory levels currently at over 4 weeks 

--Escorts Kubota: Tractor segment Oct-Dec market share at 11.8% 

--Escorts Kubota: Tractor ops retail mkt share better than wholesale 

--Escorts Kubota: First objective to gain market share in tractor segment 

--Escorts Kubota: Tractor industry saw sharp growth after Sept 

--Escorts Kubota: Tractor industry likely to grow 14-15% in Jan-Mar

By Akshay V. Johnson and Anshul Choudhary

MUMBAI – Escorts Kubota Ltd. expects its construction equipment segment to see a flattish performance in 2025-26 (Apr-Mar) due to an increase in product costs on account of the transition to Bharat Stage 5 norms, the management said in a post-earnings analyst conference call. The costs associated with this transition will be passed on to the customers, the management said.

Bharat Stage norms are emission standards for vehicles in India that regulate the amount of air pollutants produced by them. If a customer is moving directly from Bharat Stage 3 to Bharat Stage 5 norms, it will lead to an increase in cost for the customer by 10%. For customers shifting from Bharat Stage 4 to Bharat Stage 5 norms, the associated cost will increase by 5-6%, the management said. " ...in about three and a half years, it has been the second emission norm change. And the cost to the customer is going up consistently without much of an increase on the rental rates," the management said. 

During the December quarter, the tractor industry as a whole did quite well, however, the company's performance was below the industry's performance. The company's market share for the tractor business was 11.8% in the December quarter. The geographical growth of the tractor industry was unfavourable from the company's perspective, Neeraj Mehra, chief officer of the tractor business division said. In regions where the company does not have a strong presence, the tractor market saw a 28-30% growth. During the quarter, the company reduced the channel inventory of the dealers to over four weeks from five weeks earlier. The company's retail market share is much better than wholesale market share, Mehra said.

Northern and western regions contributed around 72-73% of the total tractor industry. The company has been losing market share in these key markets in the last 3-4 years. The company, which has gained some market share in the last 12 months, intends to get back the lost market share, the management said.

The company expects its export segment to grow 20% in the next financial year on better demand from the European market and the low base of this year. The tractor industry saw sharp growth after September due to good monsoon, the management said. The company expects the industry to continue this growth momentum. It expects a growth of 14-15% in the March quarter. The performance of the tractor industry in FY26 will depend on the monsoon, the management said.

The company announced its results post-market hours on Monday. The company's net profit for the December quarter rose 8.5% on year to INR 3.23 billion. The revenue also rose 8.5% on year to INR 29.35 billion. On Monday, shares of the company closed at INR 3,303.10 on the National Stock Exchange, up 1%. End

Edited by Saji George Titus

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