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Informist, Thursday, May 8, 2025

By J. Navya Sruthi and Anand JC

MUMBAI – Escorts Kubota Ltd. plans capital expenditure of about INR 3.5 billion to INR 4.0 billion in the financial year 2025-26 (Apr-Mar), excluding the expenditure to buy land in Uttar Pradesh for its greenfield project, the company's management said in a post-earnings conference call with analysts Thursday. Additionally, Escorts Kubota expects to spend about INR 4.0 billion to INR 5.0 billion to acquire land for the new plant.

The company had in August submitted a letter of intent to the Uttar Pradesh government to acquire land to set up an integrated greenfield manufacturing facility. This deal could be completed by the end of the September quarter or the beginning of the December quarter, the management said. Should the land deal go through this year, work on the new plant will begin in FY27 and its construction could be completed by the end of February 2028.

The agricultural equipment-maker expects the tractor industry to grow in the mid-to-high single digit in FY26. This growth will be primarily on account of higher rabi crop output, prediction of above-normal rainfall in the southwest monsoon season, and sufficient water level in reservoirs, the management said.

Escorts Kubota noted that the tractor industry has grown exponentially in southern India, a region where the company has traditionally been weak. "...our focus as we go forward is in the west and to a certain extent in the east where the industry is growing," the company said. "So, the intent as we go forward is to be at par with industry growth in these markets." It said the northern and central parts of India were "stagnant" last year, as they grew just 2.5-3% in FY25.

Escorts Kubota is likely to launch a new "paddy-special" product series for the southern market in Oct-Dec. The company will launch a new product in the 40-45 horsepower segment, which would improve coverage of tractors under the Kubota branding. It hopes these launches will cover up gaps in their product offerings for the southern market.

The agricultural and construction equipment maker said it does not see any increase in the input cost for the next 4-6 months. The company has reported a net profit for the March quarter of INR 2.98 billion, down 8% sequentially but up over 8% on year. The company's revenue from operations was INR 24.30 billion, up 6% on year but down 17% on quarter. In FY25, Escorts Kubota's net profit rose nearly 16% on year to INR 12.51 billion. Its revenue during the year grew by 4.7% to INR 101.87 billion.

The company expects its exports to rise 20-25% on year in FY26. It exported 1,832 tractors in the March quarter, up 36.6% from 1,341 tractors sold a year ago. The dealership inventory for its tractors is in the range of 4-5 weeks for all the brands put together, the company said.

The company raised prices by 7-10% in January with tractors having to conform to Bharat Stage-5 emission norms, from Bharat Stage-4 and Bharat Stage-3 norms earlier. The company expects complete realisation of the price hikes to happen by the end of August. 

The Indian authorities are expected to ask tractor companies to sell units compliant with the sixth iteration of tractor and mechanisation association emission norms. However, no official date has been announced yet. Escorts Kubota said the lack of clarity on tractor emission norms remains an issue.

In FY25, the company's construction equipment business in India faced challenges at the retail end, mainly because of cost escalation caused by changes in emission norms. The company expects the segment's performance to start improving in the second half of FY26, mainly because of government infrastructure development projects and price stabilisation. 

The company does not see an upward jump in earnings before interest, taxes, depreciation, and amortisation margin unless demand picks up in the next year or two. Its EBITDA margin during the March quarter was 12.1%, up 70 basis points on quarter.

On Wednesday, shares of the company rose 1.8% after the company reported its March quarter earnings, but ended the session 0.3% lower at INR 3,195.20 on the National Stock Exchange.  End

Edited by Rajeev Pai

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