logo
Why Escorts Kubota tractor margins dragged in FY25

Why Escorts Kubota tractor margins dragged in FY25

Time of India13-05-2025
New Delhi: Farm and construction equipment maker
Escorts Kubota
Limited (
EKL
) is not expecting to witness a notable growth in the overall
EBIT margin
for the company even as it prepares for a slate of product launches this year. The company expects tractor margins to improve by 50-100 basis points in FY26, though it reiterated that new products generally carry lower initial margins due to introductory pricing and lower volumes.
For the full year ending March 2025, it has reported an EBIT margin of 10.7 per cent for agri machinery products, compared to 11.2 per cent in the previous year. However, there is a sequential improvement in Q4 tractor EBIT margins, supported by a low base and reduced input costs, despite lower operating scale.
In a conversation with ETAuto, Bharat Madan, whole-time director and CFO, Escorts
Kubota
Limited, said, 'As volumes increase and products stabilise, margins should improve accordingly.'
Kubota's reliance on imported components is also a drag on margins. It does not allow the use of Escorts engines in its products. Madan said the use of imported components makes the company vulnerable to forex fluctuations. "While localisation efforts are underway, they will gain momentum once the new greenfield plant is operational, he added. It is setting up a new greenfield plant in
Uttar Pradesh
.
Kubota, a major Japanese tractor maker, entered India in 2008 but saw limited growth initially. Its 2022 acquisition of Escorts marked a turning point, leading to the formation of Escorts Kubota and giving Kubota a stronger foothold in Indian markets by leveraging Escorts' established presence.
EKL is also developing a hybrid structure, selling products under the Kubota brand through the Escorts platform. However, a key challenge has been the lack of clarity over which emission norms should be followed for the product.
Madan noted that overall margin will remain stable at around 11 per cent for FY26, similar to FY25. For the Escorts Kubota, agri machinery business is the largest contributor to the overall sales mix with 81 per cent share, followed by construction equipment at 19 per cent. Within the agri machinery business, about 80 per cent is tractors and 20 per cent is non-tractors.
For the full financial year ended March 2025, EKL said its consolidated net profit grew to ₹1,265 crore when compared to Rs 1,077 crore in FY24. Revenue from operations increased to ₹10,244 crore in FY25 as against ₹9,804 crore in FY24.
The company expects its mid-term plan to be finalised by mid-FY26, with Board approval anticipated by Q4 FY26.
Last year, the company signed a business transfer agreement with Sona Comstar to sell its Railway Equipment Business Division (RED) on a slump sale basis. Now classified as a discontinued operation, the division is being wound down, with closure expected by June 1, 2025 and full completion by the end of September, pending final approvals.
Agri machinery
Escorts Kubota reported FY25 tractor volumes of 1,15,554 units, a 1 per cent increase from FY24. Its current inventory stands at 4–5 weeks. To address portfolio gaps, the company plans to launch the Powertrac series for southern paddy markets in Q3 FY26, mid-segment (40–45HP) Kubota models in Q2, and phase two of the Promaxx series in early Q4.
The domestic tractor industry is growing in the southern region, where EKL has traditionally had limited presence. The company aims to strengthen its footprint in this area. Last year, the industry sold 9.40 lakh tractors, the second-highest volume on record, following the peak of 9.45 lakh units in FY22-23.
Neeraj Mehra - Chief Officer of the company's Tractor Business Division said given the current industry trends and positive forecasts, it is highly probable that this year it will surpass previous records, with the Indian tractor market potentially crossing the 1 million unit milestone for the first time.
The outlook remains optimistic, driven by a favourable monsoon forecast, higher MSPs boosting farmer incomes, and healthy reservoir levels. Stable input costs are supporting margins, while rising non-agricultural use of tractors is further expanding market demand.
Construction equipment
For FY25, the EBIT margin in this segment improved to 9.9 per cent, up from 9.2 per cent in the prior year. The company's margin expectations now stand at 9-11 per cent.
The transition to Trem-V emission norms began in January. EKL said it has managed to liquidate older stocks for most product lines within the last fiscal year.
The market is now seeing products from different manufacturers at various stages of the transition.
Sanjeev Bajaj, Chief Officer of the Construction Equipment Business Division, highlighted that the shift to new emission norms has led to price increases of around 10 per cent for products moving from BS-III to BS-V and 7 per cent for BS-IV to BS-V. He expects the first half of the fiscal year to see a temporary dip in demand due to these price hikes affecting affordability. However, he anticipates a market recovery as economic activity picks up, with a strong performance expected in the next financial year once current challenges are resolved.
New manufacturing footprint
Escorts Kubota, based in Faridabad, has a current manufacturing capacity of 1.7 lakh units. The company's planned Uttar Pradesh facility, will add 100,000 units in the first phase, with a possible second phase based on demand, it will cater to both domestic and export markets, with land acquisition expected by Q3 FY26 and production targeted by FY28–29.
The company has allocated ₹350-400 crore for capex in the current fiscal year, excluding the greenfield project investment, compared to ₹240 crore in the previous year.
EKL exports to over 70 countries, contributing 5–7 per cent of total revenue, with key markets in Europe and Asia. The upcoming facility aims to boost exports to 15 per cent over the next five years through new products and expansion into markets like Mexico (by Q1 FY26) and Southeast Asia, including Myanmar, Cambodia, and Thailand.
However, entry into the US market, which is one of the largest for Kubota, is expected to take time and open the opportunity with production in the greenfield plant.
EKL anticipates export growth of around 20–25 per cent in the current financial year.
Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

With new energy, JSW Group gets ready to disrupt EV market
With new energy, JSW Group gets ready to disrupt EV market

Time of India

time23 minutes ago

  • Time of India

With new energy, JSW Group gets ready to disrupt EV market

Sajjan Jindal-led JSW Group has set up a dedicated automotive vertical-JSW Motors. This will be an umbrella platform under which the group will launch passenger cars focussed on new energy vehicles at an investment of up to $3 billion over the next five years with launches set to begin in the second half of FY26. It will be separate from the group's joint venture with China's SAIC, JSW MG Motor India. JSW Motors is in talks with three-four companies across Italy, Germany, South Korea and China for collaborations to design and develop these cars, which will be sold under the JSW brand, newly appointed chief executive officer Ranjan Nayak told ET in his first media interview. All vehicles will be made in India, with the earmarked resources deployed for commissioning the manufacturing facility, research and development. JSW's automotive hub, spread across 630 acres, is coming up at Bidkin in Chhatrapati Sambhajinagar in Maharashtra. Elaborating on the expansion strategy, Nayak said JSW Motors is aiming to disrupt the domestic electric vehicle (EV) market by manufacturing "world class automotive products in the country" by leveraging the best technologies from across the globe, including Italy, Germany, South Korea and China, and combining that with India's own strengths in robust supply chain and digital integration. "We are looking at rapidly scaling up our in-house automotive technology, and not remain dependent on any external entity. Our integrated approach allows us to combine global excellence with local relevance, ensuring high performance, affordability and sustainability," Nayak said, adding, "Our first New Energy Vehicle (NEV) under the JSW badge will hit the roads in the second half of FY2026." Nayak said JSW Motors is drawing on "the unique strengths of industry-leading partners" from around the world, without specifying details of the companies it is collaborating with. "We will be combining the craftsmanship and aesthetics of Italian designers and the German precision in manufacturing and engineering with the advanced welding technologies from South Korea and China's expertise in electric propulsion systems, battery innovation and New Energy Vehicle (NEV) technologies with that of the Indian IT sector's deep capabilities in software and digital integration," said Nayak. He declined to share details of the investments the JSW Group has scheduled for its automotive venture. However, industry sources said the group has lined up an investment to the tune of $2-3 billion in its automotive business over the next five years. Similar to its strategy in the steel sector, JSW intends to "energize the auto ecosystem-spurring suppliers and competitors to rise with us" to accelerate India's shift to clean mobility and reduce its dependence on oil, said Nayak, who is also executive vice president and head, corporate strategy, JSW Group. "Our aim is to push New Energy Vehicle penetration to 50%, offering affordable, world-class electric, hybrid, and plug-in hybrid vehicles," he said. Nayak said China is at the forefront of EV and hybrid vehicle innovation and has become an integral part of the global automotive supply chain. As the world rapidly shifts toward sustainable mobility, technologies such as Plug-in Hybrid Electric Vehicles (PHEVs), pioneered by Chinese automakers, are redefining the industry landscape. By combining the best global technologies with India's own strengths, JSW Motors intends to bring high-quality, technologically advanced, energy efficient and environmentally responsible vehicles. This approach will deliver "unmatched value to Indian customers and propel the country towards a more secure, sustainable and self-reliant automotive future," he said. "Like global industry leaders-including those from Europe, America (like Tesla and GM), and Japan-we embrace relevant advancements from China and other innovation hubs, integrating them within India's ecosystem. Promoting EV, PHEV and hybrid technologies is also critical from an energy security standpoint." he said.

Highways dept appeals Madras HC order to demolish two pillars of Avinashi road elevated flyover project
Highways dept appeals Madras HC order to demolish two pillars of Avinashi road elevated flyover project

New Indian Express

time23 minutes ago

  • New Indian Express

Highways dept appeals Madras HC order to demolish two pillars of Avinashi road elevated flyover project

COIMBATORE: The Madras High Court ordered the Special Projects wing of the State Highways department officials (Coimbatore division) to demolish two pillars built for the ramps of the Avinashi Road elevated flyover project. The move comes after a landowner alleged that the construction of the pillars appears to favour a private star hotel on Avinashi Road. Meanwhile, the highways department has filed an appeal against the order. Justice Bharatha Chakravarthy observed that the pillars, originally spaced 30 metres apart, had been repositioned without structural justification. The judge ordered the demolition of the relocated pillars and reconstruction at the originally-sanctioned spots, citing risk to the structural integrity of the flyover. He also imposed a personal fine of Rs 1,000 each on two senior highways engineers, and directed that the relocated pillars be marked with the Tamil Nadu Government's motto "Vaaimaiye Vellum" (Truth Alone Triumphs), and be known as the "Pillars of Truth." The 10.1 km-long, Rs 1,621.3 crore flyover project, connecting Uppilipalayam and Goldwins, is one of Tamil Nadu's largest infrastructure undertakings. Originally, the project included five pedestrian subways at high-traffic points to ensure safe crossings under the flyover, as well as service roads to maintain access to properties alongside the corridor. Kathirmathiyon, secretary of Coimbatore Consumer Cause and a member of the Coimbatore District Road Safety Committee filed a Public Interest Litigation (PIL) against the highways department for omitting key pedestrian infrastructure and a service road in the ongoing Avinashi Road elevated flyover project. The PIL, filed before the Madras High Court, flags the silent removal of five approved pedestrian subways and the dropping of a service road near a private hotel, both of which were part of the original sanctioned plans.

GNG Electronics IPO: Allotment status out today, here's how to check online
GNG Electronics IPO: Allotment status out today, here's how to check online

Economic Times

time23 minutes ago

  • Economic Times

GNG Electronics IPO: Allotment status out today, here's how to check online

Here's how to check GNG Electronics IPO allotment status Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel The allotment status for GNG Electronics' Rs 460.43 crore IPO is expected to be announced today. With the public issue attracting overwhelming investor response across categories and subscribing 150 times overall, market participants are keen to know who will receive shares ahead of its listing on July offer had seen intense bidding from all segments. Qualified institutional buyers subscribed their portion 266.21 times, while non-institutional investors bid 226.44 times. Even in the retail category, the issue was oversubscribed 47.36 times, signalling broad-based the back of this robust participation, GNG Electronics is trading at a grey market premium of around Rs 95 per share, implying a listing pop of nearly 40% over the issue price of Rs who applied for the IPO can check their allotment status online through the registrar's portal or via the BSE 1: Through the Registrar (Bigshare Services)Visit the Bigshare IPO allotment portalSelect 'GNG Electronics' from the dropdown PAN/Application numberOption 2: Via BSE WebsiteGo to the BSE IPO Allotment PageSelect 'Equity' and then choose 'GNG Electronics'Enter your application number and PANThose allotted shares can expect them to be credited in their Demat accounts by July 29. Refunds for applicants who did not receive allotment will also be initiated on the same date. The listing of GNG Electronics shares is scheduled for July 30 on both BSE and company, which operates in the refurbished electronics segment under the Electronics Bazaar brand, offers end-to-end services from sourcing and refurbishment to sale and after-sales client base spans 38 countries, and it operates over 4,000 touchpoints globally. Backed by strong growth in revenue and profitability over the past two years, the company has positioned itself as a prominent player in the circular economy-driven tech listing is being closely tracked as a potential breakout debut in the refurbished tech hardware space.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into a world of global content with local flavor? Download Daily8 app today from your preferred app store and start exploring.
app-storeplay-store