Escorts Kubota Q4 FY25 earnings call

Escorts Kubota reported standalone operating revenue from continuing operations of ₹2,430.3 crores in Q4 FY25, marking a 6.1% YoY increase. EBITDA stood at ₹292.9 crores, up 0.7% YoY, with a margin of 12.1%. Net profit from continuing operations grew 5.9% YoY to ₹250.7 crores, leading to an EPS of ₹27.05. On a consolidated basis, revenue from continuing operations was ₹2,444.9 crores (up 6.3% YoY), with EBITDA at ₹287.6 crores (11.8% margin) and net profit from continuing operations at ₹271.6 crores (up 11.6% YoY).

The Agri Machinery segment saw its product revenue increase by 11.1% YoY to ₹1,974.8 crores. The company's total tractor volume grew 7.6% YoY to 26,633 units, outpacing the overall industry's 15.5% growth. Domestic tractor volumes increased 6% to 24,801 units. Notably, export volumes surged 36.6% YoY to 1,832 tractors, with approximately 70% of these exports channeled through the Kubota Network. The segment's EBIT margin was 11.4%.

The Construction Equipment business faced a challenging quarter, with segment revenue declining to ₹453.9 crores from ₹505.8 crores in the corresponding quarter. Total volume for the CE business was 1,719 machines, down from 1,958 machines YoY. The EBIT margin for this segment contracted to 9.1% from 11.0% in the prior year, primarily attributed to cost escalation from changes in emission norm regulations and an overall industry volume degrowth of approximately 8%.

The Railway Equipment Business Division, now a discontinued operation, reported a revenue of ₹256.5 crores in Q4 FY25, a 20.2% increase from ₹213.4 crores YoY. PBT for the division significantly improved to ₹62.7 crores from ₹35.6 crores YoY. The order book for this division stood at over ₹900 crores as of March '25, though a ₹383 crore BMBS order for freight wagons is temporarily held by RDSO.

Escorts Kubota has outlined a CAPEX plan of ₹350-400 crores for FY26, excluding investments for a Greenfield plant. An additional ₹450-500 crores is earmarked for Greenfield land acquisition this year, bringing the total FY26 CAPEX to approximately ₹800 crores. The Greenfield plant in Uttar Pradesh is projected to become operational by early FY29 (February '28 or '29), with an overall CAPEX outlay of ₹4,500 crores planned over the next three to four years.

The company's captive finance arm, Escorts Kubota Financial Services (EKFL), has commenced operations. An initial investment of ₹60 crores has been made, with the total authorized capital planned at ₹700 crores, the balance of which will be injected in FY26. EKFL aims to achieve a book size of approximately ₹100 crores by the end of FY26 and targets a penetration level of 30-35% within 2-3 years, similar to other captive finance companies, to support sales and market share.

Management anticipates mid-to-high single-digit growth for the tractor industry in FY26, potentially reaching 10 lakh units. The company's strategy for market share gain includes focusing on the 31-50 HP category, which constitutes 90% of the total segment. Key product launches include a new Powertrac series for southern markets in Q3 FY26 and a Kubota mid-segment product in Q2 FY26. Efforts are also underway to improve white space coverage in dealer networks, particularly in the eastern and western regions.

Escorts Kubota maintains a strong liquidity position, with approximately ₹6,500-6,600 crores in cash and equivalents at March end, after repaying about ₹350 crores of merged companies' debt. An additional ₹1,400-1,500 crores net cash is expected from the railway deal. The company projects its total cash on the balance sheet to reach ₹7,500-8,000 crores by next year-end. A final dividend of ₹18 per share (180%) was recommended for FY25, bringing the total payout to ₹28 per share, representing about 25% of profit, with a long-term target to gradually increase the payout ratio to 40%.