V.S.T Tillers Tractors Limited

VST Tillers Tractors achieved its highest-ever Q2 revenue of ₹315 crores, an 11% YoY increase, and H1 revenue of ₹598 crores, up 26% YoY. This growth was supported by robust sales volumes, with Power Tillers growing 16.8% in Q2 (13,128 units) and 43.3% in H1 (24,829 units). Power Weeders also saw significant increases, up 47% in Q2 (2,621 units) and 42.4% in H1 (4,970 units). Cash generation from operations improved to ₹62.5 crores in H1, contrasting with a deployment of ₹52.1 crores in the prior year.

The domestic tractor business showed a strong turnaround, growing 16% in Q2 (1,068 units) and 10% in H1, reversing a previous downward cycle. The company is strategically launching new, higher-horsepower tractor platforms, including a 3.22 liter engine with 16+4 transmission, and upgrading compact tractors with 1.2 liter and 1.6 liter Torque Max engines in Q3/Q4 FY26. These new Stage-V compliant engines are designed for global markets, with management targeting 10,000-12,000 tractor sales annually within the next two years, up from approximately 6,000 last year.

The timely flow of subsidies under the government's Project Sparsh scheme, which previously caused delays, has positively impacted demand for small farm machinery in Q1 and Q2 FY26. Retail finance penetration in focus states has significantly increased to 12-13% from 1.5% two years ago, with players like Bajaj Finance entering the segment. Management believes this will further boost demand, especially for smaller ticket size products, and aims for retail finance to account for over 20-30% of sales in the longer term, minimizing the effect of subsidies.

Export volumes declined by 33% in Q2 (254 units) and 27% in H1 (566 units), primarily due to extended logistics timelines, which have increased from 30-45 days to 60-90 days, impacting distributors' capital rotation. Additionally, component exports for electric tractors to the US were affected by Trump tariffs. To mitigate these issues, VST plans to establish its own operations in Europe within the next 6-9 months to improve capital rotation and increase export volumes.

While VST has developed electric tractor and tiller technology, high battery costs and lack of charging infrastructure currently make electric tractors unviable for the average Indian farmer. Management believes electric farm machinery will first emerge in smaller machines like weeders and tillers, where capacity requirements are lower. The company's PAT in Q2 FY26 was negatively impacted by mark-to-market (MTM) losses from its investment book, leading to a decline from ₹44.9 crores to ₹25.4 crores YoY. Management intends to realign its treasury to reduce MTM volatility, though no specific timeline was provided.