V.S.T Tillers Tractors Limited — Q3 FY26 earnings call

Quite frankly, it's very initial days in that segment. We wanted to take an exposure. We believe there is an opportunity there in terms of providing our compact engines, especially on fishing trawlers and the small boats, not necessarily as an outboard engine, but an inboard engine which occupies lesser space.

Management confirmed initial exploration into the marine engine market, focusing on compact inboard engines for small boats, indicating a new potential growth avenue without significant upfront capex.

Asked by Shreyas Dattani

We have just launched in one state, which is Gujarat, so now we'll be launching in Maharashtra which is the next place we will be launching at Gudi Padwa, coming next month. And then, go on for launches in all the other states in the next financial year. Yes. ZETOR is a complete revamped series now we'll be launching, because we've been seeding in the last 1 year or so. And now we have a complete revamped product, so that process of relaunch is happening in Q4 to begin with in March and then going forward into the next financial year. Yes. So like we said in the last quarter, we are introducing electric power weeders and electric power tiller. So we would be starting to seed them in this quarter. In March, we should be able to start seeding them in the market and scaling up steadily based on the response from the market in the next financial year. So it is going as per plan.

Management provided a clear roadmap for the phased launch of new FENTM and revamped ZETOR tractors, as well as electric power weeders and tillers, indicating future volume drivers.

Asked by Shreyas Dattani

Power weeders, for example, I'll take that's it. let me tell about power tillers first. So power tiller, no Chinese imports are allowed. So we don't expect that to happen at all. Now coming to the power weeder segment, today, there is still large imports of Chinese equipment. But what we are seeing is with the manufacturing of power weeders in India and better-quality products reaching the small and marginal farmers, they are adapting it faster. And with more trust on the brands like VST, they are coming forward, because we offer a 2-year warranty on these machines, which the Chinese do not offer. These things are creating trust on the brand. And hence, we believe going forward, based on reach and coverage, if we can reach to every small farmer in terms of establishing a counter in every Taluka, we will be able to penetrate this market and the growth will continue. So the Chinese influence will diminish over a period of time.

Management addressed concerns about Chinese competition, highlighting VST's competitive advantages (warranty, service, spare parts) and strategy to counter imports, despite being 15-20% more expensive for power weeders.

Asked by Shubham

Yes, good question. So we have been depending only on our dealer network so far, but a couple of quarters back, we started working on a distributor retail network also for this segment, that is a power weeder, brush cutter, chainsaw, that segment, we have started working on a distribution retailer network. Today, we have about 10 distributor -- it was a pilot phase for us. We have about 10 distributors and about 300 retailers at this point in time, but we want to significantly scale it in the next few years.

Management detailed their strategy to expand SFM reach beyond traditional dealer networks to a distributor retail network, aiming for significant scaling in the coming years to penetrate the market more deeply.

Asked by Shubham

So the largest segment, which is almost 8 lakhs plus or close to 9 lakhs, it is between the 30 to 50 HP. And among these 2 segments, 30 to 40 and 40 to 50, the larger growth is coming in the 40 to 50 HP segment. So till recently, VST was playing only up to 30 HP. Now we have some compact tractors that we have launched in the 30 to 40 HP. And the larger segment, which is the growth segment, which is 40 to 50 HP segment, where we are working with ZETOR and VST ZETOR products are coming in.

Management clarified VST's positioning in the tractor market, focusing on the growing 30-50 HP segment with new products, and outlined a clear market share ambition of 2-3% in 4-5 years.

Asked by Krish

Subsidy is normal, continuing, regular. With the SPARSH scheme last year where they introduced a new mechanism of paying the state governments the central portion, so all those things have been streamlined. So it's been regular this year, but not increased. It has been the same subsidy amount overall that has been coming. It has not been increased. So the subsidy allocation has been the same, but it's been more regular because it's become systematic. I don't see going forward anything happening to it because the new budget also has not changed the allocations. It has neither increased nor reduced the allocation. So I expect normalcy to continue. But in the first quarter of this year, we had some elections state government elections, which could slow down a bit in the first half of the financial year, especially in terms of subsidy flow. Whenever an election happens, we have seen that trend is, flows have stopped for a few months. So I think then it will regularize. But I don't see, at this point, anything which should hamper that, unless there is a new surprise that comes up.

Management provided an update on the subsidy environment, confirming regularity but also flagging a potential temporary slowdown in Q1 FY27 due to state elections, which could impact sales.

Asked by Annamalai Jayaraj

Yes, we will have to expand it, because our small farm machine factory based in Malur is running to almost full capacity now. So we are evaluating various options. We are at about 70,000 in terms of installed capacity. But if you do a third shift, we can go up to 1 lakh of power tillers, plus weeders, plus reapers, plus new products that are coming up, electric weeder, electric tiller and all of that. So all of that put together, we feel that we will have to add capacity. We are evaluating whether it is putting all eggs in one basket or diversifying. We have never had a manufacturing facility in any other part of the country other than the South. We believe that it is time that we should look at having a factory somewhere in the North, somewhere in the West. So we are looking at options and -- but it's too early. I'm sure in the next few quarters, we will finalize on that.

Management indicated that current SFM capacity is nearing full utilization and they are actively evaluating options for expansion, including a new factory in North or West India, signaling future investment and growth.

Asked by Shubham

Yes, going forward, I think Europe has tremendous potential. We have always believed in it. And that is the reason a couple of quarters back, we said that we are now working towards establishing a base in Europe with our ground operations starting in Europe. So far, we have been trading or rather exporting from India to our distributors in Europe. That had its own challenges with all the conflicts going around and the logistics cost and the time required for logistics varying through the year and creating complexities for the distributors in terms of cash flow, in terms of working capital involved in the business and the rotation of the same. So first is, we are establishing our base in Europe. Hopefully, first quarter of next year, that should be up and running. Second is, we are studying the EU FTA. All the details are not out. It should benefit us in some ways. The taxation difference is not much because the tractors aren't taxed much in the European market. But there could be other benefits in terms of putting our people on the ground in terms of easier visas, employment possibilities, which will help us scale up our operations in Europe faster. So we are working on it.

Management outlined a detailed strategy for establishing a direct operational base in Europe by Q1 next FY, aiming to overcome export challenges and leverage the market's potential, potentially aided by the EU FTA.

Asked by Arjun Khanna