VST Till. Tract.

VST Tillers Tractors reported a robust Q3 FY26, with revenue growing 43.4% year-on-year to INR 314 crores, and a significant increase in PAT to INR 30.7 crores from INR 1.7 crores in the prior year. For the first nine months of FY26, the company achieved its highest-ever turnover of INR 912 crores, marking a 31.6% growth over INR 693 crores in the corresponding period last year. This performance was largely fueled by strong sales in power tillers, which grew 55.1% to 37,374 units, and power weeders, which saw a 63.3% increase to 8,399 units for the nine-month period. The domestic tractor business also showed a positive turnaround with 18% growth over nine months and 32% growth in Q3.

The company attributes the sustained growth in the SFM segment to several factors, including the large market potential of 10 crore households lacking mechanization, rising labor costs (from INR 150-200 to INR 500-900), increased penetration of retail finance (now 12-13% for power tillers), and strong government focus on small farm mechanization. Management emphasized that this growth is not accidental but a result of market penetration and product availability at the taluka level, supported by a 2-year warranty, service, and spare parts availability, which differentiates VST from Chinese competitors despite being 15-20% more expensive for power weeders.

VST is actively launching new products to capture market share. The FENTM series, featuring a newly designed fuel-efficient engine, has been launched in Gujarat and will expand to Maharashtra by Gudi Padwa (next month), followed by other states in the next financial year. The revamped VST ZETOR tractors are also slated for relaunch in Q4 FY26, starting in March. Additionally, the company is introducing electric power weeders and tillers, with seeding expected to begin in Q4 and scaling up in the next financial year. VST is also exploring the marine engine market with compact inboard engines for fishing trawlers and small boats, viewing it as an adjacency with no significant separate capex required.

While tractor exports declined by 23% for the nine-month period, VST is strategically repositioning its international business. The company is establishing a direct operational base in Europe, with ground operations expected to be up and running by Q1 FY27. This move aims to mitigate challenges associated with exporting from India, such as logistics costs and working capital complexities. Management is also studying the EU FTA for potential benefits. For FY26, the export mix is projected to be 90% to Europe, 5% to Africa, and 5% to the Rest of the World, with zero exports to the US, though product development for the US market continues with a target entry in 2027.

The company's small farm machine factory in Malur is operating at near full capacity. With an installed capacity of approximately 70,000 units (expandable to 1 lakh units with a third shift for power tillers, weeders, reapers, and new products), VST recognizes the need for additional capacity. Management is evaluating options for establishing a new manufacturing facility in North or West India, with finalization expected in the next few quarters. Capex outflow for FY27 is projected to be around INR 60 crores, primarily allocated to long-term projects, technology development, and product development, including a global tech center.