V.S.T Tillers Tractors Limited

Revenue grew 10% to Rs. 301.43 crores in Q4 FY25, with full-year revenue (excluding other income) reaching Rs. 994.55 crores, up from Rs. 968.05 crores last year. Operational EBITDA for Q4 increased by 1% to Rs. 40.37 crores, representing a 13.39% margin. However, full-year operational EBITDA saw a decline of roughly 20% to Rs. 111.09 crores (11.17% margin) compared to Rs. 124.19 crores (12.83% margin) in the previous year, primarily due to increased investments of Rs. 13 crores in R&D and product development capacity.

The Power Weeder business demonstrated robust growth of 63% in FY25, with sales reaching 7,458 units compared to 4,567 units last year. The Power Reaper business grew 22%, selling 2,403 units against 1,964. The Precision Component division, focusing on external business for the first time, grew 71%. Domestic tractor sales, driven by new Power Series models (932 and 939), jumped 180% in the domestic market, contributing to a 4.53% annual growth in domestic tractor business. Conversely, tractor exports declined from 1,680 units last year to 1,411 units in FY25, primarily due to lower demand in the European market during Q4.

VST Tillers Tractors is successfully expanding into the Northern market, with Power Tiller sales increasing from ~200 units in FY24 to ~900 units in FY25, and Power Weeder sales growing from ~200 to ~1,000 units in the same period. This expansion is supported by a high reliance on retail finance, with 70-80% of sales in the North being financed due to the limited availability of subsidies. The company aims to increase its overall retail finance share from approximately 10% to 15-20% in FY26, reducing dependency on government subsidy programs.

The government's SPARSH scheme, a subsidy payment mechanism, caused significant cash flow disruptions for companies, including VST, which relies on it for 75-80% of its tiller market. This led to an increase in receivables, which rose from 59 days outstanding last year to 75 days currently, after peaking at 88 days in Q2. Management supported dealers during this period and is now actively working to bring receivables down to a target of 50-60 days. The scheme is largely resolved in key states like Tamil Nadu, Karnataka, and Orissa, with some uncertainty remaining in the Northeast.

The company projects a positive outlook for FY26, with an anticipated 20-30% revenue growth in Q1. Operational EBITDA is expected to remain within the 11-13% range, consistent with historical performance. VST plans a slew of new product launches, including several upgrades for Classic and Series 9 tractors in FY26, and new platforms for global markets (India, Europe, US) in FY27, featuring three platforms, eight models, and 16 variants. Additionally, new Power Weeder variants and electric Power Tiller/Weeder platforms are slated for launch in FY26, alongside a new product called SCORE, positioned between tillers and tractors.

VST is pursuing a global strategy, particularly in the compact tractor segment, where the European market size is comparable to India and margins are better. Despite challenges like US tariffs on Monarch tractor chassis exports and political instability affecting Bangladesh market entry, the company remains committed to its global expansion plans. The Zetor brand, well-recognized in the Northern market, is performing positively, with sales expected to be close to the target of 1,500 units for higher HP models, and upgrades are planned for H2 to meet customer expectations.

Current production capacities stand at 36,000-40,000 units for tractors (one shift), 60,000-70,000 units for power tillers (one shift, up to 1 lakh with shift), and 10,000 units for India-made power weeders. The company's strategy includes leveraging fungible capacities for new product categories like SCORE and exploring distributed manufacturing for cost competitiveness in power weeders. Management also hinted at potential M&A activity within the next two years to support strategic expansion and capitalize on accumulating cash on the balance sheet.