Escorts Limited (NSE: ESCORTS) Q4 2025 Earnings Call dated May. 08, 2025
Corporate Participants:
Unidentified Speaker
Bharat Madan — President Finance, Group Chief Financial Officer and Corporate Head
Neeraj Mehra — Chief Officer of Tractor Business Division
Sanjeev Bajaj — Chief Officer, Construction Equipment Business Division
Analysts:
Unidentified Participant
Chirag Jain — Analyst
Mumuksh Mandlesha — Analyst
Mitul Shah — Analyst
Gunjan Prithyani — Analyst
Raghunandhan N. L. — Analyst
Vikram Damani — Analyst
Jaimin Desai — Analyst
Vijay Pandey — Analyst
Rishi Vora — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to the Escorts Kubota Limited’s earnings conference call hosted by MK Global Financial Services Limited. Before we start, I would like to add that some of the statements made by the company in today’s call will be forward looking in nature and are subjected to risks as outlined in the annual report and investor releases of the company. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchstone phone.
I now hand the conference over to Mr. Chirag Jain, MK Global Financial Services Ltd. Thank you. And over to you.
Chirag Jain — Analyst
Thank you, Navya. Good evening everyone. On behalf of MK Global Financial Services, I would like to welcome you all TO Escorts Kubota Limited Q4NFY25 earnings conference call. I also take this opportunity to welcome the management team from Escorts Qbota Ltd. Today we have with us Mr. Bharat Madan, full time Director and Chief Financial Officer. Mr. Neeraj Mehra, Chief Officer, Tractor Business Division. Mr. Sanjeev Bajaj, Chief Officer, Construction Equipment Business Division. Mr. Sanjeet Garg, Head Head Finance and Tax and Mr. Pratik Singhal, Investor Relations and ESC. We will start the call with brief opening remarks from the management followed by the Q and A session. Over to you sir.
Bharat Madan — President Finance, Group Chief Financial Officer and Corporate Head
Thank you Chirag. Good evening everyone and thank you all for joining us today. Fiscal year 2025 has been a remarkable milestone for our company. Making 80 years of spreading prosperity and impacting lives. With a successful merger starting operation in captive finance arm EKFL and our best ever financial performance with highest revenue and net profit. Few highlights of the company’s standalone financial performance for the quarter ended March 25 are as follows. Operating Revenue from continuing operation at 2430.3 crores up by 6.1% year on year. EBITDA at rupees 292.9 crores up by 0.7% year on year. EBITda margin in Q4 at now standard 12.1% Pvt.
Before exceptional item from continuing operation at 358.4 crore up by 9.7% year on year. During the quarter there is an adverse impact of rupees 27.1 crore on account of impairment of investment in Poland, a wholly owned subsidiary and a joint venture company in Gujarat. For small sectors, net profit from continuing operation is 250.7 crore up 5.9% year over year. Net profit including discontinued operation at 297.5 crores up by 8.2% year on year. EPS stands at 27.05 as compared to rupees 25.05 year on year. The Board has recommended final dividend of 180% for the fiscal year 25 equivalent to rupees 10 per share with the interim dividend already paid.
The total payout for FY25 will be amount to rupees 28 per share for the face value of rupees 10 each, an increase of 56% as compared to previous year on the consolidated basis. Company financial performance for the quarter ended March 25 rs is as follows. Revenue from continuing operation at Rupees 444.9 crores up by 6.3% year on year. EBITDA has 287.6 crore with a margin of 11.8%. Net profit from continuing operation at 271.6 crores up by 11.6% year on year. Net profit including discontinued operation at 318.4 crore up by 17.9% year on year. Moving on to the segmental business performance starting with the Agri Machinery business division on the tractor business in Q4 FY25 the total tractor industry volume domestic and Export was at 2.28 lakh tractors up by 15.5% against corresponding quarter last year.
Our total volume was at 26,633 tractors up by 7.6% over corresponding quarter previous year. On the domestic front, the total industry in Q4FY25 was at 2 lakh tractor up by 17.3% as against corresponding quarter last year, industry in north and central region experienced a growth of 10 odd percent whereas rest of the country saw a substantial growth of 25.1%. Our domestic tractor volume stood at 24,801 tractors, up by 6% as compared to the corresponding quarter last year. Looking ahead with favorable macroeconomic conditions such as good Rabi harvest, higher crop prices and above normal monsoon prediction this year coupled with sufficient water level in reservoir, we expect tractor industry to continue growing across various regions in the next fiscal.
2. On the export front, the tractor industry in Q4FY25 came at 27,500 hectare up by 4% as against 26.5 thousand tractors in the corresponding quarter. Our export volume came at 1832 tractors up by 36.6% as against 1341 tractors in the corresponding quarter. During the quarter, sales to Kubota network account approximately 70% of the total export non tractor revenue comprising of agri solution business, Indian business spare parts business in Q4FY25 constitute 19% of the agri machinery segment revenue as against 18% in the corresponding quarter and 21% in the sequential quarter. Agrimachinery product segment revenue was up by 11.1% to 1,974.8 crore aggregates 1,776.7 crore in the corresponding quarter.
EBIT margin for agri machinery business division were at 11.4% as against 11.5% in the corresponding quarter. Coming on to the construction equipment business in Q4 FY25 serve industry volume comprising crane, baffle loader, mini excavator and compactor which was down approximately 8% as against the corresponding quarter last year. This growth was primarily driven by the crane industry which was down approximately 13% as compared to the corresponding quarter last year. Our total volume in the CE business were at 1719 machines as against 1958 machine in the corresponding quarter. CE segment revenue came at 453.9 crores I.e. in 505.8 crores in the corresponding quarter.
EBIT margin for the quarter ended March 25 came at 9.1% as against 11% in the corresponding quarter. Adversely impacted due to change in initial norms regulation as our commitment to innovation and focusing on the introduction of the new product during the year we introduced product in the back of hydra segment complying with the higher emission norms. Our latest backhoe loader product is engineered for the mass market in domestic and the international market. The new crane models meet customer demand for performance, safety and comfort in non industrial crane segment. The construction equipment industry is currently navigating challenges in retail demand primarily due to cost escalation on account of changes in the emission regulation.
However, as the government prioritize infrastructure development across various sector and price stabilization following the liquidation of all old emission inventory, we anticipate an uptake in the demand during the later half of FY26. The Government of India has allocated 11.21 trillion for rupees 11.21 trillion for capital expenditure in this year budget which is a significant portion designated for the development of roads, railways, port and urbanized initiative. Moving on to the railway equipment business division that’s a discontinued operation. Revenue for the quarter ended December March 25 came at 2256.5 crores as against 213.4 crore in the corresponding quarter.
PBT for the quarter ended March 25 came at 62.7 crore as again 35.6 crore in the corresponding quarter order book for the division at the end of March 25th stands at more than 900 crores. This order book however excludes BMWs order for the weight wagon approximately 383 crore supplier for which have been temporary hold by RDSO. Now I will request the moderator to open the floor for the Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mumuksh Manlesha from Anandrati Institutional Equities. Please go ahead.
Mumuksh Mandlesha
Yeah, thank you so much for the opportunity. So firstly on the tractor industry growth outlook for this year and also sir, how are you being seeing the response for the new Promax series and going ahead? What are the focus area for the new launches?
Neeraj Mehra
Hi, good evening, this is Neeraj Mehra Desaid. So the industry outlook is positive as it has been in the past couple of quarters. So we see a growth in the industry in the coming quarter as well. As for the entire year. Coming to your second question on how the Promax series is doing. So it’s early days yet, we have yet to get into a peak season for Promax but the initial response is pretty good. And I believe you had a third part of your question also
Mumuksh Mandlesha
what are. The new launches focus which are the areas launches are focused on.
Neeraj Mehra
So see we have a launch in Power track which is planned in the. Third. Quarter that is primarily an entire series for the southern market. And also we have a product in Kubota in the mid segment which is planned in quarter two. So these are the visible product launches for the current physical.
Mumuksh Mandlesha
Got it sir. How’s the product development going for the exports market? Any update around that? And what are plans to enter the Europe market? Sir.
Bharat Madan
So we are already exporting the European market. So as Pradeep mentioned, I think even in the last quarter the export growth has been quite good. Somewhat 36% growth which has come although the base is low. But 70% of the export has gone through quota network. So I think that’s quarter Europe has started even though the market conditions are not really good even as of now I think as we speak but I think the numbers for us have started Improving now.
Mumuksh Mandlesha
So any outlook sir, how do you see the growth for FY26 for exports.
Bharat Madan
2025% growth this year or last year only 4.
Mumuksh Mandlesha
Got it sir. So any update on the green feed plant in the U.P.
Bharat Madan
Sir, so we’re in touch with the U.P. government. I think they already completed the acquisition of land. So there are certain formalities we need to do internally like there’s some tests which we need to do for soil, water and topography etc so those things are happening right now as we speak. So hopefully I think they have indicated the UP government is keen for us to go fast. So I think once our internal processes are completed, I think we should go and do that.
Mumuksh Mandlesha
So the timelines. FY20 would be the timeline sir for the Broadly sir, around that time should be the. For the plan sir.
Bharat Madan
Sometime I think in second quarter we expect the formality should be committed. End of second quarter, the beginning of third quarter declaration of land would get completed.
Mumuksh Mandlesha
Got it sir. How is it delay inventory? For the practitioner.
Bharat Madan
This is the danger. Four to five weeks for all the brand put together.
Mumuksh Mandlesha
Got it. And dealer network has seen expansion over last few quarters. For the mix here, how do you see the expansion? Sir.
Neeraj Mehra
This is Neeraj again. So the expansion is happening primarily. The expansion focus is different for the different brands. So for our track it’s primarily in the southern markets. For Farmtrack it’s more in the eastern side and the western side and for Kubota it is primarily in the northern and central part of the country. So that is the plan and the white space coverage is happening as per the plan.
Mumuksh Mandlesha
Any targets, what kind of network expansion we plan to do sir?
Neeraj Mehra
So it’s not very feasible to give the exact numbers at this point of time. But the intent is to improve our white space coverage substantially in this visiting.
Mumuksh Mandlesha
Got it sir. Thank you so much for the opportunity.
operator
Thank you. Next question is from the line of Chiram Jain from MK Global Financial Services limited Please go ahead.
Chirag Jain
So just wanted to get your sense. I mean obviously in the last con call we did mention that we are largely done with the correction that we were supposed to do on the sales front and probably second half of this financial year we were supposed to grow market share, gain market share. So any update in terms of how things are likely to play out in terms of our market share within the tractor industry?
Neeraj Mehra
So Chirag, you’re right to a certain extent the inventory levels have been brought down to the level that we had aspired for as regards to market share. As you see that the industry is growing exponentially in the southern part of the country and EKL has traditionally been pretty weak over there. So our focus as we go forward is in the west and to a certain extent in the east where the industry is growing. So the intent is as we go forward to be at par with the industry growth in these markets.
Chirag Jain
Understood, understood. And I think over the medium term we have been expecting a major increase in market share. Can you share some light over there as well over the next two, three years what kind of initiatives we are undertaking to improve, let’s say, market share in the domestic market.
Neeraj Mehra
So you see, one thing that good that has happened in the last physical is that we have been able to grow market share, though marginally in our stronger markets. That was area of concern over the last four, five years, wherein in the previous calls also I had mentioned that the focus primarily will be in the north and the western part. So in our stronger markets we have actually gained in the last physical year. Now for the next couple of years, the focus actually, or the strategy is primarily twofold. One is how do we grow through the product side in the 31-50hp category, which contributes almost 90% of the total segment, we have already introduced Pro Max and in the initial question I missed out that the second phase of GrowMax is also expected in the beginning of quarter four.
So FarmTrack will primarily grow on the basis of these complete product range that and the new product range that we have introduced. In terms of powertrak and Kubota, the strategy primarily is twofold. One on coverage improvement and secondly introduction of products especially in powertrak for the servant markets and the paddy markets which we intend to do early on in the third week of. In the third quarter of this physical.
Chirag Jain
Okay. On the export front you mentioned that we might grow at about 20, 25% this financial year. Any thoughts on the component business? Because that was also supposed to start scaling up. So any update on that front as well and also guidance if you want to share for the next two, three years.
Bharat Madan
Yeah, so there also I think the work is happening. So this year also the exports have been there, but it’s not much. I think it’s only about 100 crores plus which has been done this year and next year they are targeting to double this number, but I think it will take. It’s a slow start, but I think the work is happening there with all the suppliers and the Japanese team also continuously working on this. I’m sure that the business which has good potential to grow whenever it happens I think you’ll see exponential growth maybe one next three, four years and just.
Chirag Jain
Last question and then I’ll come back in the queue. In terms of profitability, how do we see let’s say this financial year or at least let’s say next one or two quarters considering various drivers, I think.
Unidentified Speaker
Overall the trend will continue. I think the way we are seeing for this year too, I think we expect the similar number should hold good and maybe some improvement we are working on. So you know, one and above, maybe half percent to 1% sort of improvement. So it depends on how the quality prices move, you know, in the coming year and how the market reacts to that. So otherwise broadly it should be in the similar range. Obviously in the certain new product category we’ll see some pressure on the margin initially until the time the product stabilizes and we achieve volumes then the margins will start improving there.
So initial introductory prices will probably have some impact there. But overall we don’t expect to be lower than this year next year.
Chirag Jain
Understood. Thank you so much. I’ll come back in the queue.
operator
Thank you. Next question is from the line of Mithul Shah from Dam Capital. Please go ahead.
Mitul Shah
Thank you for the opportunity sir. First question again on market share. Seasonally Q4 is very strong for our company and generally it has been roughly 100 to 150 basis improvement on a sequential basis. This time it is a marginal improvement or it’s not appearing so strong. So any specific reason apart from south has reported high growth in this quarter and is it to do anything with this merger of Cobot as a combined entity, market share will not get that benefit which we used to get during Q4.
Neeraj Mehra
So. Mithil, good evening. See you actually asked the question and answered it also. So yes, what you’re saying is correct. It’s, it’s, it’s about south also. It’s about a bit about a merger also. It’s also that the industry has grown in the eastern part where there have been certain dealer legacy issues in terms of capacity. So all these have to a certain extent resulted in the performance that we have shared for quarter four.
Mitul Shah
And then second question on margin for tractor segment, seasonally it’s a slightly weaker quarter compared to Q3. Still margins are much stronger also for the leaders also. So any specific reason apart from commodity, are they sustainable or. It was one quarter effect to some extent. Yeah.
Unidentified Speaker
So there are two, three reason actually for this quarter to report better margin one in the last quarter as you know, since we normally build up inventory in second quarter to cater to the high season volumes in Q3. So normally Q3 margins for material cost is slightly higher and that’s almost 2% impact which you can say so if you normalize. So it is what is reflected in the current margins. Also the material cost this quarter is lower than last year. The numbers are lower. So that is one reason. Second, mostly there is a softness in the commodity prices.
So in this quarter also we saw deflation coming in. So that benefit is also accrued in Q4. So that’s also helping us in getting to the better margin.
Mitul Shah
So taking Q3 Q4 average is the right understanding.
Unidentified Speaker
That would be the right method. Yeah, that’s right. Everybody will look more or less. It regrets the normalized margin.
Mitul Shah
Okay, last question. On construction equipment side, despite there is a variation in the volume, margins have now stabilized around 9, 10% or even 11% previous quarter. So going forward do you see any further expansion with the help of any synergy benefit coming from Kubota Global on this side with new products or we should assume around this level.
Sanjeev Bajaj
Yeah. Hi Mittal. Sanjeev said very good evening. As far margin is concerned, I think we don’t expect too much upward jump from here. It will remain consistent for some more time until unless the demand from the market goes up which is expected in next one or two years. So probably we’ll get the advantage of volumes and scale. But as of now this level seems sustainable. But huge upward movement from here is not expected immediately.
Mitul Shah
Yes sir. Thanks. So one thing on clarification in initial remark on agri machinery you highlighted something about non tractor revenue or anything like that within the agri machinery components inspired part in other revenue stream.
Bharat Madan
Yes, Mithul. So we mentioned about the non sector revenue comprising of every solution engine business and service part business in Q4 constitute 19% of the segment revenue.
Mitul Shah
Yeah. Versus last time 18%. Right?
Bharat Madan
Yes.
Sanjeev Bajaj
Yeah.
Mitul Shah
Thanks. Thanks a lot and all the best.
Mumuksh Mandlesha
Thank you.
operator
Thank you. Next question is from the line of Gunjan Prithiani from Bank of America. Please go ahead.
Gunjan Prithyani
Yeah, hi. Thanks for taking my question. Just a few follow ups on the industry side you mentioned positive growth. You know usually you do end up giving us some, you know, some guidance for the year if you can sort of share thoughts. How positive what are the underlying you know on ground central and you know also an update on Trem because we were expecting some easing there. Right. But I don’t think that anything has so far come through. So you know maybe just give talk us through the regulatory emission as well.
Neeraj Mehra
Hi Gunjan Neeraj again. So on the on the industry side, as I said, we’re expecting a growth. So you can actually look at a mid to high single digit growth this year. So this is for sure that the industry is looking at the highest ever volume in the Indian sector market this year. And if all things fall into place, we are probably looking at a 10 lakh number this year. It’s quite possible because all the factors that impact the industry, the forecasts for the rains have been good initial forecast and all the other factors, the government focus on agri infra, everything is positive.
So we are actually looking at the highest ever industry this physical year. Now your second question was regarding emission norms. Yeah, so emission norms. So we. The earlier, the earlier date was 1st April 2026. We do not see as of now the norms getting implemented on that date as of now.
Gunjan Prithyani
Okay, got it. But there is nothing officially out yet on that, right?
Neeraj Mehra
Nothing. Nothing official.
Gunjan Prithyani
Okay. And in this high mid to high single digit is it fair to now assume that lot of the, you know, the product gaps etc being plugged there should be market share gain on a fiscal year basis in fiscal 26?
Neeraj Mehra
See yes, to a certain extent in farm track, to a large extent the gaps have been plugged in power track. As I have mentioned in my initial remarks also that we are looking at a launch of an entire series for the southern market, the Padi special series. So that to a certain extent again will cover up a lot of gaps. On the Kubota side, the product range is not there. We are in the midst of introduction of a product in the key segment of the 45hp category, 40-45hp category. So once that gets introduced, the coverage of Kubota will also improve.
So yes, all these will impact in the growth of market share. But as I have again mentioned in my initial comments, with the industry growth looking this year again in the southern part of the country and in the eastern part the ask is tough. But with the introduction of these products and certain measures on the coverage side, we hope to be at par with the industry or marginally better.
Gunjan Prithyani
Okay, got it. And just moving to margin, maybe just like sort of two part question there. One is when I look at the margin for the second half roughly at about 11% EBIT margin for the agri machinery business. Now you know there is certainly going to be some of these issues that we faced post the consolidation of subsidiaries. You know, there has been some cost synergies, etc. Shouldn’t we be expecting a better EBIT margin in fiscal 26 from this 11% range, the comment that you made was it should be at pretty much the similar zone.
I would have expected some improvement there. So any thoughts there?
Bharat Madan
So Gunjan, actually if you look obviously we don’t have this number separately mentioned in the public domain, but actually the margin on the domestic business of Escort’s Kubota, especially on the old brand, FTPD etc. The margins have improved but at least as in Kubota brand most of the stuff is getting imported and there we got an impact on the exchange. Also losses which has come up because the B has depreciated. So there the cost increases pressure has been there. So that has actually further impacted the margin. So overall the ETF stand on margin will actually improve this year compared to the last year.
So going forward I think it’s difficult to predict how the things will look because the localization is still some time away. It’s not happening immediately. And as mentioned the product is Kubota is selling. You know there’s still lot of import content is there that is next two years we expect those margins will remain in similar range even though if we will continue to work on the domestic margin for our product. So there will be some possibility of improvement there but depending on how the exchange work out going forward on these products. So that can actually impact the margin adversely too.
So that’s why we’re not really going very bullish on the margin but maybe half a percent here and there in Akram.
Gunjan Prithyani
Just last question on this import bit that you talk about Kubota. I mean this will change basis your comments only when the Greenfield plant commissions which is still a couple of years out, isn’t the alternative available to us that we use some of the engines that are there in the Escorts earlier plants, legacy plants. So is that substitution possible at all or we have to wait for greenfield to come?
Bharat Madan
So this will not happen on their platform. They will not allow us to use the Escorts engine on their brand or their product platform. But like you mentioned we are working on a hybrid structure where we will be using our platform and selling it maybe under their brand name. So that’s where the minus will start improving. We will have a total local content in those models. But that again the challenges around the mission bomb, there’s no clarity right now. So it’s a confusion if we norms come whether I should work on the trend three norms or we should work on trend four norms.
So that’s the issue. I think we just coming up as you start working on a total product series now Cocobota based on trend three norms and the norms undergo change and the entire efforts will go waste. And same thing, if we start working on trem4 and they don’t come, then again you know we’ll have to restart again working on temp norms. Otherwise the cost increase will make it unviable to sell. So there are some challenges we are facing on that front. But also the study as you mentioned is what we are following out. But there again the lineup will sometime come maybe after say now one and a half, two years.
So it’s not really something which will come immediately. But after that comes the quota brand will also have complete coverage like we have for our FT and PD lanes. But it’s still having some time away.
Gunjan Prithyani
Okay, got it. Thank you so much.
operator
Thank you. Participants who wish to ask questions may please press star and one at this time we take the next question from the line of Raghun Andan from Nuvama Research. Please go ahead.
Raghunandhan N. L.
Thank you sir for the opportunity. Firstly to Bharat sir. Sir, on the margin side, how has been the trend in terms of commodity prices? What is the expectation for the next three to six months? Months Given that there has been some increase of late. And second one to Neeraj sir, one of your peers commented that there has been some reduction in the competition intensity. If you can talk about how it is, how is the discounting trend that will be very helpful. Thank you.
Bharat Madan
On commodity side. So last I think last year has been more or less flattish. So there’s few quarters. I think two quarters some increase was there. Then two quarters we saw deflation. So net. Net. I think it was a positive year only from commodities perspective. So we’re not seeing any major pressure on the commodity side right now. So I think it’s four to six months Unless something really moves against us in the geopolitical scenarios which we don’t know right now and difficult to comment otherwise. Looks like the market will continue to be soft.
Raghunandhan N. L.
Thank you sir.
Neeraj Mehra
Hi Raghu. So as regards to the market intensity, the intensity remains the same actually the build up in terms of intensity and discounts and customer schemes. It’s primarily once a year when you get into the peak season of Navratras and Diwali. So everybody gets very aggressive there. Post that the additional discounts or the customer schemes are rolled back. And that is precisely the case with us also. We are at the normal level of pricing and a normal level of discounts. So once we get into peak season that would obviously change. So currently we are at a pretty normal Level of discounts and pricing.
Raghunandhan N. L.
Got it. Thank you. One last question on the construction equipment outlook for FY26 given the emission on changes what is the kind of outlook expected for the served industry? And also if you can throw some light on Given the blended shifting from trem 3 trem 4 towards trem 5 or ce 3 ce 4 towards ce 5 what is the kind of blended price increase that is expected and how much price increase we have already taken. Thank you.
Sanjeev Bajaj
Yeah. Hi Raghunami Sanjeev. So this changeover from BS3 BS4 to BS5 is already. It has happened so it was applicable from 1st of January and whatever stocks industry most of these stocks are about to get liquidated. For us the residual stock was over in the Q4 of last financial year itself and for many products and for large number of high volume products we moved to BS5 already and so this is one the impact to the customer is has been to the range of about 10% for products which have moved from BS3 to BS5 and about 7% for products which are not from BS all of that impact on the cost for the customer is not fully recovered.
So we built that in the pricing but it is since that mix of BS4 and BS5 both products are moving in the market by different manufacturers so complete realization of that price increase is yet to happen. And since we are also entering into monsoon period couple of months down the line so. So my sense is that by end of August and then September when the new season starts that is the time when full recovery of these price increases would happen. I hope I answered if there is anything you can let me know.
Raghunandhan N. L.
That was comprehensive. So basically the volume and margin we should see it normalizing in the second half of the year.
Sanjeev Bajaj
Yes. So from a volume perspective this year first half is expected to be impacted because of this BS5 changeover because 10% increase on one type of product and there are products which are 6 to 7% costlier for the customer so it is definitely expected to impact the demand overall demand because the product viability for a customer is at a stake. But we also believe that with such high capex plans for the government this year there will be fund flow which will start going to the market into various projects which are getting announced but those fund flows are yet to happen.
Once that happens on ground then the demand which comes up will probably will be the balancer of that price increase and people will come back buying equipment again.
Raghunandhan N. L.
Understood sir, Very comprehensive. Thank you. Just one follow up to Bharat sir. Sir, over the Next two years. You know, there are various efforts you had earlier indicated in previous calls in terms of synergies, cost savings and how you could try and get the margins towards that 12, 13% range. Just trying to understand how would your thought process be over the next two years on the margin part.
Bharat Madan
Yeah, so I think it will be something similar. I think as you mentioned though, like you should mention, the major change will happen once you have this localization. I think so it is still two years away I think till then I think we’ll remain in this range only 11 and a half to 13%.
Raghunandhan N. L.
Got it sir.
Bharat Madan
Unless the operating template pay very well for us and the volume shooter.
Raghunandhan N. L.
I hope so, sir. Thank you so much.
operator
Thank you. Next question is from the line of Vikram Damani from Damani family office. Please go ahead.
Vikram Damani
Hi, good evening. Am I audible?
Neeraj Mehra
Yes, you are.
Vikram Damani
So given where we are today, what’s the best estimate for the new plant starting date.
Bharat Madan
So if we complete the land acquisition Vikram this year, which is likely I think like I said, by end of second quarter, the beginning of third quarter. So the work will start from next year. So it will take at this previous time to go live on production there. So Maybe end of February 28 or 29 beginning is what we’re looking at.
Vikram Damani
Okay, thanks. In an earlier call you’d indicated that our export should ramp up to geography like Mexico, Southeast Asia around Now, maybe starting FY26. Is there anything sort of moving along those lines?
Bharat Madan
Mexico will start now. I think it’s already started the distributor which was a common distributor for quota and also that it started working noise operational. So we’ll see the numbers will start coming in from this quarter. So US market is where we thought, you know, which is a bigger market. But now I think obviously there’s some impact on the tariff unless we see a stability coming in, you know, post some sort of negotiation agreement on that. But in the long term I think that’s one market which will really work for us. And you have heard from, I think Quota globally has also talked about using India as a major hub, you know, for supplies to the world market for Kubota.
So they are working on a larger plan. So all the basic tractors they want to shift to basic and high end also they want to shift to India. So that’s the strategy of Kota is working on. And I think we had mentioned in the last call also there’s a midterm business plan which is being reworked now. So after this new strategy now is taking some time and they expect their Strategy will get about 79. The first cut will get approved maybe by middle of this year and then by end of last quarter or middle of last quarter of this fiscal they will be clearing it from the board.
So once that gets done then obviously we’ll put it into our plan and we’ll also then make it public.
Vikram Damani
Okay, lovely. And just the last question given that the I think opening remarks, you all mentioned that the finance company has started operations. Do we expect some sort of outsized market share gain coming through the finance support to our customers?
Bharat Madan
So not immediately. Right now the company has just started operation. It’s only I think about four months and they’re still testing the systems and gradually opening the market. It’s opened the market in UP MP and Bihar but in a very selected district. But as we go along the number of states and the districts will keep on increasing. More dealers will get added. So I think it’ll take two, three years time to start making that impact. So I think right now the numbers will be small. But I think as you go along the idea is they should be able to hit the similar penetration level as other captive finance companies are which is roughly 30, 35%.
And when that starts happening that will start impacting your market share numbers too.
Vikram Damani
Okay, but that ramp up will take some time.
Bharat Madan
Yeah, obviously it takes time to build up.
Vikram Damani
Okay, lovely. Thank you.
Mumuksh Mandlesha
All the best.
operator
Thank you. Next question is from the line of Jamin Desai from MT Global. Please go on.
Jaimin Desai
Yeah. Hi, good evening team. Thank you for taking my question. The first question pertains to exports to Europe where you mentioned that we would be. We are looking at about 20 to 25% this year. Just wanted a clarification. Is this because of the Europe specific products that we have introduced or are. You also seeing some signs of early. Signs of let’s say some stabilizing in. The European market as a whole.
Bharat Madan
So this growth is coming on an overall export number. It’s not specific to Europe. So like I said, we are also opening Mexico now we also started exporting to South Africa. There’s a good market in Tanzania and Kenya. We’re seeing good demand. Now these are large orders which are the pipeline which we expect will happen this year and market and they also looking at Myanmar, Cambodia, Thailand and other markets where we can look at exporting. So I think overall scatter, the export numbers will continue to grow. We’ll open the markets one by one as your product availability becomes, you know, viable and and you are the required products for their market markets will get opened up.
So the cadation we should have got it.
Jaimin Desai
You highlighted upon us being a good potential market for us going forward over the medium to longer term. There we had plans for some US geography specific products to be introduced. What is the update on that is that product development still continue.
Bharat Madan
The U.S. like I said will take time but that will be the last market they will open. But the product profile they need is different from what we are producing here. And then again that will be something which will be coming up in the new product development program. That’s what the quota strategy will come into play, you know, which is what they’re looking at. Shifting some of the production volume from other countries to India and that link good products which are getting exported to US market too. But that will take some time. I think once you get a plan from Kubota Japan this year then we’ll be able to form a strategy.
But US is the biggest market for quota. I think it’s almost eight and a half nine billion, you know. So Kubota is the biggest market outside Japan. So obviously the numbers are good there and quota is the market leading the compact factors in that market. So as and when the product starts in expiry.
Jaimin Desai
Finally, I know you spoke about the slightly gradual ramp up of the component exports but just from an opportunity point of view, the overall opportunity at about US$500 million meaning about 5% shift from Kubota’s current global sourcing, that sort of opportunity still remains.
Bharat Madan
Yeah, so like I said, the potential is huge. Obviously a lot will depend on how many, how many products get localized. Because your margins on the Manfred products in India will be much better compared to the source product from the outside vendors which is more like a trading activity. So even though the revenue may come up, but the margins may not be good enough, you know, to really continue building on that. So our idea is to have a mix, good mix of the manufactured product as well as the credit products from the supplier. Like I said, what are you souring more than a billion dollars.
What the company said today and they has an obvious advantage over there. I think issue they’re facing is getting good vendors which can meet their quality requirements which is I think it’s taking time for them to build up. The testing processes are stringent and I think the team from Kota as well as India, they’re working jointly to, you know, promote this business in India.
Jaimin Desai
Thank you. Thank you. Those are your questions.
operator
Thank you. Participants who wish to ask questions may please press star and one at this time. Next question is from the line of Vijay Pandey from Novama. Please go ahead.
Vijay Pandey
Hi sir. Thank you for taking my questions. I just wanted to check with you about the industry outlook, the domestic market. If you can guide a bit about the domestic market and also region wise for which whether north or south, which will be the dominant region for the growth in FY26.
Neeraj Mehra
Hi Vijay. So as I’ve already mentioned we are looking at a industry growth this year probably in mid to high single digit which will actually take the overall industry to the highest ever for India. Now coming to the regional spread we believe that the focus or the growth of the industry primarily will be in south and to a certain extent east, the northern part or the central part of India. Last year also was kind of stagnant. It was a marginal 2 1/2 3% growth. And we expect that only that similar growth will remain in the north. But the primary growth actually will come from down south and the eastern part of the country.
Vijay Pandey
Okay, can you share what is your strategy on the construction equipment side? Because we the sales have been declining and probably we have also lost market share in sea construction equipment. So if you can briefly tell us what is your mid to long term view on the industry and how are you planning to tackle the decline in the field.
Sanjeev Bajaj
Yeah, Vijay. Good evening Sanjeev. As you said. So first of all I would want to correct here that market share is not declining. So we should see this product by product. So as we have two sections of business. One is metal handling and compaction and the other business is moving which includes many excavators of Kubota and Baco Loader. So for last full year our crane market share is intact. There is a small decimal percentage of increase decrease there. And also we have gained the market share in mini Excavator. Currently we are number two player in the crane segment and we are number one player for this calendar year and financial year.
In many excavators. The challenge products for us are backer loaders and compactors and compactors. Also largely the market share is down because there is a huge volume increase in the exports business for the industry which of course is not a strong play for us because all the multinationals they have their manufacturing in India and they are exporting through their subsidiaries. But as far as backloader is concerned, yes, there is a huge headroom available and we have lost a bit of market share this year. It’s about 0.2% down from last year. And it has also not been traditionally a very strong segment for us.
And that is the reason we are, we are focusing on creating completely a new platform which we introduced and showcased in January to the public in Burma exhibition and then Bharat Mobility Exhibition. And that platform has been developed in which is very modular, which will take care of the domestic demand as well as it will also can be adapted for various different specifications in various markets worldwide. And this product, we believe that we have done a very good job. And the initial reaction from the customers who have seen these products and the dealers is very, very positive.
And we believe that this segment where we are very weak, we should be able to turn it around now. This is the first platform which we have introduced this year and there are a couple of more versions of this product line which is expected to come along with a premium range which can come with Kubota Engineering and Kubota Engine and other interventions. So I don’t see that for us the challenges. Having attained a good position in the market, overall industry is going through a tough phase. Last year of course because of the assembly election, this was every year the industry is down and this year also the main industry, which Ukraine industry is down by 13% in the last quarter and overall about 8% for the whole year.
But I think in the second half of this year, as I said, things should start doing well. And next financial year is expected to be again a very high year because all the emission norms and other things which are currently the hindrance will go away. So we believe that we will do well. And also on the second, we are very focused on product lineup for the future. Our focus is creating more value for the customer, bringing the cost down for ownership of the customer as well as operation cost and also giving the right products for the right application.
And that focus will bring more products in next two to three years time which I think will give us put us in a very strong position. So we are very confident. So let’s go from here.
Vijay Pandey
Thanks. Thanks for detailed answer. Just want to clarify, you mean the construction equipment industry will start improving from second half FY26, right?
Sanjeev Bajaj
Yes. Yes.
Vijay Pandey
Okay, thank you. Thank you sir.
Sanjeev Bajaj
Thank you.
operator
Thank you. Ladies and gentlemen. In order to ensure that the management is able to address questions from all participants, please limit your questions to one per participant. Next question is from the line of Prasemora from Kotak securities. Please go ahead.
Rishi Vora
Yeah. Hi sir. Thank you for the opportunity. Just one small question. What was the CAPEX guidance for this year? FY26 and even if you could give it to FY27.
Bharat Madan
So for FY26 we expect to be somewhere between around 350 to 400 crores and mostly this is excluding any investment cross greenfield. So if the land exhibition gets done there will be another 450 to 500 crores this year.
Rishi Vora
Okay so most likely we should do around thousand crores including land acquisition approximately 800.
Bharat Madan
Less than that, I would say about 800.
Rishi Vora
And should we expect that trend rate to sustain going into FY27 as well given that the overall capex outlay is around 4500 crores for next 3, 4 years.
Bharat Madan
So that still needs to be worked out with light launch and the project is delayed now. So I think they also need to look at the existing capacity, how much we can wrap up in the existing phase. The end of day we also looking at data with your own management which you do. So the volumes have to justify, you know any fresh investment which will happen. So land acquisition is one part but I think we’ll get enough time to commercialize there, you know in that area to acquire the land. So I think as the volumes come then we’ll obviously follow that.
But there will be lead time which will be required as minimum 24 to 36 months for any capacity to come up. So we’ll have to take that into account based on how the volume slabs are platform and then based on that plan, you know the production should come into the green field.
Rishi Vora
Understood. Thank you sir.
operator
Thank you. Next question is from the line of Mitul Shah from Dam Capital. Please go ahead.
Mitul Shah
Yes sir. Thanks for opportunity. Once again just clarification, you said that after land acquisition or plant to become operational it will be 24 to 36 months, right?
Bharat Madan
Yeah. That’s a minimum lead time after you start you commission the construction there.
Mitul Shah
And so this 400 to 500 crore related to land you highlighted is purely land purchase related cost or you will include anything on the building the plant also.
Bharat Madan
Oh this is essentially land related cost.
Mitul Shah
Lastly on the cash and cash equivalent this 1600 plus 1101710 crore from the Sona BLW already received or and excluding that how much is the cash on balance sheet?
Bharat Madan
No. So you would have fully seen the information. The closing date was extended to the 1st of June. Well certain approvals which were required did not come through so. So we had extended by another month. So it was supposed to happen on 1st of May, now it’s requiring to do it on 1st of June. So after the closing there will be some money which will flow into our account and since the approvals will be Received post the closing only. So some money will still lie in the escrow account. So free money will not be hundred percent available to us up front.
I think once you get the approvals in place with the long stop data ring is September or October and after that only that money will you know getting released towards 100%. Some money will get released to us but not 100%. So hopefully within this fiscal year everything should get completed.
Mitul Shah
Cash and cash equivalent excluding all this amount as of end of fiscal. Hello. Hello.
Raghunandhan N. L.
Thank you. Next question is from the line of Raghunandan from Nuvama research. Please go ahead.
Mumuksh Mandlesha
Thank you sir for the opportunity just a follow up on the captive nbse what would be the equity investment so far and what is the plan for FY26 and also if you can share what is the current book size? Hello, I hope I am audible.
operator
Yes sir you are audible. Please give me a moment. Jam. It. Hello everyone, we have the management connected again.
Raghunandhan N. L.
Hello, am I audible? Just a follow up on the finance business. If you can indicate what has been the equity investment so far and the plan for FY26 and also if you can tell the book size.
Bharat Madan
So far we have done investment 60 crores in the finance company. The total uphold investment right now I think is about 200 crores in the initial phase. Then the finally it will go up to 700 crores. So the balance of the amount will get injected in FY26 into that company gradually as an under book slowly gets built up. The book size is very small. I think like you said they are more testing the systems and readily opening the dealerships. I think by end of FY26 they will be sitting on a book sales of maybe close to 100 odd crores.
But the ramp up will have happened. So I think we expect maybe 5, 6, 8 could have happened by now again and next year I think the damp up should get completed on a Plan India basis. So we’ll see the faster book building up.
Raghunandhan N. L.
So by end of next year we will be investing 700 crore.
Bharat Madan
So initially pool right now with us is for 200 crores of capital. The authorized capital is 700 crores. I think we still need to get the viewers from Kubota Japan from the head office of the balance. But yes the overall outlay which we have projected was 7. In fact the balance will be more levels.
Raghunandhan N. L.
Got it sir. And I think the previous question Mittel was asking was the cash reserves. If you can share that.
Bharat Madan
Yeah so I mean the line got. Disconnected so I’M telling him in the margin we have almost 6,500 to 6,600 crores of liquidity and this is after paying off the debt of the merged companies so with this railway deal getting close post Texas will get maybe another 1400-1500 crores of net cash so maybe by next year end after taking into account the fresh cash generation and the capex and the land investment maybe you’ll be sitting at somewhere on 7,500 to 8,000 of cash on the balance sheet.
Raghunandhan N. L.
Sir and would that mean that would you consider anything on the dividend policy where the payout can increase?
Bharat Madan
So we are gradually increasing the payout so as you can see on this year the dividend which is announced is almost 25% of our profit and I think our policy sales to drop to 40% gradually in the mid term business plan that’s what quota follows globally from the free cash perspective obviously this is almost 30, 35% now this year so I think we’ll continue to expand that so that’s the idea IDE is also to maintain the dividend, sustain the level so not go down from the level that we already, you know distinguish it so so that’s having the momentum is.
Like to continue.
Raghunandhan N. L.
Also payout could be in the form of buybacks also would that be possible?
Bharat Madan
So buyback would have been a good option actually but because this tax changes resuming for the investor perspective this is very attractive now as an option the first person would have been to do that it was just hope to buy back 5 to 6% of equity from the market and given the cash to those so it would have already made sense but I’m not sure from the tax perspective now it makes sense to go with that option so maybe distribution. Will be better option.
Raghunandhan N. L.
Understood sir, thank you very much.
operator
Thank you. As there are no further questions from the participants I now hand the conference over to the management for closing comments.
Bharat Madan
Thank you ladies and gentlemen for being present on this call. For any feedback or queries please feel free to write in to us@investor.relationscortscobota.com thank you very much and have a good evening. Thank you.
operator
On behalf of MK Global Financial Services limited That concludes this conference. Thank you for joining us and you may now disconnect your lines.