Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Escorts Limited (NSE: ESCORTS) Q4 2026 Earnings Call dated May. 07, 2026
Corporate Participants:
Prateek Singhal — Investor Relations and ESG
Neeraj Mehra — Chief Officer of Tractor Business Division
Rajan Chubb — Chief Officer of Tractor Kubota Brand and Agri Solutions Business
Bharat Madan — Whole-time Director and Chief Financial Officer
Sanjeev Bajaj — Chief Officer in Construction Equipment Business Division
Analysts:
Amit Hiranandani — Analyst
Gunjan Prithiani — Analyst
Raghunandan NL — Analyst
Pramod Amte — Analyst
Ayush Anand — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q4 and FY26 earnings conference call of Escorts Qbota Ltd. Hosted by Philip Capital India. As a reminder, all participant lines will be in the lesson only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr.
Amit Hiranandani from Philip Capital India. Thank you. And over to you, Mr. Hiranandani.
Amit Hiranandani — Analyst
Thank you. Good evening everyone. On behalf of Philip Capital India, I welcome you all TO Escorts Kubota Q4 and FY26 earnings conference call. I take this opportunity to welcome the management team from Escorts Kubota Ltd. Today we have with us Mr. Bharat Madar, Whole Time Director and Chief Financial Officer. Mr. Neeraj Mehra, Chief Officer of Tractor Business Division. Mr. Sanjeev Bajaj, Chief Officer of Construction Equipment Business Division. Mr. Rajan Chubb, Chief Officer of Tractor Kubota Brand and agri Solutions business.
Mr. Sanjeev Garg, Head of Finance and CPMO and Mr. Pratik Singhal, Investor Relations and ESG. 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 subject to risk as outlined in the annual report and investor releases of the company. Now I hand over to the management for their opening remark. Thank you. Thank you. And over to you, Pratik.
Prateek Singhal — Investor Relations and ESG
Thank you, Amit. Good evening everyone and thank you all for joining us today. During the quarter, India’s macroeconomic environment remained broadly supportive marked by moderate inflation, a softer interest rate outlook and positive sentiment across both rural and urban market. However, global geopolitical development, particularly the ongoing conflict in the West Asia continue to pose challenges resulting in higher input and logistics costs due to disruption in global shipping route. Additionally, the depreciation of the Indian rupee against the US dollar further escalated cost pressure.
In this operating environment, our focus remains firmly on delivering profitable growth and disciplined cost management. We remain confident in the underlying demand fundamentals of our core business in the near term and will continue to focus on driving operational efficiencies and prudent capital allocation to create long term value for all of our stakeholders. We trust you had an opportunity to see the results and the earning presentation uploaded to the stock exchanges. Let us now walk you through our key financial highlights of the company Standalone financial performance for the quarter ended March 2026 operating revenue from continuing operation as 2950.7 crores up by 21.4% year on year EBITDA at 386 crores up by 31.8% year on year the EBITDA margin in Q4 at 13.1% up by 103 basis point YoYo PBT from continuing operation before exceptional item at 433.8 crores up by 21.1% year on year Net profit PAT from continuing operations stood at 324.8 crores up by 29.6% YoY.
Please note that Q4 of the previous year include an adverse impact of Rupees 27.1 crores on the counter, impairment of the investment in an overseas subsidy and a joint venture in India. Excluding this one time impact, the net profit grow by 20% EPS from continuing operation as 29.52 rupees as compared to 22.79 rupees reported PAT including discontinued operation up by 9.2% YOY Some highlights of our standalone financial performance for the year ended March 2026 are as follows. Highest ever Operating revenue from continuing operations at Rupees 11,472.8 crore up by 12.6% YoYo highest ever tractor volume at 1 33,670 units up by 15.7% YoY construction equipment volume came at 5,794 units highest ever EBITDA at 15.13crores up by 28.5% YoY margin at 13.2% up by 163 basis point YoY PBT before exceptional item from continuing operation at 1,805.5 crore highest ever up by 32.1% yoyo highest ever net profit after tax from continuing operation at 1380.9 crores up by 24.4% as against 11.10crores in the previous fiscal.
Earning per share from continuing operation is 125.52 rupees up for the year by to 24.3% as against 100.96 rupees in the previous fiscal. The Board has recommended final dividend of 330% for the financial year 26 equivalent to 33 rupees per share with the special dividend of rupees 18 per share already paid. The total payout for FY26 will be 51 rupees per share for a face value of 10 rupees each, an increase of 82% compared to the previous year. Payout ratio excluding profit for exceptional Item is at 26.3% PAT including discontinued operation at 2408.6 crore on consolidated basis.
Company financial performance for the year ended March 2026 are as follows. Revenue from continuing operations at 11540.3 crores up 12.7% year on year EBITDA at 1496.4 crore with a margin of 13% up by 159 basis point YoY reported net profit from continuing operation at Rupees 1366.4 crores up 21.6% YoYo net profit including discontinued operation and exceptional item at 2394.1 crores YoY Moving on the segmental business performance in FY26 the domestic tractor industry grow by 23.4% year on year reaching an all time high of 11.6 lakh units compared to 9.4 lakh unit in FY25.
This robust industry growth was supported by healthy rulers sentiment supported by strong farm income, favorable and well distributed monsoon along with adequate water level reservoir, strong crop production and higher MSPS minimum support price reduction in GST rate, accelerated pace of farm mechanization driven by government initiative and state level subsidiary program beyond near term driver long term fundamental for the tractor industry remain strong low mechanization penetration relative to global benchmark, rising ruler wages, labor shortage during peak agriculture season and the increase need for time efficient farming practice continue to underpin sustainable demand for tractor and farm machinery.
Our domestic tractor volume at 1 26,994 units highest ever up by 14.9% YoY as compared to the industry our performance was moderated by regional demand variation growth in north and the central region our strong market was around 17% whereas other region witness a growth closer to 30%. Additionally, the limited availability of certain key new models introduced during the year impacted our ability to fully capitalize on demand during FY26. We place strong emphasis on executing excellence with a clear focus on improving retail conversion, expanding market reach and enhance on ground responsiveness.
A key player of this effect was the deepening our financial partnership as well as launch of our captive finance business. We strengthen engagement with both national and regional financier, reducing approval turnaround time at the dealership level and introduce more customized financing solution aligned to specific customer profile. These initiatives support higher retail throughput and improve conversion across market we strengthen our dealer engagement and capability building through sharper retail monitoring, target training program for new product platform focus, incentive structure during peak demand period and close collaboration on inventory and supply planning.
These actions enhance dealer confidence, improve product availability in key micro market and enable us to manage regional demand variation more effectively. FY26 mark a significant year in our product journey with a comprehensive product portfolio refresh aligned to evolving customer needs, specific application and regional requirements. Key launch during the year strengthen our presence across core premium and application specific segment receiving encouraging market response. We continue to invest in innovation platform renewal and fast go to market cycle with several new product introduction plan for FY27 reform, our commitment to sustain growth and market competitiveness.
Looking ahead, we expect the current industry momentum to sustain in the near term. However, geopolitical development potential supply chain disruption and rising input costs could moderate farmer affordability and sentiments in the short term. Additionally evolving weather pattern particularly emerging El Nino signal will remain a key moderable influencing future demand trend. On export front, the tractor industry in FY26 was at 1,5000 tractors up by 7% as compared to 98,800 tractors in FY25. Our export volume stood at 6,676 sector up by 33.8% as against 4,991 tractors in the previous year.
Sales through Kubota Global China account for approximately 60% of the total export non tractor revenue comprising agri solution business, engine business and the service and spare part business in FY26 constitute 18% of agri machinery segment revenue as against 20 in the previous year. During the year under agri solution we introduced next gen Ka6 and K9 ride on transplanter in engineering Japan will deliver higher productivity, superior planning precision and improve operation comfort. These models are well aligned with the acceleration shift towards farm mechanization driven by labor shortage and government support particularly across Asia and benefit from global trends showing strong adoption of mechanized transplanting for improved efficiencies and yield.
Going forward, we remain focused on expanding our advanced agri machine agri machine portfolio leveraging Japanese engineering to bring differentiated productivity enhanced solution to the market. Agri machinery product segment revenue at for the year ended FY26 at 9799.6 crore up by 15.8% as again 8447.2 crores in the previous year. EBIT margin for the agri machinery business were up by 190 basis point at 12.6% as against 10.7% in the previous year led by easing material costs, better operating leverage and cost control measures.
Coming on to the construction equipment business in FY26 was a year of transmission or transition for the construction. By a combination of extended monsoon slower project mobilization during the first half and a broader normalization and broader normalization in demand falling and the early surge. As a result, serve industry volume across crane, backloader, mini excavator and compactor was declined by around 7 odd percent mainly led by 13% decline in the crane segment, 10% in the backloader segment while mini excavator and Compactor grew by 38 and 5% respectively.
Our construction equipment volumes stood at 5,794 machines down 10.6% year on year. Throughout the year we remain firmly focused on long term competitiveness, operational discipline and protecting the strength of our franchise while continuing to invest selectively in the capability critical for future growth. As the year progress industry condition improves sequentially, the extent of degrowth moderate throughout the first three quarter ending the year with the growth resuming into Q4 FY26. During the quarter the serve industry in Q4 grew by 4% while our volume increased by around 9% to 1877 machines allowing us to perform better as compared to industry and gain market share.
This performance was supported by improved execution, better channel throughput and gradual stabilization demand environment Construction equipment segment revenue for the quarter came at 556.5 crores up by 22.6% YoY EBITDA margin came at 12.7% up by 386 basis point. YoY led by leveraging operating leverage, improve cost discipline and more favorable product mix. During the year we continue our strength of a construction equipment focus and we introduced Kubota key U26 mini excavator operating advanced precision and compact for performance for urban and the confined space projection.
We also showcase Hydra 15 mining BLX75 backhoe loader and also showcase the concept line of Hydra 72 crane representing a significant step in the high reach lifting with new 72 port boom and enhanced safety system. These product action reforms our long term commitment to engineering in depth. Looking ahead, we believe the fundamental drivers of the construction equipment industry remain intact. Continuous emphasis on the public infrastructure development, improving visibility on product awarding and increase focus on urban infrastructure, mining and industrial activity prove a supportive medium term demand backdrop.
Additionally, evolving geopolitical development are reinforcing the importance of the domestic infrastructure creation and supply chain resilience which should structurally benefit the sector over time. At the same time we remain mindful that the geopolitical Uncertainty may lead to a temporary supply chain disruption, volatility in the input cost and potential pressure on the pace of the government capital expenditure. We will continue to closely monitor these external risks while maintaining flexibility in operation and cost structure.
Now we’ll 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 the touch tone telephone. 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 Gunjan Prithiani from Bank of America. Please go ahead.
Gunjan Prithiani
Thanks for taking my question. My first question is on the industry growth outlook. You did mention a couple of things that the momentum is sustaining but the external risk are there. How are you internally planning for fiscal 27 for the tractor industry growth? And there are a bunch of new products that you’ve launched in the last couple of quarters. Can you also talk us through, you know, a bit more on those products and how they can just, you know, they can sort of help strengthen the market share, market share improvement going forward.
Neeraj Mehra
Hi Gunjan, Good evening. This is Neeraj this side. So as already mentioned in the opening comments, we expect the industry to taper down over the next few months. The overall guidance for fiscal year 27 is kind of a flattish industry. 2, 3% up, 2, 3% down. That is what currently we are looking at overall from the tractor business perspective, I think we are very confident. Over the last few months there have been product launches across the three brands and few other launches are planned over the next three, four months.
Plus we have utilized last year in taking certain corrective actions and developing the channel. So both from the channel perspective as well as on the product side, we are well placed. Certain product gaps have been covered. So financial year 27 from a market share perspective and volume perspective looks pretty positive. Irrespective of the outlook of the industry.
Gunjan Prithiani
It’s fair to assume that we are confident of a positive growth irrespective of whether industry is a mild deficiency.
Neeraj Mehra
Absolutely, absolutely. So the products will actually help us tremendously. There were major product gaps, so you would have. I had spoken in the last call also. So we have introduced the Padi special tractors for the southern markets which was a major gap and it’s early days yet. But the bleed in terms of market share has started to drop and we this year we intend to see or we will see a gradual increase in market share in these markets. Plus certain it will be not prudent for me to speak on the new product launches but certain other product gaps we intend to cover over the next three to four months.
So we are actually pretty confident from the new product perspective side,
Gunjan Prithiani
Can you also talk a bit about specifically on the Kubota brand scale up that was anticipated in terms of expanding the JIO reach, trying to reconfigure the product so that pricing is more suitable for Indian market. Where are we on that journey as far as the Kubota brand?
Prateek Singhal
Rajan San, can you answer?
Rajan Chubb
Yes, sure. Thanks for the question. So well on Kubota brand we have both agree solutions and tractors we kind of position ourselves with in terms of tractors when we talk. You’re right, we’ve had some gaps and this year we are poised to launch multiple products to plug some of those gaps and quite upbeat about, you know, improving position in the market with a Kubota brand as well as like Pratik mentioned earlier on agri solutions we last two years we’ve been launching newer products, newer technologies and this year as well we are planning to expand our portfolio in harvesting segment as well as planting segment.
So yeah both in coming quarter and little later part of the year we have quite a robust pipeline of products getting introduced this year.
Gunjan Prithiani
Got it. And my last question is on the margin performance. It clearly seems a bit underwhelming when I look at the quarter on quarter EBIT margin decline. Can you give us some color on how you know what really happened in this quarter and how should we think directionally because I’m assuming a lot of cost pressure from steel hasn’t showed up in this quarter. Right. So how what explains the performance in this quarter and bit more color on the outlook for next year?
Bharat Madan
There was a bit of obviously some pressure had come on the inflation side but it’s not much in this quarter as you mentioned. I think most of it will happen in the coming quarter. So it’s mostly issue on the mixed side with the new product sale actually had gone up and there’s also some increase in the non product sales, non tractors revenue which slightly was up. So there the margins are lower compared to the tractor business. So that’s why year on year you see there’s a marginal dip but it’s not significant.
I think it’s more or less 1% dip. If you compare year on year on the EBIT margin for every business though compared to the Q3 also Q3 was the operating leverage, the volume was very high which is not the case. But going forward we do see pressure will be there on the poverty side because we’re still getting a lot of request from suppliers for the passing on of input cost increases. I know procurement team is still in discussion to finalize those numbers but I’m sure it’s going to be significant in the coming two quarters.
We have to wait and watch and see how this geopolitical situation really emerges and how much risk we are able to pass on to the market
Gunjan Prithiani
And on a full year basis. Can we keep it flattish or do you see that there is probably some hit in on a full year basis.
Bharat Madan
So depends the certain costs which are going to be permanent. Especially their cost led to energy and manpower. So as you know in Haryana the minimum wages have been increased by almost 35% for contract levels. And in up also where our larger vendor base is situated there also the cost have gone up by almost 2020 to 23%. So this is something which obviously will be a permanent increase. So this is also going to impact our margin a bit. So even though on the commodity side we expect even if there’s a temporary increase it will come back hopefully once the situation improves.
But the process costs which are getting passed on, especially on the energy side or on the manpower side, these probably will not come back. So as you know we had taken marginal price increase in the in the last month and in this month in April to tackle those, you know, some of those cost increases. But again we’ll have to really see so effort will be to maintain the margin on a full year basis. But obviously it’s too too early to talk about that unless we know how the geopolitical solution really emerges.
Gunjan Prithiani
Got it. Thank you so much. I’ll join back to Q.
Operator
Thank you. Next question is from the line of Raghu Nandan from Nuama Research. Please go ahead.
Raghunandan NL
Good evening team and thank you for the detailed opening remarks. Firstly to Neeraj sir Sir, can you talk about the region wise performance? Which region should be relative outperformance or underperformers in FY27 and how will that be beneficial for escorts?
Neeraj Mehra
Yeah. Hi Raghu, thank you for the question. So a bit on first on financial year 26. So if you see the industry growth in the northern and the central part of the country in the last physical as also mentioned by Pratik was close to 1617% which are our stronger areas and in the western part and in the southern part of the country Otherwise the overall growth was about 30% west was to a very large extent driven by subsidies. And we feel that financial year 27 should be from an industry perspective should be to a certain extent good from Ikea’s perspective because the growth in the last physical has not been in line with the overall growth of the industry in the northern and the central part of the.
So to answer specifically to your question, I think overall as we have mentioned a flattish outlook or a marginal 2,3% growth for financial year 27. The major hit will actually come in terms of industry in the western part and the southern part of the country. North should be more or less stable or no growth kind of a scenario. So that is on the regional outlook.
Raghunandan NL
Noted sir. So the new products plus the favorable regional outlook both should be positive for Escorts in growing volume and gaining market share for FY27.
Neeraj Mehra
Yeah, we are confident on that.
Raghunandan NL
Thank you sir. My second question is to Rajan sir. Sir, the non tractor share in agri segment is a meaningful part. Can you indicate what kind of a growth you expect in farm implements in FY27 or the next 2, 3 years due to rising mechanization and also for the Kubota under the Kubota brand tractors were expected with ESCORTS engines. When is this expected to happen?
Rajan Chubb
So thanks Raghu. There’s Rajan here. So your first question on the agri mechanization machinery other than tractors. So as we also talked about in past three years we’ve been growing a pretty robust 35% plus kind of a CAGR and we continue to look at this segment, you know at least in 20% plus kind of the next three years outlook largely because it’s the kind of product pipeline we have and the channel we are expanding also the newer products which will be introducing every year and we kind of consolidating our position in harvesting segment which is second to tractors when it comes to mechanization both in terms of volume and size of the market now coming to tractors.
So I won’t talk about specific timeline on localization but we continue to improve and introduce newer products. This year we almost planned about eight or nine newer products with three or four new segments which be covering when it comes to practice. And similarly next year also we have a decent pipeline of products coming in to fill the gap and improve our position in tractors. But yeah, I mean we are kind of increasing or improving our localization of components and products in India in both segments machinery and tractors.
Thank you.
Raghunandan NL
Thank you Rajan sir. Lastly to Bharat sir sir you indicated about the commodity inflation Approximately how much is the commodity impact expected in the near term as a percentage of sales? How much price hike was taken in April, would it be around 10,000 per unit and how much more is required?
Bharat Madan
The commodity right now like you mentioned is still not finalized. There is still negotiation happening by the procurement team with all the suppliers but the indication we are getting is varying because depends on commodity to commodity like tire suppliers are asking for 1520% hike. Steel is already gone up by 78% with already seen in the construction space. The base metal both copper album is seeing the similar double digit pressure and then there are process costs so. So we don’t know where it will really end but I think our feeling is it will be somewhere a 5, 6% sort of cost increase can happen.
The question is how much we will pass it on now or how it will be passed on in next quarter to the supplier and how much of this can be further passion to the market to customers. So like you mentioned so we had taken about 1 and a half percent sort of price increase in NPL across various brands on tractor side and also on construction equipment side but this is not really sufficient to take care of any of these price increases. So we are still talking to many other players you know and also suppliers to see how much because there are many costs which are one time impact these are not a recurring sort of cost so the cost in terms of like someone not getting LPG supplies so they’re paying higher prices to get those continued supply so that the supply chain is not disrupted.
But these are one off cost which probably can be negotiated and amortized over the longer period of time rather than taking in quarter but that’s like something is too early to talk about so we’ll obviously try to minimize the impact and it will not be different from what maybe the others in the auto industry will really pass on.
Raghunandan NL
Noted sir just a clarification 5 6% would be as a percentage of revenue or the increase in RN basket
Bharat Madan
RM is much higher with all metals waste metal everywhere is double digits out of inflation.
Raghunandan NL
And lastly capex and Investments expected for FY27 sir
Bharat Madan
Capex normal capex is in the range of 350400 crores only. So last year I was rather spent about 311 crores on total capacity as a cash flow. So the green field is going to be large investment which we expect should be. I think this year will be only about roughly 500 crores somewhere around that. So this link would land, development boundary etc so the land initial payment we already made and balance will happen early within this quarter.
Raghunandan NL
Investment into captive finance division. How much has it been so far and how much more is required? Sorry, that’s the last question.
Bharat Madan
So so far we had invested 200 crores in the capital and additional approval was taken for additional 500 crores. But obviously we are injecting as and when they need it. So by the year, this year end we expect maybe additional 300 crores will go and balance 200 will go next year. This also depends on the portfolio and how much aum they are able to maintain and grow.
Raghunandan NL
Many thanks sir. I’ll fall back to the queue.
Operator
Thank you. Before we take the next question, a reminder to all the participants. If you wish to ask a question please press star N1. Next question is from the line of Pramod Amte from Inquired Capital. Please go ahead.
Pramod Amte
Yeah, hi, thanks for taking my question. So the first one is with regard to the tractor industry outlook, when you are talking about the flattish or 2, 3% what is the type of quarterly volatility you are looking at and. And what’s the exit type of. Considering it’s a high base in the second half.
Neeraj Mehra
So. Hi Neeraj, again this side. So see last year the Overall growth was 23% but quarter one the growth was very subdued, it was about 9%. So I think we will see a growth in this year. Sorry in this quarter and then this growth will to a certain extent taper down and H2 would be a substantial negative growth because the base is very very high. Also the impact of the monsoons wherein the forecast has been subnormal monsoon this year. So the impact will also come in H2. So H2 would probably be substantial degrowth basis these reasons.
But H1 should be at par kind of a scenario.
Pramod Amte
So in that context the FY28 again it will be a challenging to turn around from a negative growth second half into a positive territory or you feel it will all again depend on demand.
Neeraj Mehra
See Pramod, the industry, tractor industry has to has been kind of cyclical. So if you look at the industry over the last eight years, leaving aside the last year it has been alternated in a growth and a degrowth. So one year it’s been it’s grows, the next day it degrowths, then it grows, it degrowth. So over the last eight years or nine years that has been the cycle. Yes, the growth has been higher than the degrowth of the previous year. So we feel. So it’s very early to comment on financial year 28 but financial year 27 even after our guidance of a flattish kind of industry would be still be a very very high base of 11.6, 11.5, 11.7 and 11.75 lakh industry.
So that is the scenario. So it’s very early to comment on financial year 28 but it’s nothing new. It’s a cyclical industry and that has been the norm over the last eight years except the last year which has been an exception.
Pramod Amte
Second, with regard to considering that there are series of new products which are coming in and you are replacing the old one. Wanted to get some thoughts in terms of how is your RNG spend has changed post Kubota coming on board and what is the extent of help you are getting from the global partner or its oil develop? Still from the Indian context.
Bharat Madan
See the major capex which are increasing actually is on the product side only. So I think out of 300, 350 crores majority of this will go on the product development side. So even last year almost 200 crores would have been spent on the product development and next year also be 200 to 250 crores will continue to be spent on this. So as the thing we mentioned in the pipeline of product portfolio is quite strong and new launches will happen across all brands across both the businesses. So these sprints will continue
Pramod Amte
Any handholding by Kubota here or it’s predominantly done from the Indian R and D itself
Bharat Madan
There are certain projects which are totally done locally especially in our own platform or brand but there are certain products which are running jointly with Kubota R D team and they’re also helping us like this Paddy special tractor they involve development was also there because quota is specialist in the paddy tractors so so their team also is involved any per development happening on the quota brand Obviously their team is equally involved so so in agri solution they are equally involved. So it’s a mixed development.
So depending on which product based platform we are working on and then accordingly both the teams contribute.
Pramod Amte
Sure. Thanks.
Operator
Thank you. Next question is from the line of Ayushannan an individual investor Please go ahead.
Ayush Anand
Good evening sir. So my question is what percentage of global qberta sourcing will shift to India by FY30?
Bharat Madan
You don’t know how much of their global sourcing will shift but obviously our plan is good so I think by FY30 so last year was not very high. I think there’s some new production which was supposed to start did not start because some quality issues. So that was delayed but now I think we started exporting in the. In the last quarter there. So. But Anyway between maybe 502,000 crore sort of numbers should happen by FY30 on component export from India.
Ayush Anand
Okay sir. And where will ROIC improvement come from? Will it from margins or capital allocation or asset terms?
Bharat Madan
Sorry, what will come from
Ayush Anand
Improvement? It was discussed in.
Bharat Madan
Okay, no, so it will be essentially the operating leverage, it will be at play and also the cost effort because the company is working on cost isolation equally both on the productivity improvement, efficiency improvement on the shop flow. So we introduced quota production system on the line and that is going to help in further improving productivity and improve quality. So I think all these factors will lead to gradual improvement in the cost structure. And we are also looking at rationalizing multiple product platforms to reduce our supply chain complexity.
So I think all these parameters will help us in reducing costs and improving our margins and reducing capital too, both on inventory side as well as on the.
Ayush Anand
Okay sir, that’s all from my side.
Operator
Thank you. Ladies and gentlemen, anyone who wishes to ask a question please press star N1. Next question is from the line of Viren Sameer Deshpande from Alpha Peak Investments. Please go ahead.
Raghunandan NL
Hello,
Operator
You’re audible sir. Please proceed.
Raghunandan NL
Yes, thank you for the opportunity. I would like to know. The results have been quite good for this year and base created for the current year is quite high. So next year it is definitely likely to be a flattish year for the tractors. But construction equipment and earlier we had the railways, now the railways we have divested of the business and we have the money sitting in the balance sheet now. But the construction equipment last year was a underperformer because of the various results. But what is the outlook for the construction equipment going forward?
Because last year our capacity utilization has been only 47% and so it had affected now the mini excavators which you were quite bullish last time. Also whether these cranes and mini excavators are likely to do well in the current year.
Sanjeev Bajaj
Yeah. Hi Sameer. Sanjeev. I audible.
Raghunandan NL
Yes.
Sanjeev Bajaj
Yeah. So two parts of your question. First is last year has been little subdued. Yes, we. I mean we’ve seen some difficult times in the last year as far as the overall industry is concerned. Both overall construction equipment industry as well as our subserved industry has gone through some tough time last year. And having said so, I mean it is compared to a base which was much higher last to last year. The base was also very high.
Amit Hiranandani
Now
Sanjeev Bajaj
What is our anticipation of the industry that you know, this year had there not been these West Asia prices challenges and supply chain issues, we would have seen some, you know, growing demand. In this quarter itself. The signs of the cat could be seen in the last quarter of last financial year while the first three quarters were very, very low. But in the last quarter actually industry picked up, came up to the last, last year’s level. So we could have continued with that growth. But in the short run we see there will be little bit of challenge because of these uncertainties of the macro factors which are playing right now.
But over a longer period, in two to three years time, we see there is a turnaround just around the corner because we believe that the capex which the government is every year committing that capex will as it gets invested, it will bring lot of growth for the overall industry. The focus on infrastructure and the focus on speeding up the, the projects, the focus on the quality of the projects and thereby, you know, moving to higher technologies of production, higher technologies of construction. That focus is clearly visible and we believe that in the product categories which, where we are, those are direct beneficiaries of all the investments on the infrastructure which is going to happen.
We believe that till, till the next Lok Sabha election there is, there is a huge pipeline of infrastructure development which the government is planning to do. It is only at the right time those funds have to flow to the market that the results will be visible in the industry numbers. Also in the short run we see there will be some challenge in terms of the raw material cost which of course every manufacturer will try to pass it on to the customer and therefore it might dampen the demand a little bit.
But if this gets sorted out in next one, one and a half quarter then I think we are looking at a phase of a big turnaround after that.
Rajan Chubb
So half two is likely to be better.
Sanjeev Bajaj
It is likely to be better. Of course, I mean the uncertainty of macro factors is not purely within the industry control but looking at the current situation, if things settle down in next one or two months, I think post monsoon we should see a big turnaround in the industry. That’s, that is the, you know, the confidence of each, every manufacturer which we talk to. Second part of your question was on cranes and mini excavators. So in both the segments our market share growth is visible. Even in the last year where it was the industry was going down, we have gained 2.7% market share in cranes and also we’ve maintained our number one position in the country in mini excavators.
So I mean from, from these two. Although the industry size for mini excavator is still very small. But we are looking at year 2030, 2031 where the industry size is expected to go to three times of what it is. So we are definitely going to get benefited in the medium to longer term by maintaining a good portfolio of products as well as maintaining a good position in the market.
Raghunandan NL
Is there any export potential for these mini excavators and epic cranes etc. Because when domestic market is weak by maybe because of the Kubota channels etc. Are we planning to do any thing on that export front?
Sanjeev Bajaj
Yes. So not for mini excavators per se. Because today whatever mini excavators we are selling it is currently fully imported from Japan and other other countries. Kubota channel also buys from Japan or Thailand. So unless until we start manufacturing in India which will probably happen once the. Once we have the new plant ready then we. That could be planned. But then probably there will be a case of exporting from India at a better price, you know, controls. So that is, that is about the excavators.
But on cranes there are few countries who use this type of cranes. Largely Africa and Southeast Asia and SAR countries. So those are the countries we are definitely exporting and we are continuously increasing our channel distribution presence there and we are making a good progress in that. Our export used to be about 3%, 3 and a half percent of total revenue. It is moving upward of 5 to 6% now and we expect this to grow to 10% by 2030. So this will continue to be our focus area.
Raghunandan NL
Now my next question is to Mr. Madan. It is regarding the cash on the balance sheet which we are currently having including the current investments of 6,000 crores. The last year we had some 3,500 crores. Now this year it seems that the balance sheet we have about 7,000 crores of cash. Now we as the capex is not likely to be very high of about just 400 or crores and the capacity utilizations currently are quite comfortable. So it doesn’t warrant any big expansion at this point. So what are the plans to utilize this big amount which we are available having available with us?
Bharat Madan
If you’ve been following our company. We have made the announcement for investing in the Greenfield facility. So which we just mentioned we just acquired the process of acquiring land and initially payment has been made and then we have phase one in that project itself is more than 2000 crores. And then this will be phase one. The expansion will happen. So overall Plan Nothing over next 7 to 10 years will be to spend more than 5000 crores on this greenfield project. And this will include both factor as well as construction equipment.
And maybe going forward even the agri solution will also get added to this. So. So there are plans to do this. And in addition there is also going to be the investment in the captive finance company. So Initially we mentioned 700 crores of capital has been AMR for finance company and we invested so far only 200 crores. So balance 500 crores will get invested over the next 12 months or so. So obviously there are plans to do that and there’ll be certain cash which will remain on the balance sheet for future growth and expansion requirements too.
So. So, so we don’t think there’s a liquidity which is more than required. So I think we think there are enough requirements for the business growth perspective which which will warrant this liquidity to remain on the balance sheet
Raghunandan NL
Over a period of two, three years. It will be utilized fully. Hello. So
Bharat Madan
It may or may not be fully utilized but there’s certain surplus which will obviously keep with the company for future growth. It’ll never be zero.
Raghunandan NL
Okay. And that’s good. We are having net cash that is always a better way to go instead of going for the debt because that puts pressure. Okay. Thank you and all the best.
Operator
Thank you. Ladies and gentlemen, please note in order to ensure that the management is able to address questions from all the participants in the conference kindly limit your questions to two per participant. Should you have a follow up question, please rejoin the queue. The next question is from the lineup. Harsha from Mysliss, please go ahead.
Raghunandan NL
Hi, my question is with respect to the capture NBFC you alluded that we’ll be earning 500 crores of capital into the NBFC. But any aspirations with respect to how much the loan size was likely to be by the end.
Bharat Madan
Sorry, how much the loan
Raghunandan NL
Book size is expected to be a leverage that they are ramping it up to.
Bharat Madan
Yeah. So as I mentioned we’ll put keep putting the capital based on the loans book size only. We don’t want to give the capital in advance to them. So as and when the portfolio increases we’ll keep on investing. So from the board is to invest up to 700 crores of capital. And so far we’ve done 200 crores investment into that entity. The portfolio is already more than 100 crores today as the end of March. So obviously the portfolio is growing as they expanding the reach in various states and more Dealers are getting onboarded.
So. So the business will increase. So as and when the requirement comes in we will keep putting the capital up to that level and obviously beyond that then we’ll look at the leverage opportunities for that.
Raghunandan NL
So we’ll be funding it full 700 crores and only 10 look after go after leverage.
Bharat Madan
Yeah. So initially up to 700 crores of capital will be funded by us. So 200 has already been invested. 500 more will go in next 12 to 15 months.
Raghunandan NL
Okay, got it. And with respect to this model, what would, what are the ROE aspirations that we have with respect to the capital mdfc?
Bharat Madan
See the long term, if you look at most of the captive finance companies, the long term ROI will be somewhere between 1 and a half to 2%. The basic purpose of captive finance is to help the main business in growing market share and increasing volume. So that is the primary objective. It’s not that we will be going non captive and focus more on the profitability. At the same time we don’t want to be in a losing proposition. So business has to be sustainable so it should be reasonable return and the same time also help the main business to grow.
Raghunandan NL
Okay sir, thank you.
Operator
Thank you. Next question is from the line of Siddhir Keria from Value Wise. Please go ahead.
Unidentified Participant
Yeah, good evening sir and thanks for the opportunity. Sir, you mentioned about the industry growth being flattish for the full year and significantly negative for the second second half of the year. My request is if you can also elaborate in terms of one reason you said about the high base. But if you can also elaborate on your view on the monsoon and Elinor effect and the subsequent effect on the rural purchasing power because of that.
Neeraj Mehra
Yeah, so. Hi Mr. Ke. So I. I had mentioned this earlier. So I had mentioned this earlier. So overall the primary reason would be the high base. But apart from that the forecast of monsoons and. And the impact of El Nino. So. So El Nino impact to a certain extent. Currently what we see is that it will impact to a certain extent. The probability is about 70%, 65 to 70 plus if you see the reservoir levels currently the rains that had to happen in Q4 of the last physical, the January, February, March period, the rains were also much lower than what they normally are.
So the reservoir levels are lesser or the levels are lower than last year or for the last 10 year average as well. So the rainfall level plus we are looking at increase in the commodity prices as has been mentioned throughout the call today. So all these facts, one of the reasons for growth of the industry Last year was the GST impact which came in September and after which the industry grew exponentially. So if the commodity prices come into the increase comes into effect in this year, of course the purchasing power or the benefit of the GST is likely to go away.
So all these things, the below normal rainfall, the El Nino impact, the high base, the commodity price increase, all these are actually going to have a kind of a negative impact in H2. So that is why I had mentioned that H1 would be again with respect to last year, but H2 would be a drop with respect to last year industry.
Unidentified Participant
Got it, sir. So my only request was. While the answer is quite comprehensive, what I was trying to understand is that there are two effects which are playing out simultaneously. Is one, a very high base effect in the second half and two, an incremental negative impact due to two reasons. One is a higher price of the material due to higher higher commodity prices and also due to bad monsoon and a low reservoir level, as you are saying. So is it possible by any reason to understand understand which effect would be playing by what percentage or let’s say if the base effect would have been a normalized, would you still be negative in that sense because of the MON effect?
Bharat Madan
It is too early to talk about this right now because we can’t say with decision how much will be the impact of each variable. There are too many variables tightened into. We only assuming a flat industry which we think will be very good because your industry was at peak last year. If you’re able to achieve that, even this headwinds, I think it will be a great achievement for the industry to really work on that. So luckily for this year emission norms have been deferred. So that was one negative impact which was at play, which will not happen.
It will only come into play horsepower tractor which is less than 25 horsepower first of October. But there also industry has about nine months time to continue to sell the old inventory. So really this year will not have really much impact on that. But really how the monsoon distribution happens, which pockets get impacted, what sort of geopolitical situation emerges, what sort of cost pressure will come in future. Very difficult to predict at this point in time. So I think our initial assumption is if it’s the flattest industry, which is what we are assuming, or it may be plus minus 2.3percent industry here and there.
I think it’ll be a good scenario to play out in this year.
Unidentified Participant
And if you have to call out H1 of fiscal 28, would you guide a moderate for H1 of fiscal 28 as well because of the effects of H2.
Bharat Madan
Too early to talk about FY28 but long term industry growth positions have been seen 6, 7, 8%. So we think in the long term that will continue with industry has done that sort of, you know, performance in the last few few years and last few decades. So long term obviously the growth momentum goal continue because your emission norm changes is only happen right now from first April 28th onward. So obviously 28 should be a reasonably good year. But again it’ll depend how the monsoon happens. What sort of water reservoir levels are there in the beginning of every 28th and then in the second half of that year.
Unidentified Participant
One more point. How much financing and the interest rate plays a part in the bank decision of the farmers?
Bharat Madan
70% sale for us is on financing only. So without financing the sale will not happen. So retail is dependent to a large extent on this financing availability.
Unidentified Participant
Okay, helpful. Thank you.
Operator
Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Kratik Singhal for closing comments. Over to you sir.
Prateek Singhal
Thank you ladies and gentlemen for being present on this call. For any feedback or queries, feel free to write into us@investor.relationscourse kubota.com thank you very much and have a good evening. Thank you.
Operator
Thank you very much on behalf of Philip Capital India. That concludes this conference. Thank you all for joining us today and you may now disconnect your lines.