Escorts Limited (ESCORTS) Q4 FY23 Earnings Concall Transcript

Escorts Limited (NSE:ESCORTS) Q4 FY23 Earnings Concall dated May. 10, 2023.

Corporate Participants:

Prateek Singhal — Investor Relations and ESG

Harish Lalchandani — Chief Officer Agri Machinery Business Division

Bharat Madan — Whole Time Director and Chief Financial Officer

Ankur Dev — Chief Officer, Railway Equipment Business Division

Analysts:

Chirag Jain — Emkay Global Financial Services Ltd., — Analyst

Gunjan Prithyani — Bank of America — Analyst

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Mitul Shah — Reliance Securities — Analyst

Hitesh Goel — CLSA — Analyst

Raghunandhan NL — Nuvama Research — Analyst

Unidentified Participant — — Analyst

Pritesh Chheda — Lucky Investment Managers — Analyst

Kapil Singh — Nomura Group — Analyst

Jinesh Gandhi — Motilal Oswal — Analyst

Jyoti Singh — — Analyst

Sameer Deshpande — Fairdeal — Analyst

Deepak Jain — Enam AMC — Analyst

Ayush Agarwal — Molecule Ventures — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Escorts Kubota Limited Q4 FY23 Earnings Conference Call, hosted by Emkay Global Financial Services Limited. 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. [Operator Instructions]. Please note that this conference is being recorded.

Before we start, I would like to add that some of the statements that the company makes in today’s call will be forward-looking in nature and subject to risks as outlined in the Annual Reports and investor releases of the company.

I now hand the conference over to you Mr. Chirag Jain from Emkay Global Financial Services Limited. Thank you and over to you sir.

Chirag Jain — Emkay Global Financial Services Ltd., — Analyst

Thank you, Michelle. Good evening, everyone. On behalf of Emkay Global Financial Services, I welcome you all for Escorts Kubota Limited Q4 FY23 Earnings Conference Call. I also take this opportunity to welcome the management team from Escorts Kubota Limited. Today we have with us Mr. Bharat Madan, Whole-Time Director and Chief Financial Officer; Mr. Harish Lalchandani, Chief Officer, Agri Machinery Business Division; Mr. Sanjeev Bajaj, Chief Officer, Construction Equipment Business Division, And Mr. Ankur Dev, Chief Officer, Railway Equipment Business Division. As well as we have Mr. Prateek Singhal, Investor Relation ESG at Escorts Kubota Limited. We would start the call with brief opening remarks from the management followed by an interactive Q&A session. At this point. I would request management for their opening remarks, over to you sir.

Prateek Singhal — Investor Relations and ESG

Thank you, Chirag. Hi, good evening, everyone. This is Prateek Singhal. Thank you all for joining us on the unlink call for the fourth quarter and fiscal year ended 31 March 2023. Few highlights of the company’s standalone performance for the fourth quarter ended March, 2023 are as follows; Revenue from operation during the quarter was up by 16.8% at INR2,183 crores as against INR1,869.6 crore in previous fiscal. On sales volumes front, tractor volume was up by 13.1% to 24,765 tractors as against 21,895 tractors last year same quarter. On the construction equipment volume, are up by 18.8% to 1,528 machines as against 1,286 machines in the last year same quarter. EBITDA for the quarter ended March 2023, came at INR235.8 crore, down by 6.2% as against INR251.5 crores last year same quarter and sequentially up by 23.9% as against, and INR190.3 crores in Q3 FY23. EBITDA margin for Q4 up by 240 basis-point to 10.8% as against 8.4% in sequential quarter and 13.5% last year same quarter. PBT before exceptional item at INR271.4 crores as against INR269.5 crore last year same quarter. Net profit at INR185.5 crores as against INR202.2 crores last year same quarter impacted due to exceptional provision of rupees INR24.4 crores on account of impairment of investment in the wholly-owned subsidiary at Cost Crop Solution Limited. Company continued to be net-debt free with sufficient availability of liquidity for growth. The Board of Directors has recommended a final dividend of 70%, i.e., INR7.0 per equity share for the year ended 31st March 2023.

On consolidated basis Company financial performance for the quarter ended March 2023 is as follows; Turnover is up by 17.4% year-on-year to at INR2214.5 crores, EBITDA margin at 10.5% as against 13.2% in last year same quarter. Profit before-tax up by 7.8% year-on year at INR277.6 crores, net profit margin up by 13.9% year-on year at INR216.5 crores.

Moving on to the segmental business performance starting with the Agri Machinery Business, the total Tractor Industry volume domestic as well as export in FY23 went up by 10.2% to 10.7 lakh tractors as compared to 9.7 lakh tractors in the previous year. This is a new record for the tractor industry beating the last peak of 9.88 lakh tractors in FY21, but our total volume went up by 9.7% 1,03,290 tractors, as against 94,228 tractors in the previous fiscal. Our total market-share was maintained at 9.7%, key to note, that this is the second time that company has crossed 1 lakh plus tractor sales unit. The domestic tractor industry went up by 12.2% to a record number of 9.45 lakh tractor as compared to 8.4 lakh tractors in the previous year. All macroeconomic factors crop production, crop prices, good monsoon and availability of retail finance remain positive throughout the year.

Our domestic tractor volume went up by 9.4% to 95,266 tractors, as against 87,043 tractor in the previous year. We ended the year with the domestic market-share of 10.1% for FY23 as against 10.3% in FY22. The marginal drop-in the market-share was mainly due to drop in Q1 FY23, post that, we have taken corrective actions in the last nine months of the fiscal from July ’22 to March ’23, our domestic market share improved to 10.4% as against 10.2% for the same-period in FY22 and in Q4, we ended market-share at 10.9%. We have more than 1,200 plus dealer count. We continue to focus on channel expansion to cover the wide spaces for both Powertrac and Farmtrac brands. We have also initiatives, we have to focus on the health of our channel and are taking the step to develop a strong and healthy dealer network.

On the export side, during fiscal FY23, industry was down by 3.2% at 1.24 lakh tractors as compared to 1.28 lakh tractors in previous fiscal. However, our export volume went up by 11.7% to all time high of 8,024 tractor, as against 7,185 tractors in the previous fiscal, driven by our continuous focus on new product development and expansion of our distribution network. Sales through Kubota Global Network is also gradually increasing and during the year, contribute more than 30% of the total export volume. Segment revenue was up by 13.5% to INR6,316.1 crores as against INR5,563.7 crores in the previous year. EBIT margin for the Agri Machinery Business stood at 9.3%, impacted during the year-by steep inflation in commodity price, advert product mix and impact of price rationalization in certain products or big geographies. For the quarter ended March 2023, EBIT margin was up by 159 basis-points to 9.9% as against 8.3% in the sequential-quarter, led by a better product mix, improved price rationalization and softening of the commodity prices.

In Q1 FY24 domestic tractor industry is expected to remain almost flat due to the advancement of the key festive season to March ’23 as against last April last year combined with unseasonal rains. However, for FY24, we expect the domestic tractor industry to do well and May there is still low-mid single-digit growth led by positive macroeconomic factor on account of good rabi harvest, improved crop prices and adequate water level reservoir.

Coming on to the Construction Equipment business, our served industry of crane, backhoe loader and compactors was up by 24.5% in volume as compared to FY22 led by growth in backhoe loader industry up 28%, crane industry was up by [Indecipherable], whereas compactor industry see a de-growth of 5%. Our total volume of manufacturing and traded products went up by 12.2% to 4,620 machine as against 4,117 machines in the previous year. Segment revenue went up by 19.5% at INR1,179 crores as against INR986.8 crores in the previous year. EBIT margin went up by 48 bps to 2.9% as against 2.4% in the previous year. There is a sustained demand for construction equipment industry, supported by government continued thrust across all infrastructure. We expect demand momentum to continue going-forward for the current quarter and further escalate in FY23-FY24 and margin for the segment to improve further owning to softening of the commodity price and improvement in the product mix.

Coming to Railways division, revenue for the year ended March 2023, went up by 32.3% to our ever highest yearly revenue of INR841.9 crores as against INR636.2 crores in the previous year. Sales from the new product contribute 65.7% of the total sales, division sales. EBIT margin for the year ended March 2023 stood at 13.8% as against 14.8% in the previous year. Order book for the division, at the end of March 2023 stood at a healthy and ever highest-level of more than INR1,050 crores with continuous focus on product diversification and export, we expect the Railway Equipment Business segment to continue in the double-digit. In FY24. Now will request the moderator to kindly open the floor for the Q&A.

Questions and Answers:

Operator

Thank you very much, sir. We will now begin the question-and-answer session. [Operator Instructions]. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.

Gunjan Prithyani — Bank of America — Analyst

Yeah, Hi team, thanks for taking my questions. I have two questions, firstly on the outlook for the industry. I’m not sure if it was flat for FY24 or low-single digit. If you could clarify that and also give us some color on how did the resales. As Steve, go on. Any color on the geo trends, where are the inventory levels. Some color on the industry, what you’re seeing on-the-ground. Thanks. This is Retial. To give you our perspective on the industry. We expect the first-quarter of this year to be flat. Given some of the adverse weather conditions, but. Overall for the year, we expect the industry to grow basically digit. That’s what have. Okay going as a trend in the festive season, the festive season in-quarter four it was if you have to split the quarter Angul two-parts. The first part of the quarter was good for us because of. Good rainfall good, what do you collect water supply, et-cetera. Good, MSP price is. Last month, which was March or impacted positively as well negatively. The positive impact was because of the festival, negative impact was because of unseasonal markets.. Okay. And I mean on-balance out. I mean, did it go as per your expectation was it growth versus if you compare with last year. Roger festive. These balance out each other. Or was it more on skilled, more on the negative because of the unseasonal rains. If you were to ask Kirti be unseasonal rain hadn’t happened now, if you see the trend versus the previous quarters growth could have been better. And given the fact there was unseasonal payments. The market still grew 14%, but it is not in-line with the growth in the previous quarters. Okay, and where are the inventory levels? Is there some higher inventory, because it didn’t go there, the festive didn’t go as anticipated?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

Actually not because if you take a look at our quarter four, our deliveries have been higher than our billings therefore our net inventory at the end of quarter four stands lower than it was in the previous quarter.

Gunjan Prithyani — Bank of America — Analyst

Less than a month, I should assume.

Harish Lalchandani — Chief Officer Agri Machinery Business Division

It is in-line with the F24[Phonetic] and as we expect, we normally have.

Gunjan Prithyani — Bank of America — Analyst

Okay, got it. The second question is more around the margins. Now, we’ve seen some sequential improvement given the combination of mix, price hikes, as well as the cost using, but if. I were to look, look-ahead and going by the assumption that there is incrementally, not much of operating leverage to play, if a flattish or a low-single digit volume growth has not incrementally much operating leverage as a lever. So how should. I think about the various portion the pull factors like, do we have scope to take more price increases, are we expecting more commodities into flow-through? So you just some perspective on how I should think about margins for F24, for the Agri business?

Bharat Madan — Whole Time Director and Chief Financial Officer

Hi Gunjan, this is Bharath Madan. So as already[Phonetic] mentioned operating leverage, we are not really banking on too much, but if you look at the trend in the last two quarters. So we are getting the benefit of the softening of the commodity prices and looks like the trend will continue in the coming quarters too. Surprisingly, it does not look like the feasibility in this scenario, when the commodities are softening. So that is something which we are still keeping a watch, so it will depend on how the competition plays out and if there is a possibility, so that will be explored. But right now, it looks difficult looking at the way commodities are moving. But as we mentioned in the last quarter, so that was the bottom of quarter for the margin perspective and we only looking at better margin coming in, going-forward. So this commodity cycle, obviously, is giving benefit going-forward too, so we expect that trend to continue. And that should actually lead to some better margins.

In addition, there are also some cost-control measures the company had put into place for this year. So that will — should also start playing out. So with that also should act [Indecipherable]. So idea is by the time we exit the year, we should be [Indecipherable] what it used to be the normal level of margin for tractor business.

Gunjan Prithyani — Bank of America — Analyst

Sir, normal you mean the low-to mid-teens because gone through a huge range in last 2.5 years, right. 13% -14 % then we [Speech Overlap].

Bharat Madan — Whole Time Director and Chief Financial Officer

I think COVID year, you should exclude. So I think pre COVID level it used to be just 14% sort of range. So that was sort of number which you’re targeting to end the year, this year with as an [Indecipherable].

Gunjan Prithyani — Bank of America — Analyst

Okay, got it. Sir, last question if I can pitch in, this construction segment margin at 8% is this sustainable, is it one off this quarter, any clarity on that?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

So construction has, the demand starting picking-up only from December last year and normally second-half in Construction Equipment business is good and you already seeing the margin historically also, the last quarter, used to be the best in terms of the margin. Whereas the same numbers will sustain, I think difficult to say, but the demand momentum is continuing, we’ve seen good numbers coming in April also, there is some spillover demand, which is there. So industry is right now struggling with capacity issues, but there is very good demand coming in both domestic as well as on the export front. Going the — I think the demand scenario for this year, we expect the momentum should be — the price increases have been absorbed in the market, So the idea is, the margins should continue to be better than last year, whether the same level sustain, I think it’s difficult to say at this point in.

Gunjan Prithyani — Bank of America — Analyst

Okay, got it. Thank you so much. Thank you. The next question is from the line of Chirag Jain from Emkay Global Financial Services, Please go ahead.

Chirag Jain — Emkay Global Financial Services Ltd., — Analyst

Thank you sir. I have couple of questions on the market-share front within the tractor space, we have seen a decline last year. So how do we see that shaping up this year. And any major initiatives, that you can call-out which can help in terms of boosting our market-share?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

Hi, Chirag. Thanks. This is Harish. Chirag, again, if you take a look at the full-year. Okay, and if you take a look at the sequential quarter wise, quarter-on-quarter, we have increased our market-share from Q1 to Q2 to Q3 to Q4. Okay, the biggest drop that we had was in Q1. Subsequent to that, we have always grown in our market-share. So that is point number-one. Two is, this is — already some initiatives have been taken. Key among is the focus on digital second is our focus on the 31 HP to 40 HP, our focus, 41 HP to 50 HP, as well as our focus on greater than 50 HP. Second is in terms of geography, our focus on the strong as well as the opportunity markets which will feed into a significant growth of share in the strong as well as the opportunity markets across quarters. The third is our focus on the haulage segment. So we see haulage segment as an opportunity for us going forward and even in the last few [Indecipherable] we have inroads [Technical Issues].

Chirag Jain — Emkay Global Financial Services Ltd., — Analyst

Okay, second — the second question is with respect to the product mix or let’s say the segment-wise, let’s say, growth profile within the tractor space, let’s say, Agri and non-Agri, how do we see that, let’s say, in this financial year, and this could have some implications on the margin profile as well. Maybe if you can discuss that as well?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

Two bids. If you were to take a look at the market today, if you have to take a look at the pure on Agri our estimate at the moment, Agri market is approximately 15% to 20% and if you take a look at that specific market, while it’s predominantly driven by investments into infrastructure. Given that the government has stated intent to double the spend in infrastructure, this financial year as compared to the actual spend last year. We see this segment, showing a significant growth that is point one. Agri If you take a look at it, given the current water levels that we have and the positive trend that continues into this year, we also see a positive momentum in that segment.

Chirag Jain — Emkay Global Financial Services Ltd., — Analyst

Okay. Sir, just last thing, and then I’ll come back-in the queue. In terms of trend for regulations, any update do we have? I think in the last call, we mentioned that it might come probably in September ’24. So any final notification or any update that we have?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

So no further update. It is just that as part of the DNA, we have submitted a pigmentation [Technical Issues] to try and keep a five-year gap between the ’24 and ’25, but they’re still to get back.

Bharat Madan — Whole Time Director and Chief Financial Officer

And also sir, last call we had mentioned in the regional emission not for more than 50 HP got delayed by almost 18 months. So we expect similar delay should be there for the lower HP segment also. So earlier, the initial change of emission was supposed to happen from first April ’24, now if you look at 18 months delayed, it would have been September ’25 not September ’24. So but right now there is no notification being issued, so are still waiting and we’ll will come once the discussion is out and the notification is out,

Chirag Jain — Emkay Global Financial Services Ltd., — Analyst

Okay, thank you so much. I’ll come back-in the queue.

Operator

Thank you. We have the next question from the line of Devika Jain from Ratnabali Investments Private Limited. Please go ahead.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Hi, Sir, Good evening. Thank you for taking my questions. So we have grown our exports by nearly 12%. I just wanted to understand how our peers has performed and the reason for our outperformance as against the industry?

Bharat Madan — Whole Time Director and Chief Financial Officer

So industry has actually declined by almost 2% last year. Exports in India have not done well. So the industry total was roughly 25,000 this year. [Indecipherable] 30,000 years before. So in our case, the exports had progressed softly, we have started exporting Kubota Network was also which is also one of the reasons. So almost 30% export, in our likely this year were to Kubota Network and that’s a trend we’re seeing volume will continue. So that’s why we are more bullish on export number going-forward to. So in the industry scenario with some other countries have started taking decisions basically in EU countries. So we are seeing some sort of [Indecipherable] condition are prevailing because of the geopolitical issues and U.S. also is expected to [Indecipherable] decision. So on exports demand may get impacted slightly, but in our case, since we are banking more on [Technical Issues] through Kubato Network, so maybe will not see impact other than that the industry will see.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Okay, this quarter our exports though Kubota was more than 14% what is the number going-forward does it expecting through Kubota channel.

Bharat Madan — Whole Time Director and Chief Financial Officer

So right now we are predicting the similar level as we have seen in the last year. Once we open more countries than lot of work needs to happen on the product side, once the product is ready, then obviously, you will see the numbers going up. So that will take some time, but definitely. I think the current product portfolio, what we have, which we are also already exporting and a certain new models which are opening this year. So we expect the number should gradually continue. So it will be in the range of 30% – 40%, majorly [Technical Issues].

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Got it, and one last question, sir. So, I also wanted to understand the reason for poor volume uptick in the Construction Equipment segment in this quarter.

Bharat Madan — Whole Time Director and Chief Financial Officer

What volume uptick, why do you say that?

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

As compared to the industry the growth of our volumes [Speech Overlap]

Bharat Madan — Whole Time Director and Chief Financial Officer

Potentially because of the product mix which we, if you look at we are — our main product portfolios is in the pick and carry crane segment where we we’ve done almost at par with industry. The issues is on the backhoe loader, which is earthmoving segment here, we are very small player with about 1.5% to 2% market-share, and the maximum growth in the industry has happened in that category. So it is more in terms of the issue in terms of mix with the industry has and what segment has grown, where we are not very strong player. So that’s why in the served industry it looks like as if we have been dropping the market share. But if you look at our own pick and carry segment a clean quarter — this quarter, we almost gained market-share back to 40% plus, which is a largest segment for us.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Got it. Thank you so much for clarification.

Operator

Thank you. The next question is from the line of Mitul Shah from Reliance Securities. Please go ahead.

Mitul Shah — Reliance Securities — Analyst

Sir, thank you for the opportunity. Sir, I have question on your year — yearly guidance of single-digit growth for the industry. Sir, in view of festival being not there in April, this time in March, last year April had a festival. So base was high, even for this quarter also base for coming months May-June remains high. Overall, climatic situation, is still advance and untimely monsoon, so despite all those negative factors fundamentally right now, on — what are the factors you see good help driving single-digit growth? [Indecipherable]

Bharat Madan — Whole Time Director and Chief Financial Officer

So Mitul if you heard the commentary from Prateek, I think he mentioned in this quarter, since you already seen April has declined, the industry has declined and May, we expect to be flow of almost flat industry and June probably will see growth coming in. So overall for the quarter, we are anticipating flat industry this quarter. The low-single digit growth, we’re talking about is for the full-year basis. [Speech Overlap]

Mitul Shah — Reliance Securities — Analyst

My question is on full-year only. I asked that, this quarter we are seeing flat and full-year, we have some growth, is that the negative factors even, in fact inventory level is also high for the industry, which probably may come down slightly. So adjusted for that wholesale growth you are indicating single-digit for that, what I want to understand?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

No, no. So Mitul, if you take a look at it, there are three positive factors that are impacting the industry today. One is the good MSP prices that we have, as well as the crop. The second one is, there is [Speech Overlap] which are significantly better than what we had last year. The third one and the most important one is the fact that it is an election year. But we expect infra Sprint as I indicated is doubling this year as compared to the previous years. So, the haulage, plus the mix segment which accounts for close to 30% to the total industry is expected to give a big boost to that particular entire space. That’s — so that infrastructure growth and hence a significant boost in the 30% – 35% in the market, plus the growth in Agri because of MSP increase as well as irrigation, water reservoirs. that is expected to give you that single-digit growth.

Mitul Shah — Reliance Securities — Analyst

Okay, sir. And second question again on the same in terms of you — as per the commentary, it seems that the second half would see the growth, first half, may not be very great [Technical Issues] In terms of region-wise, where do you see high-growth coming or which is the regions, do they still have some weakness because this monsoon impact is to be more in the North and Central belt, where we are relatively stronger compared to South.

Harish Lalchandani — Chief Officer Agri Machinery Business Division

I think the growth we are expecting is going to be pan India, that is one. And second one is monsoon is, if it comes, and I’m not sure what the outlook is going to be, but I think it will impact, most of the geographies if it does impact, in fact the irrigation in the Northern and the Western zones are actually better than some of the other peers, if you see the historical trend. So we feel lesser impact to happen in our strong markets.

Mitul Shah — Reliance Securities — Analyst

Okay. Sir, thanks and all the best.

Harish Lalchandani — Chief Officer Agri Machinery Business Division

Thank you.

Operator

Thank you. The next question is from the line of Hitesh Goel from CLSA. Please go ahead.

Hitesh Goel — CLSA — Analyst

Yeah, thanks for taking my question. Sir, first question is on this factor margin which has improved 160 bps Q-on-Q. You had highlighted in the last con-call that there is not much commodity cost-benefit which you are expecting in the fourth quarter, but the commentary seems to be have got some benefits, and that will flow through in the next quarter. So, is it mostly commodity benefit that has helped margins or it is also the mix to some extent?

Bharat Madan — Whole Time Director and Chief Financial Officer

So it is the three reasons we mentioned. One we also mentioned last quarter, since we’ve taken a price increase after the festive season was over. So the full impact in last quarter was not visible and obviously you’ve got the full impact in this quarter which. It still is almost 0.75%, [Indecipherable] the margin improvement. And then second, the softening of commodity price had happened. So still there is some decline is happening on the last-time it was not visible. But during the quarter, when the rate got settled with the competition, the leader, who actually — take the lead-in settling those rates on the commodity side. So we did get some benefit, which happened towards the later part of March. And that’s why we got baked the full-quarter and this will continue in the coming quarters too. And third is the product mix which was also positive, because if look at the trend, more than [Indecipherable] sales number into the percentage has gone up by about 3% in this quarter. So that also contributed to the better realizations. So all three factors were responsible for the improved margin trend in the tractor business.

Hitesh Goel — CLSA — Analyst

And sir, my second question is on this, which Harish, also highlighted actually. Irrigation intensity has improved quite dramatically, especially in states like Madhya Pradesh and all right. So I did an analysis that only, I think Maharashtra and Karnataka and to some extent Gujarat is the areas where monsoon can have an impact on tractor volumes if the water levels are quite high, is the analysis, right. So we should not worry too much about monsoon at least because it’s only — the weather[Phonetic] levels are only lower in UP, Bihar where — anywhere the irrigation intensity is very-high, is the analysis, right?

Harish Lalchandani — Chief Officer Agri Machinery Business Division

No. Broadly in-line with what we are also thinking that we don’t feel that is going to be a significant impact of monsoon this particular year because of that, is that reservoir levels across in most areas, which are key markets for us being reasonably good. And plus, as I said, the infrastructure growth which is happening because of the election year.

Hitesh Goel — CLSA — Analyst

Great, thank you. Thanks a lot.

Bharat Madan — Whole Time Director and Chief Financial Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question please rejoin the queue. Thank you. We have the next question from the line of Raghunandan NL from Nuvama Research. Please go ahead.

Raghunandhan NL — Nuvama Research — Analyst

Thank you, sir for the opportunity and congratulations on the strong margin performance. Both in Agri and the construction equipment space and very heartening to hear the improvement expected by end of the year. Just a couple of questions. The firstly on. Kubota Agri Machinery. If you can share your thoughts on the timeline for merger And also, what is the progress happening on the localization part, would you see that exercise completing within two year -three year period and seeing EBIT margin of 15%? And on Kubota Agri Machinery, how do you see the components exports to global Kubota. What are the efforts there, and on a pilot basis have you started exports?

Bharat Madan — Whole Time Director and Chief Financial Officer

So Raghu, on the merger front right now we are waiting the approval from SEBI. So, we had filed our application and almost [Indecipherable] given — all the queries were resolved and the macro [Indecipherable]. So we are yet to receive their approval, it’s almost close to three months since pending with SEBI. Once we get the approval from SEBI, then it will be filed with NCLT for the necessary processes. So, it will take another six months’ time. So right now the way things stand, it looks like the process call — gets delayed by another three months. While, we are expecting it should happen by September-October, but the way adding things are today, so SEBI has already delayed this whole process, so it looks like it may go somewhere around December-January types, assuming everything comes in-line in future.

On the localization front. So obviously the localization from the JVs is essentially for the Indian manufacturing, which is a major part, which right now is getting imported and also other products which are right now traded, because in the manufacturing, we are only doing two models for them right now and the balance of the malls are [Indecipherable]. So to that localization will happen [Indecipherable] that’s introduce in the portfolio, which will happen. I think over the next two-three years, as you mentioned, because we have already factored that in our midterm business plan which was unveiled to the industry somewhere in the last year in November. So that obviously is very much on, So work is happening on that front. On the component export. It’s already, [Indecipherable] is exporting to some other countries including Thailand and and U.S. market and as they grow and develop more component and do more indigenization. So the opportunity for export will also further increase. So that is also already indicated, and that still containing our detailed visibility to numbers will only have happen when the merger happens. So right now, there are still standalone entity and we only consolidate the bottom-line numbers there. So that is not really reflected right now. But if the merger –integration happens and the merger happens, we will get to know more. I think about them.

Raghunandhan NL — Nuvama Research — Analyst

And the effective date will be from first week, right sir?

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah I appointed date is 1st April 2023, so as and when it happens, so we’ll do the consolidation of results from 1st April and produce consolidated results.

Raghunandhan NL — Nuvama Research — Analyst

Kubota is selling in the network of 300 odd outlet. Any thoughts on cross-selling, do you think the Escorts Farmtrac Powertrac network?

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah, so, like we mentioned. So this is one of the keys synergies, which is there. So when the integration happens. So, definitely there will be an opportunity for the dealers of both the companies to do cross-selling. So the good dealers from Kubato can also sell our products, maybe from a different showrroom, not in the same showroom and same thing will happen with our dealers also. specifically in the Northern Central India will be strong and Kubato is not really strong so that it gives them also an opportunity [Indecipherable] through our network.

Raghunandhan NL — Nuvama Research — Analyst

Thank you sir. And on the construction equipment and railways can you talk about outlook for FY24?

Bharat Madan — Whole Time Director and Chief Financial Officer

Sanjeev, you want to talk about construction then go ahead take the Railway.

Unidentified Participant — — Analyst

Yeah. Thank you. Raghunandan. So this Sanjeev and I want to talk about Construction Equipment outlook for this year now. Last year, we feel that the first half was very subdued. And the second half only, we saw that the demand came up and we expect that the speed at which the projects are moving at present in the demand from probably infra project is very high. So this year it is expected that the same level of demand will continue. Although there are some backlog, which was to be covered in last quarter for the first-half of the year. Second half of the year, I mean, this year we expect the industry will continuing to grow. Our [Indecipherable] industry did grew at about 10% to 12% is what we are expecting and we see that at end of the year this demand should continue except for the small period of monsoon when the projects actually went to halt.

Ankur Dev — Chief Officer, Railway Equipment Business Division

Yeah, hi, good evening, Raghu, this is the Ankur Dev. So regarding Railway business. So as of now, we have strong order pad of INR4,000 crore-plus as we mentioned in our opening remarks. Most of this will be executed in current financial year only, financially ’24. Additionally, we are going to commercialize three more products which were in-field trial in the last financial year and obviously these — commercialization of these three new products will add to order pad and the revenue in the current financial year. So overall, I can say that we are concerned — we will continue this growth momentum in railway business and we are hoping that we’ll be able to grow by double-digit in the current financial year also. Thank you.

Raghunandhan NL — Nuvama Research — Analyst

Thank you, so much Ankur and to Ankur sir, if you can talk a bit on the localization efforts new products and how the margins trajectory will go-ahead on railway?

Ankur Dev — Chief Officer, Railway Equipment Business Division

So regarding localization. As of now, mostly it is in the brake side for the electric coaches and we have already done the localization of the components which we are importing as of now. So all those localized components are put into the field trial as per the Indian Railways regulation. So we expect that this localization benefit will flow into our margin in financial year ’25, basically the next financial year.

Raghunandhan NL — Nuvama Research — Analyst

Have you seen margins going back to [Indecipherable] high levels of 18% to 20%?

Ankur Dev — Chief Officer, Railway Equipment Business Division

It is difficult to say exactly to those high levels, because we have been impacted by the inflation in the metal costs in last two years, but obviously we are working towards that.

Raghunandhan NL — Nuvama Research — Analyst

Thank you, sir. Thank you so much. And all the best.

Ankur Dev — Chief Officer, Railway Equipment Business Division

Thank you.

Operator

Thank you. The next question is from the line of Pritesh Chheda from Lucky Investment Managers. Please go ahead.

Pritesh Chheda — Lucky Investment Managers — Analyst

Yeah sir, my question is, will be a Escort Kubota. I have been in-place, what kind of opportunities has open up from a product perspective and what kind of gaps [Technical Issues] from a product perspective? And over the next three year, along side exports, this 95,000 or 100,000 tractor volume we see, what kind of volumes are possible on [Indecipherable] releases, if you could just give a small recap on that?

Bharat Madan — Whole Time Director and Chief Financial Officer

Pritesh already unveiled our midterm business plan. So maybe you can have a look at that, it’s already available on our website. It gives the overall picture and also our exploration is to go, not significant three years we talking what years here by FY28 as well as on the domestic front, export front, outsourcing opportunity which exists for ETL, which Kubota intends to use both on the components side as well as on the finished goods so. I think all those questions are getting addressed over there. So it’s difficult to put a number right now, [Indecipherable] what will happen, but obviously the idea is to make sure, wherever the white spaces exist in the [Indecipherable]. So that gets addressed and there’s also [Indecipherable] do a joint development upwards, which there is a plan. So most of the first introduction will happen by FY26 as I think it stands today and the predicts are on and it includes both the first on the domestic side as well as for the export market. So product introduction will happen by FY26. [Speech Overlap] Product which is totally under new development, but there are many opportunities, which will be in the sort of taking the existing platform. So that’ll happen sooner. So again you will see some products coming into the play. Okay. Okay. I will go through [Indecipherable]. Thank you very much.

Operator

Thank you. The next question is from the line of Manoj Bhatt from Motilal Oswal. Please go ahead. Mr. Manoj. I have unmuted your line, kindly proceed with your questions. As the current participant is not answering. We move on to the next question which is from the line of Kapil Singh from Nomura Group. Please go ahead.

Kapil Singh — Nomura Group — Analyst

Yeah, hi, good evening, sir. Just follow-up on the same for loans. How much was the cost increase that we did for more than 50 HP segment. And were we able to fully pass on this cost increase? And did that have any impact on volumes for this segment?

Bharat Madan — Whole Time Director and Chief Financial Officer

So Kapil the impact is roughly 10% to 15% of the total cost of the tractor. It’s on the higher 50 HP and above tractors [Indecipherable] emission also already been put into place. So [Indecipherable] is that [Indecipherable] effective only from first of January, and most of the metrics we’re carrying inventory. So really the impact has not been seen, however whether this gets absorbed in the market or not. I think we’ll come to know in the coming quarters. So I think it’s difficult to say at this point in time, But definitely, no one would like to keep the cost on their P&L. So everybody will like to pass it on to the market.

Kapil Singh — Nomura Group — Analyst

So we have already taken 10% to 15% price increase.

Bharat Madan — Whole Time Director and Chief Financial Officer

So like I mentioned, most of the manufacturers are getting inventory of the old tractors with the holding engine. So once the new emission norm tractor start coming to the market and start getting retailed, so only, we’ll come to know, but yes, the price increase will happen based on this cost increase.

Kapil Singh — Nomura Group — Analyst

Okay, and by when is it expected that the new tractors will start coming into the market.

Bharat Madan — Whole Time Director and Chief Financial Officer

And from this quarter, you’re starting seeing the impact.

Kapil Singh — Nomura Group — Analyst

Okay. The second question on an exports, [Indecipherable] sharp decline any particular reason, was that a one-off or do you think that exports could be soft this year?

Bharat Madan — Whole Time Director and Chief Financial Officer

No, So export will not be soft, we have order book. We had more than 800 tractors order likely, but it could not be completed with some model mix issuance supply-chain issues were there. But they will get it the coming months. So there’s no shortfall, as well as the order book is concerned, for exports. I think it was only temporary issues in the line and some quality issues which are getting addressed. So that could likely get taken care off in the coming months.

Kapil Singh — Nomura Group — Analyst

Okay, so. Is it already addressed or it could — by when do you expect that this would be addressed, the issue was [Speech Overlap].

Bharat Madan — Whole Time Director and Chief Financial Officer

Have been address, so you will see the impact I think from the coming months.

Kapil Singh — Nomura Group — Analyst

Okay, thank you. That’s all from my side. All the best.

Operator

Thank you. The next question is from the line of Jinesh Gandhi from Motilal Oswal Financial Services. Please go ahead.

Jinesh Gandhi — Motilal Oswal — Analyst

Hi, sir, a couple of question from my side. One is the RM cost selling you expect it to continue in coming quarters and what material are we seeing further administration from where we are today?

Bharat Madan — Whole Time Director and Chief Financial Officer

Yes, we expect the softening will continue. So we are seeing. I think only thing the news clippings on the sheet metal steel companies they are talking about reducing the prices, from about INR1,500 to INR2,000 per ton. On the costing also, we are seeing some softening is happening. So both on the core prices and then this big RM, both are going down. So we’ll see some softening happening on costing to which is a major component for the tractor industry. We also seeing that our rubber prices going down. So where we seen the results of tire companies, also companies at least in the margins would have been last quarter, so hopefully as we get the impact with some lag, so that should also start benefiting the Company.

So to your question, yes. Broadly, we see the trend is downward on the commodity side. So we should continue with that impact as the quarters [Indecipherable].

Jinesh Gandhi — Motilal Oswal — Analyst

Okay, okay and in that context, we did recommend any price increase and in fourth quarter or till-date and 1Q.

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah, so industry hasn’t taken any price increase, the prices are coming down. So net-net basis if you look at whatever the inflation has been there, it’s been fully passed on to the market by the industry, including us. Yes, the margin on that increase has not been absorbed by the market and no one has enabled pass it on, so that is why we are seeing the cost -wise, percentage-wise the material cost is looking very-high compared to what it used to be two years ago. So. I think as the softening happens, you will see the gradual increase will start happening in the margin front too.

Jinesh Gandhi — Motilal Oswal — Analyst

Got that. Once again, Lastly, with respect to the merger of this two entity. Can you clarify what kind of impact that will have on margins and profits based on FY22 numbers or other indicators on a frequency basis?

Bharat Madan — Whole Time Director and Chief Financial Officer

So I think it’s already there in our Investor Presentation on our website. So we giving the consolidated view of FY22 numbers based on both the JVs number. So broadly if you look at the last year’s number, there was a dilution of happening in the EBITDA margin of 1.5% to 2% where they were — there still almost breakeven sort of operation. So, I think once the merger happens, a lot of cost synergies, will be flowing. So as you keep cutting down the calls, the margins will continue to improve going-forward. So end objective is, they should also continue to come back to the same level of margin, what we are doing in ETL on the tractor business. [Indecipherable] really some different with the positioning for Kubota brand is different than our [Indecipherable]. So to that extent, there will be some differece will be there, but overall blended margins should be actually in the same range as the tractor industry enjoys.

Jinesh Gandhi — Motilal Oswal — Analyst

Okay, and given that this is happening in FY24, impact might be much lower than 1.5 percentage to 2 percentage points [Indecipherable].

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah, it will be similar.

Jinesh Gandhi — Motilal Oswal — Analyst

You mean similar dilution of 1.5 percentage point to 2 percentage point because of [Indecipherable]

Bharat Madan — Whole Time Director and Chief Financial Officer

Revenues will continue to be in the same range, so there’s no major change in the margin profile.

Jinesh Gandhi — Motilal Oswal — Analyst

Got it. Got it. Okay sir, thanks and all the best.

Operator

Thank you. The next question is from the line of Jyoti Singh from N Capital Market Limited. Please go ahead.

Jyoti Singh — — Analyst

Yeah, thank you for the opportunity, Sir, as most of my question got answer. So I just have one query. So how is the traction we are seeing on the non-automotive side?

Bharat Madan — Whole Time Director and Chief Financial Officer

Non-automotive means?

Jyoti Singh — — Analyst

I mean — sorry non-Agri side.

Bharat Madan — Whole Time Director and Chief Financial Officer

Non-Agri. There will tractor users for non-Agri segment,

Jyoti Singh — — Analyst

Pardon.

Bharat Madan — Whole Time Director and Chief Financial Officer

Are you talking about tractor users for non-Agri purposes?

Jyoti Singh — — Analyst

Yes.

Bharat Madan — Whole Time Director and Chief Financial Officer

So two-parts to it. As I mentioned, the tractors users for non-Agri purposes is going to see a boost this year, at least that’s our estimate. Given the increase in infrastructure spends, which is a doubling as compared to last year, point number-one. Two is starting from Q2 of last year, we had an increased focus in this particular segment, and we are consistently seen a growth of share within that segment, we continue to focus on the segment for F 24.

Jyoti Singh — — Analyst

Okay, thank you sir.

Operator

Thank you. The next question is from the line of Sameer Deshpande from Fairdeal. Please go ahead.

Sameer Deshpande — Fairdeal — Analyst

[Indecipherable] and so Bharat Madan, congratulations and welcome on the Board of Escorts. You really deserve the seat and I’m happy that you are there. I hope the Company prosper even better under your stewardship. Now, the question is actually we have a capacity utilization of around 90%. And we have sold 1.03 lakh tractors this year. So we are I think around 101.10 or something as a capacity. Now, we earlier when we — with Kubota we were planning to increase the capacity by about 50,000 tractors. So what is the status of that [Indecipherable].

Bharat Madan — Whole Time Director and Chief Financial Officer

Yes, Sameer ji, you are right. So our own capacity in the ETL was close to a 120,000 tractors and with JV, we have another 50,000 tractors capacity order which roughly 30,000 capacity was available for all users by ETL also. So overall, we had about 150,000 tractors capacity. So right now, we had 103,000 this year. So capacity-wise, it won’t be an issue on an immediate basis and as we indicated in our mid-term business plan, there is a plan to double this capacity in next five years and this is one of the key project as part of our main midterm business plan. So we’ll be increasing the capacity from 150,000 to 300,000 tractors by setting up another greenfield venture within this five years period. So that will be on, so obviously we will ensure there is no shortage of capacity in terms of what we need in terms of the requirement. This 90% capacity is only in this quarter of March. So overall, the utilization level, not 90%, so that’s why it’s more seasonality which comes into play. So there are options to keep the inventory buildup, with the requirement is there for any particular season quarter, subsequent months. So that can be done. So overall, so we don’t see really from capacity perspective will be an issue. But yes, they are already plans to expand the capacity further.

Sameer Deshpande — Fairdeal — Analyst

And now with this, regarding margins, and tractor industry outlook due the aforementioned that mid single-digits growth is possible this year. Despite this [Indecipherable] etc., because of the good water levels and overall irrigation improving, let’s say, weather is good. It’s clear, and even though tractors in the non-Agri segment also expected to have a good sales with the election there [Indecipherable] good, but the margins, you mentioned that currently we have 9.8% in this quarter for tractor segment, segment margin. So you had, I think mentioned that earlier we had about 14% – 15% percent, now about one year back, 1.5 years back. So are we likely to return to those levels by the end of the year?

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah, that’s what I indicated. So both. I think we expecting the commodity prices continued to soften. And then also some benefits which will flow in from some of the cost initiative what we have undertaken this year. So both put together should really lead us to a situation where we end the year, It’s sort of margin profile, which used to be there for the tractor business for us,

Sameer Deshpande — Fairdeal — Analyst

Which will keep on improving [Indecipherable] where margins can go on increasing

Bharat Madan — Whole Time Director and Chief Financial Officer

[Speech Overlap] the first impact from whatever cost initiatives can we take, the impact will be maximum in the last quarter with every quarter, we keep on growing. So definitely in the last quarter, you will see the maximum bit coming in. So we think when we end this, exit — we exit this year, in the last quarter. So, we should be in that range.

Sameer Deshpande — Fairdeal — Analyst

And then last question. I mean. This in our balance sheet, we had last year under current investment, INR4,587 odd crores. And now that has almost INR2,785 crores has shifted to non-current investments. So what actually does that mean?

Prateek Singhal — Investor Relations and ESG

I’ll take this sir.

Bharat Madan — Whole Time Director and Chief Financial Officer

This mainly is only a classification issue where the investment which has held for more than one year is shifted to non-current. Otherwise the overall investment portfolio remains same. So we have close to INR4,800 crores of liquidity on the balance sheet, which is in the state in this debt mutual funds. And that’s excluding the [Indecipherable]. So overall, if you include [Indecipherable] on-balance, it will be more than INR5,000 crores [Indecipherable]. Thank you.

Sameer Deshpande — Fairdeal — Analyst

And in Construction Equipment really after a long-time we are seeing very good results. 45% of the capacity utilization at volume of around INR4,600 crores, they have been in any position to turn-around and make some 3% odd percent on margin. So if the capacity goes up by 30% – 40% percent more between the election, maybe 20% – 30% more. Can we see the margin cross 5% to 6%.

Bharat Madan — Whole Time Director and Chief Financial Officer

So the Sameer Ji, capacity depends on what product we are selling versus the demand maybe for different products, So if some of the products we are facing shortage of capacity today. So there are capacity cost in especially on the safe crane part, which is one of the key component, which is a high-margin [Indecipherable]. So there we are actually not able to produce, which is why we saw some of that spillover happen from last quarter to this quarter of some volume. So overall capacity looks like there [Indecipherable] backhoe loader, we are not doing much so there we have surplus capacity, but where we need capacity there were some shortage. So don’t look at overall number that, that is to the combined capacity, which is reflected in the presentation. But individually basis is something what we need to really track in the sourcing, how much we can grow.

Sameer Deshpande — Fairdeal — Analyst

Thank you and all the best.

Bharat Madan — Whole Time Director and Chief Financial Officer

Thank you

Sameer Deshpande — Fairdeal — Analyst

Thank you. [Operator Instructions] I request to all the participants, we would request them to limit their questions to one per participants, should you have a follow-up question please rejoin the queue. Thank you. We have the next question from the line of Deepak Jain from in Enam AMC. Please go ahead.

Deepak Jain — Enam AMC — Analyst

Sir, you were having some product mix issues few quarter back, so are they being addressed. And in context of that, this 14% EBIT margin for the exit quarter will it come entirely from the cost moderation or some other price hikes on product mix improvement at inventory also be there?

Bharat Madan — Whole Time Director and Chief Financial Officer

So it will be a mix of both, I think multiple matters. So, like we mentioned, cost initiatives, one which we are looking at. Then there is also some softening of commodity price, which we are expecting will happen, so that will also lead to improvement in the margin. And non-product mix, I think it’s compared to what we were earlier, we think some improvement, which has happened in last quarter also and same trend was there in April too. So we hope that continues. So that will only help us in getting earlier than in the last quarter.

Deepak Jain — Enam AMC — Analyst

Okay sir, thank you.

Operator

Thank you. The next question is from the line of are Ayush Agarwal from Molecule Venture. Please go ahead.

Ayush Agarwal — Molecule Ventures — Analyst

Hello.

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah, please go ahead.

Ayush Agarwal — Molecule Ventures — Analyst

Yeah, hi sir. I wanted to ask about the commodity, the commodity prices, you said are expect to go down. So in that, which commodity have you seen the prices to soften, that was castings and?

Bharat Madan — Whole Time Director and Chief Financial Officer

Castings sheet metal and rubber prices, I had mentioned.

Ayush Agarwal — Molecule Ventures — Analyst

Good. And could you please give us some more idea about how much of the cost of our Company will coming from castings and rubber?

Bharat Madan — Whole Time Director and Chief Financial Officer

So. I think we indicated in last call also, last quarter, so it’s almost 50% to 60% cost comes from these two commodities within Rubber and tires and castings for tractors, which is why you did not see the impact what we saw in the auto industry, we didn’t see EBIT coming in the tractor industry.

Ayush Agarwal — Molecule Ventures — Analyst

So [Indecipherable].

Bharat Madan — Whole Time Director and Chief Financial Officer

Sorry.

Ayush Agarwal — Molecule Ventures — Analyst

Casting, you said casting and rubber is 50% around. so casting alone would be around?

Bharat Madan — Whole Time Director and Chief Financial Officer

Almost 40%, — 35% – 40%.

Ayush Agarwal — Molecule Ventures — Analyst

30% to 40%. And over this past also this current — in FY23, how was — how high the prices [Indecipherable].

Bharat Madan — Whole Time Director and Chief Financial Officer

FY23, as you all know. I think on the geopolitical issue happened so, in the March-April, we saw a very steep increase in the commodity prices, in a single quarter, we had seen almost 4% to 5% the increase happened in this material cost for us. And only the prices coming — started coming down from Q3 onwards, very marginally and it only happened in sheet metal likely first and casting, the price cut has only happened now. Some of the dip we saw in Q4 and then naturally something will happen in this quarter too. But it’s not a major changes has happened in the casting, so that’s why you are not seeing major impact coming on the commodity savings in the tractor industry.

Ayush Agarwal — Molecule Ventures — Analyst

Right. And sir, castings we have more than three suppliers or are they consolidated?

Bharat Madan — Whole Time Director and Chief Financial Officer

No, there are multiple suppliers for casting and many suppliers.

Ayush Agarwal — Molecule Ventures — Analyst

Multiple.

Bharat Madan — Whole Time Director and Chief Financial Officer

Yeah.

Ayush Agarwal — Molecule Ventures — Analyst

Okay. Thank you.

Operator

We have a follow-up question from the line of Devika Jain from Ratnabali Investments. Please go ahead.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Thank you for taking my questions again. So I wanted to understand how and [Indecipherable] will be deploy the cash balance and where exactly [Indecipherable].

Harish Lalchandani — Chief Officer Agri Machinery Business Division

So Devika, you can refer to a midterm business plan. We given a capital allocation strategy there. How the money will get utilized is obviously there are capex plan by the Company. There are certain money which we got from Kubota, is meant for using the business only, it is not meant for distribution. So that is the purpose of that money, which is being raised. So we had given the indication how much will get spent on capex and how the greenfield project has to cover, would it be additional capacity get created and then within the existing facility, lot of changes are happening and [Indecipherable] is happening there and the product development, which is another major spend [Indecipherable] on the multiple product which will get introduced both for domestic market as well as for export market. So net-net we given the overall indication, but the capital allocation strategy, the company will deploy including in [Indecipherable] distribution, the payout ratio, the buyback, so everything. I think is spelled out there.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

I basically wanted to understand when will we start seeing some movement?

Bharat Madan — Whole Time Director and Chief Financial Officer

As it will happen gradually. You can expect to happen overnight. So obviously, as you see the improvement happening the performance also in the numbers, start looking up. So these things will also start getting better. So you’ve seen the dividend itself, this year, we have maintained the same ratio as last year. Because in the payout actually has gone up compared to what we had last year. So idea is to basically move-up to the level what we had indicated in the mid-term business plan.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Okay, and if we have any inorganic opportunities are they exploring.

Bharat Madan — Whole Time Director and Chief Financial Officer

So if somebody comes to us definitely will look at that.

Devika Jain — Ratnabali Investment Pvt Ltd — Analyst

Okay. Thank you so much.

Operator

Thank you. Ladies and gentlemen due to time constraint that was the last question for today. I would now like to hand the conference over to Mr. Bharat Madan for closing comments. Over to you sir.

Bharat Madan — Whole Time Director and Chief Financial Officer

Thank you, ladies and gentlemen for being present on this call for any feedback and/or queries, please feel free to write into us at investorrelations@escortskubota.com. Thank you very much. and gave a good evening.

Operator

[Operator Closing Remarks]