VST TILLERS TRACTORS LTD (NSE: VSTT) Q2 2025 Earnings Call dated Nov. 04, 2024
Corporate Participants:
Nitin Agrawal — Chief Financial Officer
Antony Cherukara — Chief Executive Officer Officer
V.T. Ravindra — Managing Director
Analysts:
Ashish — Analyst
Unidentified Participant
Romil Jain — Analyst
Arjun Khana — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to our VST Tractors Q2 FY’25 Post Results Conference Call. From the management side, we have with us today Mr. V.T. Ravindra, Managing Director; Mr. Antony Cherukara, Chief Executive Officer; and Mr. Nitin Agrawal, Chief Financial Officer.
At this point, all participant lines will be in the listen-only mode and there will be an opportunity to ask questions after the management presentation and opening remarks. Over to you, sir.
Nitin Agrawal — Chief Financial Officer
Good afternoon, everyone. My name is Nitin Agrawal, I’m Chief Financial Officer. I will start the discussion with a brief presentation and then open up for the question-and-answer session. This is the safe harbor statement. In terms of content for today’s discussion, we’ll be covering first the sales volume for this quarter and financial results for the quarter, then I’ll also give you a view on H1 sales volumes and how the H1 results have been and then update on the October monthly number. The first slide is about sales volume for SFM, which is smart for machining division, which is basically tillers as well as factors.
So in terms of power tillers, in Q2 financial year we have — we have sold INR11,236 tillers, which was INR10,729 in the same quarter last year. So there is a growth of 5%. Our tractor industry, we have sold 1,306 tractors this quarter. Power weeders segment is giving a good growth, I would say, 1,779 power weeders we have sold in this quarter compared to INR1,337 in last quarter, also INR598 of rippers.
The next slide is the P&L for quarter two. So in current quarter, we have revenue of INR283 crores, which was INR278 crores in the same quarter last year at EBITDA of INR64.55 crores. As a percentage, EBITDA is 20.81%. But in the EBITDA number, there is a major portion of other income also. So for operational tracking and operational performance perspective, what we track is operational EBITDA, which is calculated by excluding the other income completely. So at an operational EBITDA level, we are 13.33%. Profit before tax for the quarter is INR57 crores, which is as a percentage to sales is 18.5%.
Moving on to the H1 volumes so for the power weeder segment for current half year we have sold 17,000 units as against 19,800 unit in the last half year tractors are around 2,600 tractors, power weeder 3,490 compared to 2,200 in the last quarter also 632 numbers of ripper. The next slide is about profit and loss statement for half year. So for half year for this current H1 the revenue from operation is around INR474 crore and EBITDA of INR99.25 crores which translates into 19% of EBITDA. At an operational EBITDA level we are INR51 crores rupees and in terms of percentage it is 10.8% PBT is INR85 crore for the quarter, which translates into as a percentage 16%. October number should be encouraging for both power tiller as well as tractors.
In the month of October, we have sold 1,583 tractors as against 1,200 in October ’23. Similarly for the tractors, we have sold in the month 680 tractors which in October ’23 it was 289. So this is the brief overview presentation. Now I — we open the floor for question-and-answer.
Questions and Answers:
Operator
Thank you, sir. We will now begin the question-and-answer session. [Operator Instructions] We will wait for a moment as the question assembles. The first question is from Mr. Ashish. Please unmute and ask your question. Mr. Ashish?
Ashish
Yeah, can you hear me?
Nitin Agrawal
Hi, Ashish.
Ashish
Yeah. Thank you for this. So sir, if you could kind of update us on the several initiatives that we’ve been taking over the last three, three years on the tractor side and there is certain guidance on the path to achieving a certain growth that you had given for the next two, three years. So where are we the softer aspects of it on the market development and acceptance of these tractors and how you have fed till now the picture like going ahead?
Antony Cherukara
Yeah, good afternoon, Ashish. This is Anthony. Happy to share the details. So in tractor specifically, we had taken two to three initiatives. The number one being our entry into higher horsepower tractors with VST Zetor JV, where we launched the products in May of this year, May 2024, very happy to state that the scale-up is happening and it is going as per plan.
This year, I had indicated we should be doing around 1,000 numbers. We should be around that number by the end of March this financial year. The second big project that we are undertaken is consolidating our presence in Europe through the launch of new products in tractors. That is also going as per plan and we are further launching products in — in the coming week IMA, Italy, where we are launching Stage 5 30 HP tractor for the first time in Europe and which will be very soon followed by 35HP project.
These were two projects that we had planned for this financial year for Europe and that is being launched as per plan. And this should give us the volume plan growth in Europe by the end of March of this financial year. The third project was the long-term plan, which we had announced in terms of entering into the U.S. market for tractors. That is going as per plan. The company has already been registered as already informed to you, for product development, which is a completely new platform, wherein we are launching six variants and almost — sorry, six models and almost 16 variants, which we’ll be launching in the next two to three years, all in the compact tractor space.
This should give us the volume growth and the plan of achieving the aspirational financial figures that we had announced. So all the plans are as per plan. Execution and monetization is happening with full server and that is a brief. And just one more addition I would like to make that we have made our entry into the Northern markets. This is something in terms of the new markets that we are entering. So in the Northern markets, very happy to say that in the first half of this year, we have been able to appoint 56 dealers and the majority of the sale of VST Zetor as per plan is happening as per the seeding plan and progress is happening in the northern markets.
Ashish
Okay. Good to hear that, sir. So since the distribution recruitment for the products and there’s been — I mean, we’ve spoken, I think last year, we’ve spoken on the calls. So what is the expectation? I mean, given the numbers that you had shared on the number of dealers and stuff, even if one were to do certain basic calculations, the numbers that would be required for sales would be much higher than probably the 1,000 numbers that we are achieving this year. So anything to suggest the path of how this is going, given you have the feelers now of how the acceptance by the customers or the farmers is happening. So some qualitative aspects would help us to appraise the progress more so that if you could share on that, it will be helpful.
Antony Cherukara
Yeah. So like I said, we unveiled the tractor in the last financial year. So we took a lot of feedback from farmers giving them a few tractors for usage in various markets to test and kind of finish the tractor based on the customer requirements. So based on which we launched the product in May of this year. And since then we are in the process of ramping up volumes. We started with very little production, 10 numbers in the first month, second month we increased to 15, 20 then. So we wanted to take it step-by-step because as you know, it’s a very competitive segment and we intended to ensure that every single customer of us is satisfied.
And very happy to say that the performance of the product has been absolutely splendid and the feedback that we are getting is tremendous. We are having — having repeat purchases, one or two issues that we had in terms of the product has been rectified during the seeding phase. So that kind of gives us the confidence to now ramp up production and increase the number of dealerships that we will be serving.
So right now, we are at 56 dealers which are doing VST Zetor in the North. By the end of this year, we want to consolidate that at about 75, 80 numbers. We will consolidate that figures, ensure that these dealers are able to perform with a certain unique number of volumes so that they are profitable.
And hence from then on, we will then scale up in the next financial year. So the plan is build, consolidate, and then build again. So that is the approach that we are taking. And I hope that clarifies your question.
Ashish
Yeah. So sir, I mean, given the competitive nature of this industry, I mean, how would you put our right to win the customer versus what already is. So how does that work because I just wanted to understand that.
Antony Cherukara
See, I will tell you very plainly that in terms of product differentiation, we are focusing on a rough, tough and reliable product, point number one. Point number two is we are looking at how the customer can benefit in terms of productivity. But having said that, what we know very clearly in the market that there is very little that differentiates one-product from the other. So that is where the importance of the dealership and the network comes in where we believe that a profitable dealership will be able to service and value the customer much more.
And hence we said that we will not push inventory to the dealers, we will ensure the dealer’s profitability. Hence, we are saying that we will build, consolidate build. So we believe that the dealers win is what can be converted to the brand or the product win in the marketplace, because as you and in the industry knows, product differentiation is very little in the segment.
Ashish
Right, sir, at what numbers a dealer becomes profitable with your product?
Antony Cherukara
At around 30 to 40 units.
Ashish
Okay. Okay. And as of now, across India, how much numbers would it be? I mean you said north is around 56.
Antony Cherukara
Yeah, 56 dealers to 60 dealers is what we have now. And we are consolidating now and getting them to four to five units per month so that they can get to about 40 to 50 numbers per annum. So that is a work going on. And after that, we will build further.
Ashish
Got it, got it. Got it. And sir, lastly, on the numbers that we’ve shared, some targets of around INR3,000 crores in maybe FY’27. So that’s still a long way to go till then. So we are at about INR1,000 crores. So you see that with all these three engines that we have started on the tractor side, but still looks somewhere.
Antony Cherukara
Tractor is only one piece of that big strategy. So one is tractors. Second, I have spoken about the small farm machines, how we are growing those small farm machines. The launch of the products are yet to happen in the small farm machines. You will find some disruptive products coming from the small farm machine segment in the coming quarters.
I had spoken about it earlier. It’s too early to give the specifics of it, but I think we will see that happening in the next coming two quarters.
Ashish
Okay. Okay. So what’s — so as I asked that those numbers that you target that still remains across is it?
Antony Cherukara
Absolutely. See, we lost two years. We lost two years to COVID. I was — the effort of the company has been to ensure that we don’t give further two years, try and do it in FY’26, that is one year. But then you know, we currently have like in the last quarter, I shared with you that we have a visibility of around INR2,000 crores. That looks very much there. So to get to that 3,000 number, it looks like we will have to move to FY’27.
But definitely that milestone is not something we’ll give up on and we will definitely chase it down.
Ashish
Okay. Okay, sir. All the best. Thank you so much.
Antony Cherukara
Thank you.
Operator
Thanks, Ashish. Next in the line is Mr. Mr. Shreyas. Please unmute and ask your question.
Unidentified Participant
I just want to understand why has your receivables increased to 70 days and payables reduced like what are you doing with your working capital?
Antony Cherukara
Let me explain that. Okay. So payables — I mean, so receivables have gone up purely because of the government orders we have received and the supply which is in process. So I would say that by the end of Q3, it would normalize and come back to the normal levels of around 45 days to 50 days of receivables. Payables is purely a function of when the payment is due, especially we are focused on clearing MSMEs on time and it has got nothing to do with a particular management strategy to control payables or shorten the cycle of payables.
Unidentified Participant
Okay, got it. And can you share a few bookkeeping questions. Can you share volume of our tractors in Q2 and October?
Antony Cherukara
See, we don’t share specific tractor volumes of Zetor, but what I can tell you it is going as per plan. But eventually once we discuss with our JV partner, in the next financial year, probably we’ll start sharing the numbers on separately.
Unidentified Participant
Okay. And revenue breakup of between tractors, SFM, distribution.
Antony Cherukara
For Q2 or H1?
Unidentified Participant
For Q2.
Antony Cherukara
Yeah, Q2, the SFM is at INR185 crores. Tractor is at INR74 crores. Distribution is at INR26 crores.
Unidentified Participant
And can you give over the same for H1 as well?
Antony Cherukara
H1 we don’t have that right now.
V.T. Ravindra
Maybe you can you can reach out to us on the email we’ll share you maybe those videos.
Unidentified Participant
And one last question. We have gotten a short-term debt for INR7 crores. So while that’s from our interest.
Antony Cherukara
Yeah, better capital management, better working capital management, we have looked at see how to use some debt when it is usable instead of looking at you know kind of taking funds from our treasury.
Unidentified Participant
Got it. Great. Thank you so much, sir. And just one question, can you share like what is the — okay, power tiller is you are saying that new launches will lead to the growth and current product is just leading to stagnant growth for the past two, three years. So all the growth will come from new products. That’s correct, right?
Antony Cherukara
Not really. There is expansion of market also happening only. If you see two years back, we were at 38,000. Last year, there was a drop 36,000, but before we did 38,000, we were at about 32,000. So last year was an abnormal year with the monsoon playing, kind of problems with the farming segment itself and we saw industry dropping all across. But I strongly believe that this year with the rainfall monsoon and the spatial and timely distribution of the rainfall, it is all looking favorable and I expect a strong growth this year in the power tiller business because H2 of last year was abysmally low and this year you will find that completely the opposite.
Unidentified Participant
Okay, got it. Thank you, sir.
Operator
Thanks, Shreyas. [Operator Instructions] Next question is from Romil Jain. Please unmute and ask your question. Mr. Romail Jain. You have unmuted, you can ask your question. Hello? He’s not able to answer. Ask the question, sir.
Antony Cherukara
You can even type in the chatbox.
Operator
I’ll go to the next guy — I’ll go to the next guy.
Antony Cherukara
Got connected, okay.
Operator
No, no, sir. I will go to the next person.
Antony Cherukara
Okay, okay.
Operator
Next we will — Mr. Saket Kapoor, you can unmute and ask your question.
Unidentified Participant
Greeting to the team, sir. Sir, when we look at your presentation part, as you yourself alluded to the fact that the H2 was very, very big for powertillers last year. So what are our expectation for the current year? I missed your comment on the same. Since H1, we are tagging by 13% in the Power Tiller segment, what should be the expected number?
Antony Cherukara
So this year, like I have said in last-time we spoke, Saket ji, we are looking at a 20% minimum growth in the small far machine space.
Unidentified Participant
And sir, when we say small pump you are including all the three power tiller, power and ripper all combined.
Antony Cherukara
Correct, correct.
Unidentified Participant
Okay, because —
Antony Cherukara
So the power weeder segment will grow more rapidly. Power reaper is a seasonal business. It will grow, especially in the Q3, Q4 space and power tiller growth will be seen more in second half of this year because Q1 was down. Q2 has picked up and we see from the October trends that Q3 is going to be pretty big.
Unidentified Participant
And just if you could give the reasons why power weeder have outperformed also on a base of 2,000 — the numbers are 3,500 for H1. So what are the factors that has led to this increase and what should be — what are we eyeing in terms of the number of units and also the top line breakup if you could provide us for the small farm equipment breakup between power tiler, reaper and power weeder.
Antony Cherukara
Saket ji, we will not be able to give you a breakup in this particular reason is symbol that it is very strategic to us. What I can tell you is power weeder typically sells a unit up to about, let’s say, 60,000 units — INR60,000 okay to a unit, roughly power weeder. And the reason why it has been growing is the base is large. Like I’ve said before, we have been late entrance to this segment. We are growing rapidly in this segment. This year, we should be upwards of 8,000 numbers this year within just two years.
And we expect in the next another two years, we should be three times that volume, minimum. The good news I can share with you, which I had announced earlier also, we will be manufacturing power weeders in India. With the scale up of volumes that has happened, we are rolling out the first power weeders this month onwards.
Unidentified Participant
Okay. And sir, which category of crop are we addressing through these power weeders?
Antony Cherukara
More than category of crop, it is the farmer segment, which is less than two acres of the farm.
Unidentified Participant
Okay. Yes, that is —
Antony Cherukara
Small marginal farmer, yes.
Unidentified Participant
[Technical Issues] Okay, sir. And sir, about our — if you could give the splitter between the spare business, what we have done and also we were also inclined to do some trading business with pumps, electric pumps. So where are we in terms of the inroads we have covered?
Antony Cherukara
Yeah. So we should be — last year, we had INR10 crores of business in electric pumps. This year we are growing that business.
Now the interesting part about electric pump business is when the rainfall is extremely good, the pump is rarely used. So you will find a bit of a slowdown in the electric pump industry as a whole, especially for the agri segment. The domestic segment is very different, but in the agri segment, you will find that the pump usage reduces and hence the sale reduces. But we expect the growth because our base is very small. Last year, we had done INR10 crores, we should be able to do upwards of INR15 crores this year, that is what we are looking at.
And we are operating in only six states at the moment and we will consolidate that as we move forward. And the distribution business also is expected to grow at about 20% this year. Last year, we added about — we had done about INR100 crores of distribution business.
Unidentified Participant
This — assuming the spare part, the spare business.
Antony Cherukara
Spare parts oil.
Unidentified Participant
Okay. And sir, about our — I think the precision unit at Mysuru, how — what is the contribution there from that?
Antony Cherukara
Yeah. So I had spoken earlier about the precision distribution business, looking at the China Plus One opportunity, very happy to share that we have garnered a few customers in the railway segment. Also precision components supply to metro rail kind of projects. Also precision components supplies to few engine manufacturers. So we can see good growth, but I wouldn’t want to share the numbers at this moment until we scale up and — but I think it is working out to our strategy.
Unidentified Participant
So sir, a ballpark number of what we did H1 at INR474 crore, what should be the contribution from the precision part in terms of I think so the alignment —
Antony Cherukara
Precision — precision component division has both businesses, which is internal supplies to VTTL and also the external business.
Currently, the external business is very small. That is why it is too early for us to give out any numbers. But as we grow, I will definitely share with you, probably end of this financial year, I will start sharing the numbers.
Unidentified Participant
Okay. So as two small points. Last year, as you mentioned, H2 was a small quarter. I mean, it was very bleak last year H2. So this year we are starting on a very low base. So what should we anticipate in terms of H2 in terms of the revenue profile and also, sir, for the treasury book, what steps are we taking to further invest money in our business and lower our treasury component?
Antony Cherukara
Yeah. So two parts to the question. One is you are asking how would be the outlook of Q2 — sorry, Q3 and Q4, which is H2. I think H2 should be like given the good monsoon, given the good situation in terms of water availability and the crops, I think H2 should be pretty big this time. And interestingly, last year, the H1 was pretty big and H2 was very bad. This year, I would say H1 was kind of flattish except for the Q1 drop that we had about INR30 crore, INR40 crores.
But if you see Q2, we have caught up and in fact, we’ve got a slight growth and in Q3 and Q4, we should be able to grow at the rates we always wanted to grow at about 20% to 30% kind of growth we should be able to achieve.
Unidentified Participant
Okay. And last is on the margin part. I think so earlier you did alluded to the fact that in order to grow the business, we will be sacrificing margins, pressing more needs on marketing and on the R&D part to develop more products and be more relevant in the market. So where are we in that journey, sir?
Antony Cherukara
Absolutely. Thank you for that question. A very important question that you have asked in terms of the long-term perspective. See, the margins have been maintained, as I had said at 13.33% on an operational level. And I had said we will always be on the higher side of 11% to 13%, we’ll be closer to 13%. So that is where we are. And of course, the money that is being spent is on product development. We have cruised up our R&D further and we have enhanced the number of people working in our R&D.
Today, we are 80, 90 strong R&D personnel. We are working on multiple platforms, including our entry into the U.S. market, developing platforms of various kinds of engines. We are talking about developing disruptive products in small farm machine segment. And in the next two to three years, you will continuously hear from us about the launch of products in various segments and various markets.
So extremely important step that we have taken in terms of investing our money, which is the money that the company has managed to accrue in terms of organic growth. And in terms of using our treasury money, we will — we are also looking at good opportunities that may come up in the inorganic growth opportunity as well.
Unidentified Participant
But there is nothing in the annual sir, which we are working on currently.
Antony Cherukara
We have a couple of things are on the annual, but nothing to announce at this moment in time.
Unidentified Participant
Thank you. And lastly, sir, what investors have always been looking for the land value, when can we expect that unlocking, sir? Do I do for — do we find a case currently for that to be realized or we can continue to hold on and ride on the same?
Antony Cherukara
See — see, we won’t — we won’t — like I’ve shared this before, we will not sell the land just for selling the land purpose. What we are looking at is the appropriate opportunity for which we will need to generate cash. At that opportune time, we will look at the best resource of raising funds. If that opportunity — the better option if it is to sell the land at that point, we will look at selling the land.
Otherwise, we will monetize that. So we have not — the Board has not taken a decision on that yet. So I think there is nothing to announce at this point in time.
Unidentified Participant
Correct, sir. And sir, this time in your opening commentary, you — I missed your point about how is our raw material basket behaving. I think so the prices for some of the engineered products, especially for the steel prices have gone up. So how well are our margins protected or if you could give us some color what is the RM basket currently shaped up?
Antony Cherukara
Yeah. So the RM has not been influenced by commodity pricing in Q2, but it is more to do with our product mix. As our higher horsepower, our volumes are growing and especially when it is a new product, there is a bit of a margin pressure when the product is new for a few months before it normalizes. And hence, the material cost is looking up at a percentage or so at the company level other than that there has not been any commodity pressure to say in Q2. But looking forward to Q3, it is hard to predict, but all around the demand doesn’t seem to be growing and hence, I don’t see any commodity pressure in terms of pricing or the cost to go up in Q3 as well.
That is what everybody says, but you guys should know more than me as you’re talking to many, right.
Unidentified Participant
But sir, can you provide the mix, then it will help us out better. What are the key components of RM?
Antony Cherukara
Yeah. So steel, you have your castings, your forgings, your sheet metal, your rubber, these are the larger items and in steel you have cold rolled, hot rolled, CRHR, sir. So the prices there have moved up. Slightly in Q2, quarterly settlement, it hasn’t played much of a role. That’s what I was trying to tell you.
Unidentified Participant
And lastly, sir, I joined the queue. For the pump parts, sir, where are we sourcing those pump and what is the range hot pump?
Antony Cherukara
So we are launched — we are sourcing up to 10 horsepower, both the domestic centrifugal and borewell. We are sourcing mostly from and Ahmadabad.
Unidentified Participant
Okay. So any branded concern or we are develop — we are co developing only for us?
Antony Cherukara
They are not really branded players, but what I can tell you is they are supplying to various brands.
Unidentified Participant
Right, sir. All the best, sir.
Antony Cherukara
Thank you.
Unidentified Participant
Thank you.
Operator
Next is a follow up question from Mr. Shreyas. Please unmute and ask your question.
Romil Jain
Yeah. Hello. Good evening, sir. This is Romil Jain here. Unfortunately, I think there was some disconnection. Can you hear me now?
Antony Cherukara
Yes, yes.
Romil Jain
Sorry. So, sir, first question from my side is just to understand October month, we have seen a very sharp recovery in the volumes, right, on the tractor and tiller side. So just want to understand whether it is more related to our distribution network and the acceptance of the products and all or it is more prevalent in the industry because industry also has picked up well. So little sense on that.
Antony Cherukara
Yeah. So definitely, the industry growth has helped. I wouldn’t deny that but the effect is also so pronounced for us because we have been working consistently on growing the network, growing the number of products that we have in the offering and also our entry into the new horsepower, higher horsepower segment. So as I said, as we increase the number of high horsepower production and ramp-up, you will see the sales figures growing for us. So that is one segment that we have never been present seriously, which we are now and you will see as we ramp up the volume, sales volume also increasing.
Romil Jain
Okay. And sir, so far this year, I think on the volume side, now we are much more flattish in terms of tillers and tractors. I think tillers would be down by 8%, 9%. But so what kind of growth do we see for the whole year in both of these sorts?
Antony Cherukara
So tiller, we would expect — I would expect at least 20% plus growth by the end of the year.
Romil Jain
For the full year?
Antony Cherukara
Yeah. And tractors, I think we should do much, much better growth than because considerably low base we have from last year.
Romil Jain
Okay. This is excluding the Zetor, just wanted to understand.
Antony Cherukara
It will be including Zetor, because see larger hospital segment will play a larger role in terms of increasing our volume because as we can see in Q1 and Q2, if you see the less than 30 HP segment, it has not grown across the industry.
Romil Jain
So this number that we have given also includes Zetor, right.
Antony Cherukara
Yeah, yes, whatever we have given includes Zetor but in Q1 and Q2, the volumes are low, look comparatively.
Romil Jain
Okay. Just on the tiller side, I think we are expecting very strong growth also. Market share earlier was about 65%, 70%. Is it going to remain so or maybe increase from here or you are seeing competitive intensity increasing in tillers as well as the overall SFM space, the weeders and everything?
Antony Cherukara
Definitely more and more players are entering that segment. But we don’t see too much of an effect in the power tiller space, but you can see larger competition in the power weeder segment. But what we feel is the market share is not the key here because we — once you’re at 70%, what we are looking at is how do you gain more volumes, how do you create the industry and that is what we are doing. So that is why we are saying Q3, Q4 should be much higher than last year and hence, we will end up at around 20% growth.
Romil Jain
Okay. How much would be the penetration of finance in this tiller product?
Antony Cherukara
And penetration overall currently is upwards of 4%, 5%, which were zero two years back or rather one year back.
Romil Jain
Okay. So that is also helping the growth of the tillers.
Antony Cherukara
Yes, definitely in submarkets, it is definitely helping in — I have seen dealers who are doing retail finance up to 30% of their volumes now, which was never the case earlier.
Romil Jain
Okay. Okay. And the reliance on subsidy, as you have earlier also alluded to is no longer very important element.
Antony Cherukara
See, the subsidy will always play a role. Like I have said, I don’t deny that subsidy will not play a role. What I have said always is subsidy becoming the key factor for decision making to buy power tiller will not play a role. Because see, if it is like this, if some government declares a subsidy, every farmer wants it.
Romil Jain
Correct.
Antony Cherukara
Right. But that doesn’t — earlier what was happening was only when subsidy was declared people would come to buy. Now that has changed completely.
Romil Jain
Okay.
Antony Cherukara
With DBT happening.
Romil Jain
Okay. Just one macro question understand your growth trajectory over the next two, three years and reach the targets that we have given. So broadly, I think we have four segments, tractors, tillers, SFM, and the distribution part of the business.
Antony Cherukara
So this part of SFM — tillers. So we have three segments tractors, SFM and distribution.
Romil Jain
And distribution — just can you just give us a sense of the growth trajectory in each of them, where do we see over the next two years, three years, which one should grow faster and some sense. And how much would these segments contribute in terms of overall top line?
Antony Cherukara
Yeah. So I’ve said this before also. These are very different and very unique industries. Tractor serves a segment of customers which are more affluent, who can afford INR5 lakhs to INR10 lakhs, INR12 lakhs of investment, whereas the Tiller segment is a marginal farmer who is less than two acres of land or 1. 1.5 who can definitely not afford a tractor. And distribution is all about getting closer to the customer irrespective of what segment you’re operating in. So these are very three distinct segments. The bases are different.
For example, the distribution base, it is at an INR100 crore base. The SFM base is at INR600 crores, INR700 crore base and the tractor is at around INR300 crore base. So you will find and necessarily the tractor will grow based on how you can expand more into the northern markets with the higher horsepower and the combat tractors in Europe and the U.S. market in the long-term. And, SFM, you will find growing based on, competing against non-consumption, that is making first time buyers or introducing people to mechanization for the first time.
So that is a very different way of working, very different way of converting the customer. And the third aspect is distribution, which I’ve already shared, the number of counters you opened and how close you are to the customer will ensure your growth. So there is no uniformity in this. So there is no particular percentage I can attribute to each one of them. But what I can tell you is all the three are getting significant importance. There is no particular segment that we will focus more or less.
Romil Jain
Okay. Okay. And lastly, sir, just exports is also a part of our strategy. So to reach the INR2,000 crore and then subsequently INR3,000 crore kind of top line, how much would the exports contribution be embedded in this?
Antony Cherukara
Absolutely. Thank you for that question. So two years back or three years back, we were at about 3% of international business. Last year, we closed at about 13% of international business. And we are going to take it to about 25% to 30% of our business. Okay, by in the next two years.
Romil Jain
Next two to three years, yes. Okay. And that would be largely at similar ROCE levels?
Antony Cherukara
Yeah, the ROCE should be good, the profitability is good because the pricing opportunity in the international market is better.
Romil Jain
Okay. Okay. Got it, sir. Thank you so much and wish you all the best and we’ll connect once again. Thanks.
Antony Cherukara
Thank you. Thank you.
Operator
Next in the line is Mr. Arjun Khana. Please unmute and ask your question.
Arjun Khana
Sir, the first question is in terms of the facility for power weeders, you mentioned we have started manufacturing. So this is the 6,000 unit facility that you are referring to, sir?
Antony Cherukara
Yeah. So we have the powertiller facility where we have installed capacity of about 72,000 tillers that we can do in a year, which we can take it up to 1 lakh powertillers. Using that same facility, we are looking to produce the power weeders as well.
So initially, it will be limited production. This year, we are looking at, let’s say, 100 to 200 units from the plant per month, very little numbers but in the next two to three years, we expect the plan to do at least 1,000 to 2,000 weeders per month.
Arjun Khana
Sure. So effectively — so power tillers, we used to understand it was 60,000 units. Effectively you’re saying through debottlenecking, it’s 72 and with further debottlenecking, you think that can be 1 lakh units, which is fungible between power weeders?
Antony Cherukara
The third is 1 lakh will go through an extra shift. 72 through debottlenecking and 1 lakh through a third shift.
Arjun Khana
Right, sir. Right, sir. This is helpful. Sir, if we talk about — we also talked about earlier that potentially signing a JV with the Japanese blade manufacturers Kobashi. Is there any update on that on the same, sir?
Antony Cherukara
Yeah. So what they can tell you is that project is on hold right now. It has not dropped, but because the JV partner Kobashi is taking more time in terms of moving certain technologies in certain products, which we wanted in the JV. That decision is not yet made. And unless those products are moved to India, we don’t believe that we have a real scale-up model with blades alone and hence that project is on hold.
Arjun Khana
Sure. Helpful. Yeah, sir, just on the Zetor joint venture. Could you help us understand in terms of the international bit, so while you talk about the domestic bit where you see us reach maybe 1,000 units for this year and maybe 1%, 2% of the market over the next couple of years. What is the international agreement with them? Are we allowed to export the production that we make in India?
Antony Cherukara
Yes. Yes, we are allowed to export. So we are allowed to export to the VST channel as VST brand or rather VST Field track that is a brand we use abroad and as Zetor brand through the Zetor channel. So the VST Zetor joint brand will be only for India.
Arjun Khana
Okay, sure. This is very helpful. Sir, my final question is just in terms of a growth for this year. So while we are forecasting a very strong second half. Is it related to release of some subsidy or is it just the market growing? What are the key drivers for this very strong forecast for second half of FY’25?
Antony Cherukara
Yeah. So subsidy, I don’t think will increase. I mean, last year also it has not increased year before also it was almost the same. Last year what really happened was that demand went down because the rainfall affected agriculture as a whole. So it was nothing to do with subsidy. Again, this year, I don’t see the subsidy amounts increasing. So subsidy playing a role in terms of growth is very minimal now. But having said that, like I said to the earlier person who is raising the same question, if a subsidy is announced, there is no farmer who says, no, I don’t want it. Everybody wants it.
But the question — the real reason that remains is that the purchase decision of buying a machine is no more dependent on subsidy. So subsidy really doesn’t play a role in terms of increasing or decreasing demand per se. Number one. Number two, why second half will be buoyant is because of the same fact that I told you that acreage has gone up, up, monsoon has been great, reservoir is a full, minimum support prices are better.
So in every sense of the word, it looks positive. And that is seen in October and we hope that same sentiment continues through to November and December.
Arjun Khana
Sure. Thank you and wishing you all the best, sir.
Antony Cherukara
Yeah.
Operator
Thanks, Arjun. Next in the queue will be Mr. Adam please unmute and ask your question.
Unidentified Participant
As you spoke on the demand front and think how things are playing out with the new product launches and all. So everything as per the new product, the demand is the response has been so far good as per expectations, the monsoon is coming in our favor. So what one thing is which according to you would be worrying or you’d be seeing any one thing which should be of other or a cause of a concern may be which you are looking at.
Antony Cherukara
So the one concern that I have is on the bottom line. So while I’m saying to the earlier caller that the commodity prices shouldn’t come under pressure in the coming quarter, which doesn’t look like because demand is slowed down almost across markets. I hope that doesn’t reverse itself and the commodity prices shoot up because of an extended war or the Gulf War or whatever reason. I hope that doesn’t happen. The second aspect that I would say is, which is not a worry, I would say, but I would put it as a challenge in front of us to accelerate our execution. So that is something that keeps us up all night and every day. So we have to accelerate our executions. Our projects are all in monetization phase.
We have to control — consolidate the dealerships that we are opening in the northern markets. We have to consolidate the products that we are launching in the European markets. We have to accelerate on the product development for the American markets. So this is something of a challenge, I would say, or rather which enthuses us to come to work every day.
Unidentified Participant
Got it. Yeah. Thanks a lot and wish you the best.
Antony Cherukara
Thank you.
Operator
Thank you. Next in the line will be Mr. Siddharth. Please unmute and ask your question.
Antony Cherukara
Yeah.
Unidentified Participant
Yes. Sir, could you give us the bifurcations of revenue for tillers, tractors, and spare parts. Sorry if I missed it out earlier.
Antony Cherukara
Yeah. Just for information, I will definitely give you the revenues, but just for information, it is all uploaded on our website as well, just in case anybody wants to take a look at it later on as well. While I’ll just give you the H1 revenue figures as well, somebody had asked for H1 and after that, I will give you Q2. So H1 tractors is at INR130 crores. Small farm machines are at INR274 crores. Parts is at INR53 crores and then others is about INR17 crore, INR18 crores.
Unidentified Participant
Okay, sir. And Q2, can you just put it up here. Just a second.
Antony Cherukara
Q2 small farm machines is at INR185 crores tractors is at INR74 crores distribution at INR26 crores and others at INR4 crores.
Unidentified Participant
Okay, sir. And just one more thing. On the particularly, I mean any sort of discounting or something you’re seeing or it’s at the same realization levels what we saw earlier.
Antony Cherukara
No discounting.
Unidentified Participant
Okay.
Antony Cherukara
No discounting. I mean, are you asking that we will push volumes through discounting? The answer is no.
Unidentified Participant
Okay. Okay. So there is enough demand, so that can be absorbed without any sort of —
Antony Cherukara
The issue in tillers is not pricing or what clearly is like I said, creating first time buyers, it’s industry creation. So we are taking these machines to first time mechanization users.
Unidentified Participant
Okay. Got it, sir.
Antony Cherukara
Yeah.
Unidentified Participant
Okay, sir. Thank you.
V.T. Ravindra
We can take the last question.
Operator
On due to lack of time that was the last question and do you want to make any closing comments, sir?
Antony Cherukara
Yeah. So thank you so much and I wish all of you a very happy Diwali. I should have done this in the beginning. Happy Diwali seasons, greetings to everyone of you. Thanks to have taken the call and look forward to being in touch in the next quarter as well. Thank you.
Operator
Thanks. On behalf of B&K Securities, we thank all the participants who joining the call and thanks to the management for taking time out for the call. Have a good day.