VST TILLERS TRACTORS LTD (NSE: VSTT) Q3 FY23 Earnings Concall dated Feb. 13, 2023
Corporate Participants:
Pankaj Khemka — Chief Financial Officer
Antony Cherukara — Chief Executive Officer
Analysts:
Annamalai Jayaraj — Batlivala & Karani Securities India Private Limited — Analyst
Anshul Mittal — Care Portfolio Managers — Analyst
Saket Kapoor — Kapoor and Company — Analyst
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Devanshu Sampat — Yes Securities — Analyst
Shreyans Gathani — SG Securities — Analyst
Dhruv Gilada — — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to the 3Q FY ’23 Earnings Conference Call of VST Tillers Tractors Limited hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference call is being recorded.
I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Annamalai Jayaraj — Batlivala & Karani Securities India Private Limited — Analyst
Thanks, Rituja. Good afternoon to everyone. On behalf of B&K Securities, welcome to 3Q FY ’23 conference call of VST Tillers Tractors Limited. I also take this opportunity to welcome the senior management team of VST Tillers Tractors Limited. We have with us today Mr. V.T. Ravindra, Managing Director; [Technical Issues] Chief Executive Officer; and Mr. Pankaj Khemka, Chief Financial Officer.
I’ll now invite VST Tillers Tractors management for the opening remarks to be followed by question-and-answer session.Over to you, sir.
Pankaj Khemka — Chief Financial Officer
Yeah. Hello. Good afternoon, everyone. Myself Pankaj Khemka. To start with opening remarks, for the quarter ended quarter three ’22, the income from operations stands at INR213.69 crores against INR208.44 crores for the previous year same quarter. The EBITDA as a percentage stands at 14.56% against 16.62% previous year same quarter. PAT for the quarter is INR19.43 crores against INR21.05 crores previous year same quarter.
Now talking about the volumes for different businesses, power tiller registered a volume of 7,456 numbers for the quarter, tractor volumes were 1,537 numbers. And the turnover for different businesses are as follows: for the small farm mechanisation business, turnover for the quarter is INR121.58 crores; for the tractor business, we have done INR61.42 crores, and for the spares division, we have done INR22.8 crores.
So those are my opening remarks. We are open for subsequent questions.
Questions and Answers:
Operator
[Operator Instructions] The first question is from the line of Anshul Mittal from Care Portfolio Managers. Please go ahead.
Pankaj Khemka — Chief Financial Officer
Hello.
Anshul Mittal — Care Portfolio Managers — Analyst
Yeah, sir. Actually I wanted to — first question was mainly regarding the higher horsepower tractors. Sir, what is the current…
Operator
Sorry to interrupt, Anshul, but your voice is not that clear.
Anshul Mittal — Care Portfolio Managers — Analyst
Hello. Am I audible now?
Operator
Yes, please go ahead.
Anshul Mittal — Care Portfolio Managers — Analyst
Sir, so I wanted to ask my question regarding the higher horsepower tractor. Sir, what is the current contribution from higher horsepower tractor in terms of volume? And what is the average realization which we’re looking at? And also, sir, going forward, what is the target which we have — desired horsepower next year and in next couple of years?
Antony Cherukara — Chief Executive Officer
Yeah. This is Antony Cherukara, the CEO. Higher horsepower currently is at about 10% to 15% of our volume. However, as I stated before, we have not yet launched the VST Zetor range of products, which we expect to do towards the end of this quarter, which we are expecting our higher horsepower contribution for next financial year should be at around 30% of our total volumes. And going forward, the higher horsepower would be at least 30% to 40% of our business.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay, sir. And what will be the current realizations of higher horsepower average realization? And sir, and considering we have small exports or how much are we exporting in higher horsepower, what are current exports?
Antony Cherukara — Chief Executive Officer
Our current export in higher horsepower is zero. We are not exposing anything in higher horsepower. However, with longer four-wheel drive, we will be exporting in the coming years in higher horsepower as well. As far as average value realization for higher horsepower is concerned, it will be roughly about 5 lakhs per unit.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay, sir. Understood. Sir, as per my understanding, so once the utilization increases, so we are expecting operating leverage is supposed to kick in. So, sir, how much — so what do you think our margins going forward can be once we reach a decent utilization level? And do we have any plans to increase our advertisement spend or marketing spend going forward?
Antony Cherukara — Chief Executive Officer
See, as far as the margins are concerned, we will be in the range of 12% to 14%, which are maintained, which is a likely range, which we will look forward this financial year. However, considering the marketing spend going forward, there could be a slight downward revision on the range of margins in the coming one year.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay. And what is the — so I understand the sustainable margin is being 12% to 14%. So while the operating leverage is taken, do we — can we increase it further going forward once the marketing spend also reduces?
Antony Cherukara — Chief Executive Officer
Absolutely. We will be able to do that. But the key is, we are entering certain key northern markets wherein we were never present. So, for the next one to two years, we will be having higher marketing expense.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay, sir. So can you — okay, sir, no problem. Sir, also wanted to understand. So what is our current R&D cost, which we are doing? And what is the plan for future?
Antony Cherukara — Chief Executive Officer
See, current R&D capex investment is roughly to the tune of INR40 crores to INR50 crores. In the next couple of years, you will see that rising to almost INR100 crores per year.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay, sir. Understood. And sir, what is our royalty agreement with Zetor. So how much fixed royalty are we planning? What is the tenure of [Technical Issues].
Antony Cherukara — Chief Executive Officer
See, I’m not able to understand your question. The voice is blurred. I mean, it’s not clear.
Anshul Mittal — Care Portfolio Managers — Analyst
Am I audible now, sir?
Antony Cherukara — Chief Executive Officer
Yeah, better.
Anshul Mittal — Care Portfolio Managers — Analyst
Sir, what is our current royalty agreement with Zetor? And what is the tenure of our partnership with Zetor as well?
Antony Cherukara — Chief Executive Officer
There is no royalty agreement with Zetor. And it will be going forward a profit-sharing model. That is what we are planning with Zetor.
Pankaj Khemka — Chief Financial Officer
There is no timeline.
Antony Cherukara — Chief Executive Officer
And there is no timeline.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay, sir. So, okay, understood. And sir, one more question from my end. So, currently can you give me a breakup of distribution network geography-wise for the company?
Antony Cherukara — Chief Executive Officer
The distribution networks currently stands tractor at about 350 dealerships, mostly spread in the South, East and the West. North, we have only about 30-odd dealerships for tractors, which we will be expanding this quarter onwards with the coming launch of VST Zetor.
In the small farm materialisation space, we have 650 dealers, again, spread mostly in the West, South and East. In the North, we would have very less number of dealers for small farm materialisation to the tune of about 30, 40 numbers.
Anshul Mittal — Care Portfolio Managers — Analyst
Okay, sir. Understood. Okay, sir. Thank you. That’s it from my end.
Operator
Thank you. [Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor and Company. Please go ahead.
Saket Kapoor — Kapoor and Company — Analyst
[Foreign Speech]. Sir, if we compare our volume numbers for farm mechanization tractor on a Q-on-Q basis, how good is the comparison or whether the seasonality factor kicks in when we look at the quarter two volume versus the day [Phonetic] quarter three was. So if you could give us some color on what the current business environment is shaping up for our product profile, that would be very helpful.
Antony Cherukara — Chief Executive Officer
Yeah. So compared to the previous year quarter in Q3 of — just a second.
Saket Kapoor — Kapoor and Company — Analyst
Sir, I asked for comparison from Q-on-Q — quarter two versus quarter three firstly.
Antony Cherukara — Chief Executive Officer
Quarter two versus quarter three, just give me a minute, just we pull up the numbers.
Pankaj Khemka — Chief Financial Officer
Sir, I have the numbers — we did — tillers was 8,819 [Speech Overlap]
Antony Cherukara — Chief Executive Officer
8,626 the previous year. Quarter three number was 7,456 for tillers, 7,139 the previous year.
Saket Kapoor — Kapoor and Company — Analyst
Correct, sir. So I just wanted to understand the dip firstly And then if you could give first a broader color on how things are shaping up, the. I will come up with further questions.
Antony Cherukara — Chief Executive Officer
Yeah. So, the October, November, December Q3 volumes of tillers were not as per the seasonal demand that we expected because there was no expected cash flow that was happening in key states like Orissa, Tamil Nadu, Karnataka and Orissa. However, in the — towards the end of December and January, we saw that the season really picking up. So if you see our January numbers, the season has picked up very well. That is continuing into February and hopefully into March as well. So, sir, if I just [Technical Issues] concerned. The volume in Q2 was 1,688 against which we have done 1,53. Again, in the last three months, November, December, January, we have started posting growth over the previous year. We’re expecting that to continue. But that predominantly is coming from the new launches that we were waiting to happen. So, the compact tractor launch has happened. So you will see tractor business growing on a quarter-to-quarter basis from now on.
Saket Kapoor — Kapoor and Company — Analyst
Sir, you are commenting on the Zetor launch, sir, we articulated a November 4 launch.
Antony Cherukara — Chief Executive Officer
If you remember, I have spoken about compact tractor launches also. So, we have launched the two products that we are expecting to launch, one is the 929, which is the 28-horsepower which we were not present in that segment. So we have launched that in Maharashtra to begin with. And then, the 171 which we have launched, the 17 hp mainly in Gujarat. So these products are giving us the growth, and further growth is going to come from the launch of 936, which will be a 36 horsepower. There will also be launches from the VST without stable [Phonetic] in the coming Q4 end.
Saket Kapoor — Kapoor and Company — Analyst
Sir, November 4 launch was expected for Zetor at Chandigarh. So, what is the update on that? Did we launch it in that month?
Antony Cherukara — Chief Executive Officer
The VST Zetor product, we have unveiled the product, the launch has not yet happened. So we have unveiled the product. We have shown it — taken feedback from the market. So, some minor changes are going on, which we will launch in quarter four.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So what kind of volumes do we expect for January to March out of this new launch?
Antony Cherukara — Chief Executive Officer
This VST Zetor, there will be hardly any volumes in Q4 because we are likely to do it only in the March end, but we’re looking forward to 1,000-plus numbers in next financial year from VST Zetor.
Saket Kapoor — Kapoor and Company — Analyst
And sir, if I hear you correctly, sir, you guided for 12% to 13% margin. Is it the EBITDA margins, sir, earlier we were in the vicinity of 14.5% — of 14.5% to 16%. So, are we…
Antony Cherukara — Chief Executive Officer
I have given guidance on EBITDA margins of 12% to 14%, which we continue to do for this financial year. And next financial year, we will be slightly down, considering the planned marketing spends we are going to do.
Saket Kapoor — Kapoor and Company — Analyst
What is the absolute number on the marketing expense we have zeroed in for the next year? And what have been we have done for this year.?
Antony Cherukara — Chief Executive Officer
I will come back to you on that once the numbers are clearer to us, but there will be a downward of 1% to 2% roughly at this point in time.
Saket Kapoor — Kapoor and Company — Analyst
Sir, we were looking to close this year with a top line of INR1,000 crores. So, with the type of deferment, if I may, of sales for this quarter and you are speaking that — it is picking up for the month of January and also the tillers from February, so are we looking to close this year closer to INR1,000 crores top-line?
Antony Cherukara — Chief Executive Officer
Yes.
Saket Kapoor — Kapoor and Company — Analyst
Okay, but not reaching there?
Antony Cherukara — Chief Executive Officer
We hope to reach there.
Saket Kapoor — Kapoor and Company — Analyst
We hope to reach the INR1,000 crore top line this year. And the margin profile would be similar to what Q3 and nine-month average has been?
Antony Cherukara — Chief Executive Officer
It will be better. That is why I said I am continuing with the guidance of 12% to 14%.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So what was our margin for the third quarter, sir, EBITDA margin?
Antony Cherukara — Chief Executive Officer
Year-to-date was 10.58.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So we are looking an upward revision from 10.58 to — in the vicinity of 12.5, sir. This is what…
Antony Cherukara — Chief Executive Officer
Yes. Two reasons for that. One is the volume pickup. Second is the commodity price normalization that is happening now or the reduction of commodity prices that is happening now, which will accrue in Q4.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So we have also bought from some price revisions of our finished products also since the commodity price has cooled? Or what are the price changes we have taken, sir, for this quarter?
Antony Cherukara — Chief Executive Officer
We have taken price revision in December we have taken. In compact, we’ve taken 4,000, and in [Indecipherable] we have taken 9,000.
Saket Kapoor — Kapoor and Company — Analyst
Downward revision in both the…
Antony Cherukara — Chief Executive Officer
Yes, yes. So, in December, we have taken in tractor, and the similar pricing is more dependent on the government prices. The good news is that we have got price revision in few of the state governments like Orissa, Tamil Nadu and Karnataka.
Saket Kapoor — Kapoor and Company — Analyst
Okay. Sir, how it is a good news when we are revising prices lower? I didn’t get the point.
Antony Cherukara — Chief Executive Officer
No, no, price upward — from the subsidiary pricing, normally the power tiller pricing is dependent on subsidy price revision. So we have got upward price revision in Karnataka, Orissa, Tamil Nadu, that is what I said.
Saket Kapoor — Kapoor and Company — Analyst
Okay. And what percentage of our sales towards these three markets, sir — three geographies?
Antony Cherukara — Chief Executive Officer
These markets count to about 40% to 50% of our sales.
Saket Kapoor — Kapoor and Company — Analyst
That’s correct, sir. And sir, if you could give us some more color on how the receivables currently are? And then I come to the compact, Zetor and other questions.
Antony Cherukara — Chief Executive Officer
Yes. So, the receivable currently is at about INR128 crores, which is at 52 days.
Saket Kapoor — Kapoor and Company — Analyst
And this is the average, sir, or have we bettered the number?
Antony Cherukara — Chief Executive Officer
It will definitely be better by the end of the year because a lot of subsidy payments are coming from the government, which should be realized in the month of January and February, and expect to have a better receivable situation by March.
Saket Kapoor — Kapoor and Company — Analyst
And CFO, sir, what is the reason for this increase in other expenses Q-on-Q. Earlier, we were guided that the other expense line item would normalize to 6% to 7% of the total cost. But if we see, the jump on Q-on-Q basis, it has gone up from INR16 crores to INR24 crore level. So, could you explain the reason for the same?
Pankaj Khemka — Chief Financial Officer
Yes. So two or three things that we have done. One is that I’ve been talking about increase the brand strength that will happen going forward. So, we have decided to do brand spend. One thing that we did was, we were the title sponsors for Bangalore Bulls, which is a Kabaddi league, which is quite popular. The Kabaddi sport is quite popular in the rural areas. So that is something that we have done. We have also started marketing spends in tractors and sales acceleration projection in tractors.
Saket Kapoor — Kapoor and Company — Analyst
Can you quantify the number on a like-for-like basis, what should be the increase in the other expense line item?.
Pankaj Khemka — Chief Financial Officer
Yeah. The retails are definitely out there in our reporting, but for our consideration, it is about INR2.5 crores on the title sponsorship of the Kabaddi league. There is also a spend on marketing [Indecipherable] which is about INR1.2 crores. And there is also product exhibitions across the countries that we have participated where we have unveiled our VST Zetor range of products, which is also to the tune of close to INR1 crore. And the total traveling expenses have gone up compared to the COVID times.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So, these three line items, do we expect the continuity of INR4 crore, INR5 crores now on a regular basis going ahead also?
Pankaj Khemka — Chief Financial Officer
The marketing spend — like I said, we expect to continue the marketing spends going forward, especially in the northern markets where we are not present, which we want to accelerate our network growth as well as our volume growth in those markets. Not necessarily maybe the same items that we will spend on.
Saket Kapoor — Kapoor and Company — Analyst
Sir, come again, sir. I missed your last point. Sorry.
Pankaj Khemka — Chief Financial Officer
So, what I said is, not necessarily the same item we will spend on, but the spend will be on similar amounts.
Saket Kapoor — Kapoor and Company — Analyst
So, as a percentage of sales, this number will be — it will be similar line item?
Pankaj Khemka — Chief Financial Officer
In similar line, yes.
Saket Kapoor — Kapoor and Company — Analyst
Okay, sir. Sir, you mentioned about the Northern market re-penetrating, and I think so earlier call also, you did mention about our presence. So, what is our game plan, if I may use the word, in penetrating in the Northern markets? And what kind of revenue could be looking for going ahead on the geography?
Pankaj Khemka — Chief Financial Officer
Yes. So what we are doing in the Northern market is, we are taking a cluster-wise approach. We are starting with the markets of MP and Rajasthan. And here, we are creating cluster of dealerships where we want to establish the dealership performance and performance of our products. We have got initial successes both in Rajasthan and MP. We want to take it forward. And this should take us about five to six months, almost half a year. After which, we will scale up the number of dealerships. And along with it, we will be doing a lot of marketing activities in all the other areas.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So, taking into account the steps, we are in the annual, what should be the mix then the total revenue pie, how much would be currently from North, I think, sir, and what are we envisaging for the one-year down the line?
Pankaj Khemka — Chief Financial Officer
See, one year down the line, I don’t see a significant impact. But in the next three to five years terms, the Northern market should give us 30% of the revenue.
Saket Kapoor — Kapoor and Company — Analyst
Okay. That’s a very considerable number, sir. The mix will change. Okay. And lastly, sir, about…
Pankaj Khemka — Chief Financial Officer
That’s what I said. If you remember I spoke to another gentleman, so I told him the higher horsepower will eventually be about 20% to 30% of our total price.
Saket Kapoor — Kapoor and Company — Analyst
Correct. And sir, if you look at the precision unit at Mysuru, sir, how is that contributing? And sir, for the spares business, what is the future? That has also seen a slight dip. There is no growth as such Q-on-Q. On a competitive number of INR23.43 crores for Q2, we did closer to less than INR23 crores for the December quarter. So what should be the growth number we are looking for the tiller segment and the precision unit at Mysuru’s contribution?
Pankaj Khemka — Chief Financial Officer
Yes. So the two aspects you asked me. One is regarding the parts business and Mysore, these are mutually exclusive, so I will talk separately about it. One is the parts business, which is actually a distribution business for us. We are — as I have said before, we are setting up the distribution channel in two states this year for electric pumps. We have set it up in UP and Bihar early this year. We are doing about 30 lakhs to 40 lakhs of revenue every month in these markets where we are fresh entrants with no brand name and the first time we are entering these markets.
Now there is a consistent revenue that is coming from these two markets through the electric pump business. Now we are scaling up to four more states. In the coming quarter one, we will scale it to our more states, establish the distribution there as well. So in the next three years, what we expect this electric pump business to get to about INR100 crores. That will give us the growth in the electrical pump space in the distribution business.
The parts and the oil, which is largely dependent on internal consumption, has grown slightly this year. We expect that to grow with more dealerships getting added in the Northern belt. So that also should register a reasonable growth of at least 10% going forward. That is on the parts and distribution business.
Coming to the Mysore establishment, we have seen flat revenue growth in terms of Mysore. We have been trying to establish the [Indecipherable] business. The rotavator business that we started to have being streamlined, it was a cash-and-carry business now, which used to be earlier a credit-driven business. Now it is a cash-and-carry, and we have been able to maintain the revenue. Now going forward, we are introducing new products in that range.
Secondly, we are looking at collaborations with multiple companies to expand the business in farming machines and farming implements. This will also come in the mechanization that is a precision implement division that we are talking. Once it is finalized, I will let you know.
Saket Kapoor — Kapoor and Company — Analyst
If we take the revenue number, sir — yes, ma’am, I’ll come, just answer the question. If the revenue part, we look from the Mysore unit, what have been the contribution for the nine months, sir?
Pankaj Khemka — Chief Financial Officer
For the nine months, revenue from Mysore is pretty low. It is about — external business is only about INR5 crores to INR6 crores.
Saket Kapoor — Kapoor and Company — Analyst
And we spent around — more than INR100 crores on this unit, sir?
Pankaj Khemka — Chief Financial Officer
That is why it’s an external business because the large amount of business parts that we manufacture, we supply internally to the production of our VST Tillers and Tractors.
Saket Kapoor — Kapoor and Company — Analyst
Okay. Can you give the TIM number, sir?.
Pankaj Khemka — Chief Financial Officer
That number would be, on a quarterly basis, again, for quarter three FY ’23, the total revenue is almost INR21 crores.
Saket Kapoor — Kapoor and Company — Analyst
INR21 crore contribution. I’ll join the queue, sir.
Pankaj Khemka — Chief Financial Officer
About INR20 crores to INR23 crores every quarter we’ve taken from Mysore.
Saket Kapoor — Kapoor and Company — Analyst
Okay. Sir, can I put one more question and join the queue, sir, with your permission?
Pankaj Khemka — Chief Financial Officer
Yes. Please go ahead.
Saket Kapoor — Kapoor and Company — Analyst
Sir, when we look at this other income line item, sir, I think it is about the investment in mutual funds — and because of this, the MTM is generated, sir? What is the reason for the other income line item?
Pankaj Khemka — Chief Financial Officer
Yeah. Other income line item is basically from the investment in retail funds and equity.
Saket Kapoor — Kapoor and Company — Analyst
Okay, sir. So, taking into account good practices also. And if that could be adhered to, sir, this can be routed to the other comprehensive income or the OCI route also. So that would give us a fair picture of…
Pankaj Khemka — Chief Financial Officer
You’re right. We’ll take it from the next quarter. We will find that being reported after the — as other comprehensive income. We have already discussed, and we’ll be doing that.
Saket Kapoor — Kapoor and Company — Analyst
That would be very helpful, and that would give a clear picture of the operation number, sir.
Pankaj Khemka — Chief Financial Officer
Absolutely. Absolutely.
Saket Kapoor — Kapoor and Company — Analyst
Yes. And Khemka sir, resignation, sir, all the best of luck for his future endeavor. Any specific reason for — and are we looking for any other suited for the same? Do we have somebody to succeed him from the organization?
Antony Cherukara — Chief Executive Officer
It’s purely for personal reasons, there are no other reasons.
Saket Kapoor — Kapoor and Company — Analyst
Okay. And we have the succession planning for the CFO?
Antony Cherukara — Chief Executive Officer
Yes.
Saket Kapoor — Kapoor and Company — Analyst
Okay, sir. I’ll join the queue, and thank you for the elaborate answer. I will just sum up also — I request the moderator when — give me the last and ultimate chance for two, three more questions. I will wait for my turn. Thank you.
Operator
Thank you. The next question is from the line of Arjun Khanna from Kotak Mahindra Asset Management. Please go ahead.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sir, thank you for taking my question. My first question is, I just wanted to understand if I heard correctly, we are saying Zetor incremental sales would be 20% of the overall mix. Is that the right understanding from next year, FY ’24?
Antony Cherukara — Chief Executive Officer
Higher horsepower eventually will be 20% to 30% of the overall mix. But it will not happen in the next year. It will happen over the next one to three years.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. Sure. And in terms of price points, sir, so could you give us a sense what kind of price points that would be — so if I see for this quarter, our current average realization is roughly INR4 lakh per unit. So, what would be the price point of these higher HP tractors?
Antony Cherukara — Chief Executive Officer
Higher horsepower will be almost 6 lakhs. Current higher horsepower that we sell is about 5 to 5.5, which is with our launch which is coming in the premium segment, which is 6 lakh plus.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure, sure. And sir, if we look at the tillers segment, we have seen growth this year, and most likely, we’ll probably be north of what we have seen in the past three to four years, do you see next two years sustainable in terms of these tiller sales or do you possibly see a slowdown from here on?
Antony Cherukara — Chief Executive Officer
You’re asking about the industry?
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Yes. Our sales, sir. Our power tiller sales. Because if I look at…
Antony Cherukara — Chief Executive Officer
I don’t see any slowdown happening in our power tiller sales. Last three years, we have grown. And like I said, we will be somewhere in the tune of 15% to 20% on growth even this year for the power tiller business. Currently, we are talking at about 14% roughly at the end of January. So, we should be able to cross that 15% to 20% growth guidance that I said in terms of power tiller. I was expecting the tractor business to be at the lower single-digit growth, but it looks like we will be flat in terms of the tractor business, primarily because of the long delay that we had in terms of the new products for our tractors.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. Sure. And sir, in terms of our outlook for the next year, FY ’24, would it be possible to grow tillers from these levels, sir?
Antony Cherukara — Chief Executive Officer
Yes, we are getting into the annual report we have shared very clearly, we are looking at three phases in which we are going to walk in towards our mission. One was the cleaning phase, gearing phase and now — next year, we are getting into the exponential growth pace. So many of the projects that we had undertaken, one is the VST Zetor project. Secondly, the investment that we did and the supplies that we are starting with Monarch, which is electric tractor company, in the U.S., and several other projects that we had put up is all scaling up. And in the next two years, we will see the revenue growing faster than currently.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. So, if I understand correctly, while we have given a guidance here of an EBITDA margin cut in FY ’24, on an absolute EBITDA basis, we are yet looking at a healthy growth. Is that the right understanding?
Antony Cherukara — Chief Executive Officer
The top line, we are looking at definitely a healthy growth in percentage terms, as you rightly said, there could be a cut. But overall, there will be a growth. I mean, in terms of the pure value.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
In terms of earnings for the company?
Antony Cherukara — Chief Executive Officer
Absolutely.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. Thank you so much. Just one last question. In terms of power weeders, you usually give us some numbers in terms of the mechanization, have those numbers formed growth?
Antony Cherukara — Chief Executive Officer
Yes. So definitely, it has grown, this year currently [Technical Issues] 3,722. Last year, if you remember, we have closed it around 2,000 number. So this year, we should be about 2,000 number in the brush cutter weeder side.
Arjun Khanna — Kotak Mahindra Asset Management — Analyst
Sure. Thank you, and all the best, sir.
Operator
Thank you. The next question is from the line of Devanshu Sampat from Yes Securities. Please go ahead.
Devanshu Sampat — Yes Securities — Analyst
Hello, sir. Good afternoon. I have a few questions. So just one, if you can update on the share of financing in sales. What is the number that we’re working with right now?
Antony Cherukara — Chief Executive Officer
Financing sales for tillers is currently about [Technical Issues]
Operator
Ladies and gentlemen, thank you for patiently holding the line. The management line is reconnected. Thank you, and over to you, sir.
Antony Cherukara — Chief Executive Officer
Yeah. I’m audible now, I suppose. So, could you repeat that last question you were asking?
Devanshu Sampat — Yes Securities — Analyst
So what I was asking is the share of financing in our overall volume of sales right now.
Antony Cherukara — Chief Executive Officer
Yeah. So 1% to 2% is a power tiller financing, but now we have got into multiple arrangements. One is with Yes Bank, and we are also talking to a couple of NBFCs, wherein we are tying up with them to increase the retail finance in power tillers.
Devanshu Sampat — Yes Securities — Analyst
What did you say the number was?
Antony Cherukara — Chief Executive Officer
Right now, it is about 2%.
Devanshu Sampat — Yes Securities — Analyst
Okay. So this number, if I’m not mistaken, you’ve mentioned a few quarters ago, so…
Antony Cherukara — Chief Executive Officer
Slightly during COVID, it had gone up, then it has come down now. Now it is slowly rising again with the tie-ups that we are doing.
Devanshu Sampat — Yes Securities — Analyst
Okay. But are we doing this only for tillers right now? Or are we doing this across other farm implements also?
Antony Cherukara — Chief Executive Officer
Mainly for tillers because the tractor finance is already available.
Devanshu Sampat — Yes Securities — Analyst
Okay. Got it. And sir, second question I had was about the dealers. Now, if I’m not mistaken, at the end of a year ago, the tractor dealers were around 340, and you said right now it’s 350 only. So this number has not been moving up and especially that we’re looking at launching higher horsepower in the northern market. So what are the issues, what are the — what’s the feedback we’re getting Why is that number not scaling up as per intended?
Antony Cherukara — Chief Executive Officer
Yeah. So, the intention was to launch the tractor in Q3 of this year, which has got slightly delayed. So hence, we didn’t scale up the number of dealerships in the North. That is one. Secondly, I said, we have refined our process, so we are developing clusters of performance. Like I said, we are doing that in Rajasthan and MP to begin with. And so, the cluster approach has created cluster of dealerships, which is doing well, and then we want to create other clusters of — because we understand that we are the 10th or 11th player who is getting into the higher horsepower segment. So we are doing it pocket-by-pocket.
So that is why we have kind of stabilize the number of dealerships in tractors, it’s about 350. Once we have established the higher horsepower in this 350 dealerships, then we will take up and scaling up for more dealers. However, the same approach is not there in power tiller segment. Power tiller segment, we are at about 650-plus dealers, and we’ll continue to grow.
Devanshu Sampat — Yes Securities — Analyst
Yes, I think that number has gone up by 100 from a year ago if I’m not mistaken.
Antony Cherukara — Chief Executive Officer
Correct.
Devanshu Sampat — Yes Securities — Analyst
So all of the incremental numbers we’re looking at will mainly be from MP, Rajasthan right now or are we looking at…
Antony Cherukara — Chief Executive Officer
Yeah, mostly in the higher horsepower will be coming through MP, Rajasthan, also our strong builds of Maharashtra, Gujarat south where we are strong already.
Devanshu Sampat — Yes Securities — Analyst
Sure, sure. And just wanted some updates on some of your other initiatives that you have mentioned in the last few years. So, one is, on bringing manufacturing into India with the company from France. So any thoughts on that? Because last I remember you said it was because of COVID, we couldn’t travel. Is there any developments there?
Antony Cherukara — Chief Executive Officer
Yes, we are looking at multiple companies to manufacture in India, not only the France, so talks are going on, nothing is finalized yet. So we should be able to close something in the coming financial year.
Devanshu Sampat — Yes Securities — Analyst
So this is for any particular product or can you give us…
Antony Cherukara — Chief Executive Officer
A small farm mechanization product. And also VST Zetor, I have already spoken to you earlier. We are already selling compact tractors. We have started just, in fact, started in January. We have started sending our tractors to sell through the Zetor network in Europe.
Devanshu Sampat — Yes Securities — Analyst
Okay. Okay. So what number are we looking at for export volumes?
Antony Cherukara — Chief Executive Officer
Yeah. Export volumes, like I said, we should be — earlier last quarter when the call happened, I said we could be slightly down compared to previous year, considering the situation in Europe. But most likely, we are going to end up flat. We will not be down. But last year, we had done about 1,315 numbers, we should be around the same number this year. So we won’t be down in exports.
Devanshu Sampat — Yes Securities — Analyst
And you also mentioned now and this was the plan also that the Monarch business should start contributing from early 2023. So, assuming for FY ’24, can you give us a sense of what number you’re working with?
Antony Cherukara — Chief Executive Officer
Yeah. We are looking at upwards of 1,000 units to Monarch in the advertising.
Devanshu Sampat — Yes Securities — Analyst
As revenue of, roughly?
Antony Cherukara — Chief Executive Officer
Roughly about INR40 crores to INR50 crores.
Devanshu Sampat — Yes Securities — Analyst
INR40 crores to INR50 crores coming in from Monarch in FY ’24, you’re saying?
Antony Cherukara — Chief Executive Officer
Correct.
Devanshu Sampat — Yes Securities — Analyst
Okay. Okay. So this number could — are you looking at maybe from a two, three-year perspective going up to, say, 150, 200 types?
Antony Cherukara — Chief Executive Officer
There should be, yes, considerable upside.
Devanshu Sampat — Yes Securities — Analyst
Okay, sure. And sir, what’s the cash on books right now? Cash and investments value?
Antony Cherukara — Chief Executive Officer
Investments right now? Just a second, the CFO will answer the question.
Pankaj Khemka — Chief Financial Officer
Investment around roughly INR450 crores.
Devanshu Sampat — Yes Securities — Analyst
INR450 crores, okay. And any update on the land sale update, as we’ve been in talk for a while and you’re looking at getting the market and everything now. So what is the Board thinking? Why is there a delay in this development?
Antony Cherukara — Chief Executive Officer
No. Right now, there is no update on the land. Definitely, once the things are finalized, we will let you know.
Devanshu Sampat — Yes Securities — Analyst
Sir, but is there a change in intention of doing anything or is this still on the table for us?
Antony Cherukara — Chief Executive Officer
Definitely on the table.
Devanshu Sampat — Yes Securities — Analyst
Okay, sure. Thank you, and wishing you all the best. Thank you.
Antony Cherukara — Chief Executive Officer
Yeah, thanks.
Operator
Thank you. The next question is from the line of Shreyans Gathani from SG Securities [Phonetic]. Please go ahead.
Shreyans Gathani — SG Securities — Analyst
Hello.
Antony Cherukara — Chief Executive Officer
Hello, yes. Good afternoon.
Shreyans Gathani — SG Securities — Analyst
Hi. Good afternoon. So I had a couple of questions. So, the first one is on the new product launches, which we showcased in 929 and likes. So what is the response that we are seeing on that? And also, I wanted to know on the higher horsepower category. We have our own brand and then we have VST Zetor, which is like VST and VST Zetor both, so how do they compete in terms of features? Or do they have any cannibalization in that sense in terms of product?
Antony Cherukara — Chief Executive Officer
Yeah. So I’ll answer the first part of the question. This is 929, which is getting tremendous response in the market that we have launched in Maharashtra. The volume is being ramped up. That is why I made the statement that we are expecting good growth in the tractor volumes going forward.
Coming to the higher horsepower, we have clearly two positioning. The VST range of products will be value for money positioning, and the VST Zetor products will be premium basis. So the VST Zetor products will compete with one year for kind of premium products in the market. And the VST products will compete with the value for money positioning in the market.
Shreyans Gathani — SG Securities — Analyst
Got it. Got it. And so, just following up on that, on the UP strategy, on the Northern strategy, there’s like very established and strong brand. So is there — like how do we compete with them on pricing? And how do we intend to gain market share? Would it be on pricing or brand? Or what is the strategy to compete with the larger guys who are — have a stronger presence in those markets.
Antony Cherukara — Chief Executive Officer
Understood. But this is kind of a larger question and take a little more time to explain it, but in the short time that I have, I’ll try and explain our strategy on this. You are absolutely right that we are the 11th or 12th player in the higher horsepower space. So it is very clear for us that in the market that what we can achieve in terms of product or differentiation is limited. Of course, giving a good quality product in the tractor industries today high yield. So that definitely will be up there, and we will be definitely having all the features premium product that we have. And of course, the value for money positioning products is also placed accordingly.
Now having said that, the key differentiation is in terms of the capability of dealerships and the coverage that we established in the market. So this is where we have created a cluster strategy where we will focus on specific clusters, wherein we will trace the product in the market, do kind of one-to-one marketing that is happening today, establish our product for few lead customers in the market, make others follow these customers and that is what exactly is happening in the Northern market.
And once you’re established in the cluster which we are doing an active sales — acceleration work, once we establish in one cluster, then we move on to the next cluster. So we have laid down procedure by how we will establish in each cluster and we have been able to make surplus out of this unique cluster. So, I mean, there is much more to it, as I said. But in short, this is the answer.
Shreyans Gathani — SG Securities — Analyst
Got it. Got it. Thank you. Thank you so much.
Operator
Thank you. [Operator Instructions] The next question is from the line of Dhruv Gilada [Phonetic], an individual investor. Please go ahead.
Dhruv Gilada — — Analyst
Yeah. Hi, sir. So my first question is on our strategic investment and supply agreement with Monarch. It looks interesting given the backing and multiyear licensing agreement Monarch has with a global leader like CNH and the scale at which they’ll be manufacturing. So, can you please give us a sense of how you see this relationship developing?
Antony Cherukara — Chief Executive Officer
Yeah. So let me tell you the relationship with Monarch at one level is as an investor and at the other level is as a supplier. So, the agreement they have with CNH is for a totally different category of higher horsepower product and for their autonomous software and controls that they have developed for. So that is a separate agreement.
Now what we are supplying is for the Monarch range of tractors for which we are supplying the transaction, the deal rigs, etc, which we call as the glider. That is what we supply to Monarch from here in India. So, this is for a totally different tractor product. So there is no relationship between what is happening between Monarch and CNH, and what is happening between Monarch and VST
Dhruv Gilada — — Analyst
Sure. Got it, sir. But over the long term, how do you see this relationship developing with Monarch?
Antony Cherukara — Chief Executive Officer
Yes. So I said we are an investor in that company. We expect the relationship to be in the long term. The plans are not laid out in terms of what are the next steps that need to be taken. Right now, the focus is on ramping up production. As I said, 1,000 units plus is what we are looking at in FY ’24. So the focus is on that.
Dhruv Gilada — — Analyst
Sure, sir. Coming to my second question, you recently said that the small farm sector in India is expected to adopt a lot of electric machines in the near future. With Monarch recently entering India and looking for manufacturing partners, are you open to contract manufacturing opportunity with Monarch or any other OEM that may come knocking on the door?
Antony Cherukara — Chief Executive Officer
No, Monarch has not started manufacturing operations in India with anybody else. We continue to be a supplier to Monarch for their products that they have launched, which is a Monarch [Indecipherable] suppliers. There is no other investment with them in terms of manufacturing. However, they have opened software centers somewhere in Hyderabad.
Dhruv Gilada — — Analyst
Yes. Sir, just to clarify on my question, actually, what I meant was that they are — like I was seeing one of the recent interviews in which they mentioned, they are looking at India, to scale up in India in a big way, so — and they…
Antony Cherukara — Chief Executive Officer
Absolutely. That is why I said there is nothing finalized at the moment. So I cannot give you anything which is not, get completely finalized so there are there are discussions happening. Once anything is final I will let you know.
Dhruv Gilada — — Analyst
Sure. And another — lastly, on the capacity utilization at Hosur plant, which has remained low for many years. So what is the strategy and progress in increasing our capacity utilization there?
Antony Cherukara — Chief Executive Officer
Yes. So the last two years, the work has been happening with Monarch, with VST Zetor and increasing our range of production. Fundamental reason for all these is to build our utilization of the Hosur plant. So we expect FY ’24 utilization to be much better than the previous year? And in the next three years, we should be upwards of 80% plus utilization of the Hosur plant, which is total — manufacturing capacity of close to 40,000 tractors. So between – as the Zetor, between Monarch, between USC consumption, between what manufacturing needs to do for Zetor for their products. All these put together, we will definitely be looking at increasing utilization to the levels that I say.
Dhruv Gilada — — Analyst
Okay, sir. Just one final question. CNH has also talked about it’s big plants in India and they’re specifically looking at the 40 to 50 HP tractor segment, which we have also recently entered. But do you see any potential synergies and partnerships with them as coinvestors in Monarch?
Antony Cherukara — Chief Executive Officer
Right now, there is no discussion with CNH, but we will be open to anything that we definitely may come across.
Operator
Thank you. The next question is from the line of Saket Kapoor from Kapoor & Company. Please go ahead.
Saket Kapoor — Kapoor and Company — Analyst
Yes, sir. Thank you for that follow-up. Firstly, sir, regarding your comment by — earlier by our CEO, Mr. Antony regarding the investor presentation we made a part. I think during the AGM. So where are we in terms of the presentations being provided to us with these numbers being accumulated in a PPT presentation and the key highlights of the quarter. So that’s making the concord more interesting.
Antony Cherukara — Chief Executive Officer
Yes. Within the next three, four days, we will upload the presentation on our website, number one. Number two is sometime in the future. Unfortunately, my [Indecipherable] CFO, has decided to leave us. The successor will soon take over. So very soon, probably in the next call, we will try and have a discussion over it.
Saket Kapoor — Kapoor and Company — Analyst
Sir, you mentioned presentation will be uploaded for this year — this result also?
Antony Cherukara — Chief Executive Officer
This results we will upload in the next few days — couple of days.
Saket Kapoor — Kapoor and Company — Analyst
And please provide them to the exchanges also as been the mandatory.
Antony Cherukara — Chief Executive Officer
Yes, we will provide. The transcript will be provided.
Saket Kapoor — Kapoor and Company — Analyst
Okay, sir. I’m happy. I think it is getting — sir, we want the presentation. Transcript of this con call will be provided. Specifically, you will be providing us with any…
Antony Cherukara — Chief Executive Officer
You want the presentation also to be given to the exchanges? I’ll check with my company secretary and if there is no other issue, I will definitely upload it in the exchange.
Saket Kapoor — Kapoor and Company — Analyst
Okay. Now coming to your vision part, sir. I think so the last call also, you mentioned that because of the COVID sector because of this war scenario and geographical changes, we are still looking for FY ’26 exit at INR3,000 crores. So taking into account the current — the investments we have done over a period of time. And you’ve been articulating that there will be substantial increase in the revenue pie also going that. So are we sticking to our target of INR3,000 crores by FY ’26.
Antony Cherukara — Chief Executive Officer
Yeah. By FY ’26, we are — like I said in the last call, we might — we wanted to do it by 2025, but we might kind of cover up for the COVID time loss that we had and we might move into FY ’26. But definitely, we are chasing that target down.
Saket Kapoor — Kapoor and Company — Analyst
Correct, sir. And sir, for the Monarch part, what has been our investment in the JV? Is it in the form of equity or if you could give some more color?
Antony Cherukara — Chief Executive Officer
Investment is in the term in equity only.
Saket Kapoor — Kapoor and Company — Analyst
How much have we invested, sir?
Antony Cherukara — Chief Executive Officer
Roughly about INR22 crores.
Saket Kapoor — Kapoor and Company — Analyst
Okay. And this figure gets some in our INR450 crore investment?
Antony Cherukara — Chief Executive Officer
Yes.
Saket Kapoor — Kapoor and Company — Analyst
Okay. And sir, then about this — these last two points about firstly, I think with FarmTech and the NCB US, you were also looking for this power weeder and brush cutter parts. So how are sales moving ahead in these two aspects, sir?
Antony Cherukara — Chief Executive Officer
Yes. We are working with them. Currently, we are taking supplies with FARMECH, Taiwan, that is progressing very well. Like I said, we are in talks with multiple players in terms of productionizing in India. Nothing is final yet. As soon as it is final, we will announce it.
Saket Kapoor — Kapoor and Company — Analyst
Okay. And also, sir, about the MNM product, I think the last quarter, you did discuss about the interesting point of this being a product for the power tillers. So how is the traction there? And is it standing as a competitor to us in the power tiller segment?
Antony Cherukara — Chief Executive Officer
As of now, we don’t see it as a competition to power tiller because our power tiller demand continues to grow every month. I don’t see it as somebody in. However, having said that, I see mergers as a new segment happening. So, the prices at which that particular product was launched has gone up now, the company has revised the prices upwards. So I see a new segment emerging between tractors and tillers so that will be an interesting space that we are also keen to enter.
Operator
Sorry to interrupt, Mr. Kapoor.
Saket Kapoor — Kapoor and Company — Analyst
Just concluding, if you could allow me this to conclude and then we’ll get another opportunity next quarter on this. So just a small point with the permission.
So, in conclusion, we are looking for a 14% to 15% volume growth for power tiller to end this year with a single-digit growth in the tractor segment. And looking at the top line closer to INR1,000 crores for FY ’23. So this understanding is correct, as of now?
Antony Cherukara — Chief Executive Officer
Yes.
Saket Kapoor — Kapoor and Company — Analyst
Okay. But the gap in the profitability, sir, if we remove the other income line item, then also there is a substantial gap in the nine months — yearly and the nine months as on date. So…
Antony Cherukara — Chief Executive Officer
So, as I said, EBITDA is at about 10.58 now year-to-date. So what we are seeing is getting into a range of 12 to 14, which I’ve always said where EBITDA will be.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So this fourth quarter would be substantially higher then the average will go up to 12.5?
Antony Cherukara — Chief Executive Officer
I told this earlier also, there are two reasons for this. One is the commodity reduction that is happening is not accrued to the P&L as of now, as of year-to-date, December, which we expect it to happen in Q4. There is also an upward — I mean, the business is good in Q4 so far. So it is looking up, and we should be able to maintain that 12% to 14% range that we have always spoken about.
Saket Kapoor — Kapoor and Company — Analyst
Okay. So there is a gross margin expansion that is — we were expecting because of the…
Antony Cherukara — Chief Executive Officer
Yeah, definitely only — that is the only way that’s possible, right?
Saket Kapoor — Kapoor and Company — Analyst
Yes. Thank you for all the elaborate answers, sir, and all the best to Pankaj ji for his future endeavor. And sir, I think then this change in inventory will get depleted. I think — there is an increase in inventory for 9 months to the tune of INR27 crores. With the improved revenue, this will get even out for the fourth quarter.
Antony Cherukara — Chief Executive Officer
Yes, inventory, we will be slightly upward compared to the previous financial year closing. The reason is simple that in June, July, we lose space because we are not able to do demand. We don’t want that to happen going into the new financial year. So there are some corrections that we are doing in that respect.
Saket Kapoor — Kapoor and Company — Analyst
Okay, okay. Thank you once again, sir, for all the elaborate answers, and all the best. Will try to get in touch with you next time.
Antony Cherukara — Chief Executive Officer
Thank you.
Operator
Thank you. Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
Antony Cherukara — Chief Executive Officer
Yes. So, thank you, everyone, and we look forward to a good Q4, as I have mentioned. So far, the going is good. January was good. We expect February to be good. We look forward to meeting you all in the month of May. Thank you.
Operator
[Operator Closing Remarks]