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Escorts Bets On Agri Business Division To Drive Overall Performance This Fiscal

Escorts expects to do better this fiscal than last year, driven by agri-business division despite the Covid-19 disruptions.

Bikes are parked next to a tractor laden with cattle feed at a farm in Karnal district, Haryana, India. (Photographer: Prashanth Vishwanathan/Bloomberg)
Bikes are parked next to a tractor laden with cattle feed at a farm in Karnal district, Haryana, India. (Photographer: Prashanth Vishwanathan/Bloomberg)

Escorts Ltd. expects to do comparatively better this fiscal than last year, driven by its agri-business division despite the impact of the coronavirus pandemic, according to a senior company official.

With strong demand for tractors continuing from rural markets, the farm equipment and engineering maker is optimistic that in spite of the supply-side constraints witnessed in the first quarter of this fiscal, it would be able to catch up in the remaining months to post better than industry sales, which is expected to rise by single digit.

"With all verticals put together, driven by agri division, which is almost 80% of the top line, overall we should be better than last year... Overall our expectation is that it will be a positive year, may not be the best year but it will be better than last year definitely," Bharat Madan, chief financial officer at Escorts Group, told PTI.

In the first quarter of the fiscal, he said despite the supply-side constraints due to lockdown, the company was able to enhance its market share in the tractor segment. Escorts had sold 18,150 tractors in the quarter ended June against 21,051 a year ago.

In July, the company restricted production to 60-65% of capacity impacted by localised lockdown and Covid-19 cases in suppliers and at its factory, after reaching 90-95% capacity in June.

The company's total tractor sales in July grew 9.5% year-on-year at 5,322 units. Domestic sales were at 4,953 units against 4,505 units in the year-ago month.

"Hopefully by August things will become normal and lockdown areas are also opened," Madan said. "We expect production to come back and we should be able to catch up. We should be able to gain some market share this year and do better than the industry," he said.

On the outlook for the festive season, he said, "Our expectation is that the production will again pick up from August and we expect a strong festive season. In fact, we expect the industry to grow in the balance nine months in double digits and overall for the year, the industry may show single-digit growth."

While July and August are usually softer months from a demand perspective, he said the company wanted to build up production "only to catch the festive season".

"Normally, we build up the inventory during these months to catch the festive season," Madan said.

Escorts has three main verticals — agri machinery, construction equipment and railway equipment division. The agri machinery segment posted revenue of Rs 953.5 crore in the quarter ended June against Rs 1,092.0 crore a year ago.

The construction equipment division's revenue was down at Rs 52.5 crore in the quarter against Rs 212.2 crore in the year-ago period.