Escorts Kubota Limited (ESCORTS) Earnings Call Transcript & Summary

Namaste, Good afternoon, dear shareholders. On behalf of our Board of Directors and the entire Escorts Kubota family, it gives me immense pleasure to warmly welcome each one of you to the eighth Annual General Meeting of your company. Thank you for joining us today and more importantly, thank you for your continued trust, confidence and support. Every AGM is an opportunity for us to connect directly with you. Your trust inspires us your expectations challenge us to improve and your confidence strengthens our resolve to build an even better Escorts Kubota. As the requisite Coram is present through video conferencing, I am pleased to declare the meeting duly constituted and now commence the business of today's AGM. This meeting is being held through video conferencing and other audiovisual means in compliance with the circulars issued by the Ministry of Corporate Affairs and the Securities and Exchange Board of India. The company has taken every feasible step to ensure that all members have seamless opportunity to participate and exercise their voting rights. We deeply value your participation because active shareholder engagement is one of the cornerstones of a strong corporate governance. To enable wider participation and transparency, today's AGM is also being webcast live through the company's website and social media platforms. The statutory registers are available electronically for inspections during the course of this meeting. Now let me move on to the introductions. Our Board of Directors bring decades of leadership experience from different fields. I am personally thankful to them along with the entire team for their guidance and to shape the long-term direction of your company. It is my privilege to introduce our respected directors joining us today through video conferencing. The names are in alphabetical order on the last name basis. Starting with Mr. Bhandari, Independent Director and Chairman of the Audit Committee and the Remuneration Committee of Compensation. Mr. Bhargava, Independent Director; Ms. Dubash, Independent Director; Mr. Ichikawa, non-executive non-independent Director, Mr. Kato, Whole Time Director designated as Deputy Managing Director; Mr. Madan, Whole Time Director and Chief Financial Officer; Mr. Munjal, Independent Director; Ms. Nanavati, Independent Director; Ms. Nanda, Whole Time Director and Chairperson of the Corporate Social Responsibility Committee. Mr. Saito, Independent Director, he is joining along with us from our headquarters in Faridabad. Mr. [indiscernible], Independent Director, I've been told due to some urgent prior commitments he's unable to join us. Mr. Sasaki, nonexecutive, nonindependent Director. Mr. Singh, nonexecutive, nonindependent director and Chairman of the Stakeholders Relationship Committee. Dr. Sodi, Independent Director; Mr. Suzuki, nonexecutive, nonindependent Director. On behalf of all our shareholders, I would like to sincerely thank our Board members for their guidance, support and commitment. Their experience and oversight help us make sound decisions with the highest standards of governance, integrity and long-term value creation. We are grateful to have such an accomplished and vibrant board supporting Escorts Kubota's growth journey. I would now like to welcome our auditors who are present today. Starting with Mr. Ashish Gupta partner, [ Walker Chandiok ] and Company LLP, our statutory auditors. Ms. Neelum Gupta, proprietor, the firm Neelam Gupta & Associates our secretarial auditors. Ms. Parvati Venkatesh, Partner, the firm Ramnath [indiscernible] & Company, our cost auditors. I sincerely thank our auditors for their continued support in strengthening our governance framework with financial discipline and transparency. During the question-and-answer session later today, Shareholders are welcome to interact with our auditors on matters relating to the financial reporting and audit. While the Board of Directors set the strategic direction, it is our leadership team, which drives the execution. I am pleased to introduce our business leaders to you today. Starting with Mr. Mehta tractor business for Farmtrac and Powertrac brand. Mr. Chugh, Agri Solutions and Tractor business for Kubota brand. Mr. Amano tractor business, exports, Mr. Tewari, service and spare parts business. Mr. Bajaj, Construction Equipment business, Mr. Kawabe, engine business; Mr. Satani Research and development Mr. No, Operations; Mr. Okada, Quality Assurance, Mr. Single, human resource and general affairs. I would also like to introduce other key executives of your company. Mr. Satinder Singh from the internal audit team and Mr. Arvind Kumar our Company Secretary and Compliance Officer. I now request our Company Secretary, Mr. Arvind Kumar to guide the shareholders through the procedural aspects and general instructions relating to today's meeting. Over to you, Mr. Arvind Kumar.

Thank you, Mr. Nanda. Good afternoon, ladies and gentlemen. As this meeting is being held through video conferencing, I would like to mention a few things. Every member who has joined is muted by default to avoid any disturbance arising from background noise and to ensure seamless conduct of the meeting. the company's leadership speech for this AGM is prerecorded. As the question-and-answer session starts, the moderator will announce the name of registered speaker shareholders one by one. on calling the name, the speaker shareholder needs to unmute himself or herself. If the speaker shareholder faces any connectivity issue, we will ask next speaker shareholder to speak in turn. And previous speaker shareholder will be allowed to speak post all speaker shareholders have finished asking questions. Also, members post their queries in the message box provided on their screen, and we shall appropriately respond to the same post the AGM. We, at Escorts Kubota Limited are committed to address all carries of the shareholders the questions which will may not be able to answer due to weak network connectivity or the part of the company or the shareholder or for any other reason whatsoever, the shareholder can e-mail their queries to the e-mail address provided in the notice of AGM. And we will e-mail the responses post the Annual General Meeting. The entire proceeding of this live meeting are being recorded. members can cast their votes during the AGM, if not already cast through remote e-voting, dear shareholders. Further, I wish to inform you that SEBI why did circular dated January 30, 2026. And in order to facilitate transfer and dematerialization of physical securities, which were sold purchased by them before April 1 2019 has opened another special window for the rellodgment of transfer dets, including the transfer request which were submitted earlier but were rejected, returned, not attended due to the efficiency in documents, procedure or otherwise. Therefore said, a special window is open for a period of 1 year from February 5, 2026 to February 4, 2027. Shareholders are requested to refile such cases with [indiscernible] Technologies Limited, restart share transfer agent of the company. Now I request the Chairman to address our member.

Thank you, Mr. Kumar. Once again, I want to thank you for taking the time out to join us today. I trust all of you have had the opportunity to read our annual report for the financial year ended 31st March 2026. Before we begin our presentation, I would like to sincerely thank all our shareholders for standing by Escorts Kubota over the years. Your trust in this company gives us both confidence and a sense of responsibility. . I'm delighted to share that FY '26 marked another important milestone in our transformation journey. During the year, EPL delivered the best performance in terms of revenue and profits. The impact of partnership between Escorts and Kubota is extremely positive as we launched the highest number of new products under all our 3 brands, namely Kubota, Farmtrac, Powertrac in the fiscal year. While we are proud of the progress, we remain even more excited about the opportunities ahead. Our ambition is to build one of the world's most admired engineering companies with the steps we have initiated through investments in our research and development and the new greenfield project setting the stage for Make in India for India and for the world. We will now share a prerecorded presentation in which Kitao-san and I will take you through the company's performance during FY '26 and the priorities that will shape Escorts Kubota Limited's next phase of growth.

Namaste. Dear shareholders, it is my pleasure to walk you through our performance for the year FY '26 and our strategic direction for the years ahead. Accompanying me is Kitao-san, our Deputy Managing Director. At the outset, I would like to draw the kind attention of this August gathering to our safe harbor statement. This year, we continue with our team on your side. I want to be clear about what type means because it is not a tagline. It is a commitment. When a farmer wakes up at 5:00 in the morning, when the sowing season is tight and the rains are uncertain, he needs wing, equipment that simply works. He cannot afford downtime. He has no backup plans. In that moment, we want him to know Escorts Kubota is on his side. The same goes for every contractor, every dealer, every supplier partner. That is what this company was founded on, and that is what we are building forward on. Today, the world around us is more volatile, more uncertain, we have witnessed uncertain global situation, geopolitical tension, particularly in the Middle East, have created real disruptions in commodity costs and supply chain. We are managing these headwinds through pricing discipline cost efficiency and supplier partnerships. We are ensuring through our actions that they will not define us. The India story on the other hand, has never been more compelling. We are the world's fastest-growing major economy. Agriculture supports over 150 million families Government's commitment to agriculture and infrastructure is consistent and long term. We are not driving a cyclical wave. We are positioned at the center of a structural shift. In FY '26, the Indian domestic tractor industry reached a historic high of 11.6 lakh tractor units, the highest ever recorded with robust demand growth of 23.5% year-on-year, supported by strong monsoons, healthy reservoir levels, higher MSPs and GST rationalization. We grew with the market, but let me be candid. We did not grow as fast as the domestic market. I will come to that later in my speech. Over 8 decades, Escorts Kubota Limited has served more than 2 million customers whose livelihoods have in some way been connected to what we manufacture. And 6 years ago, we made 1 of the most important decision in our history. We partnered with Kubota Corporation of Japan. That decision has made our products better. our ambition larger and our customers better served. FY '26 was the best year in the financial history of Escorts Kubota Limited. Revenue from continuing operations grew 12.6% to 11,473 crores. EBITDA grew 28.5% and to INR 1,513 crores, with margins expanding by 163 basis points to 13.2%. Profit after tax from continuing operations stood at INR 1,381 crores with earnings per share of INR 12.5 million. Our OCE came in at 14.8% and ROE at 12.1% from continuing operations. In addition, the divestment of our Railway Equipment Division generated proceeds of INR 1,600 crores and a PAT gain of INR 1,028 crores. bringing reported PAT to INR 2,409 crores. However, view the normalized PAT at INR 1,381 crores in as a more accurate reflection of the operating performance, one where we are generally proud about. Free cash generation of INR 1,205 crores and surplus net cash flow on our balance sheet over INR 9,600 crores, CRISIL AA+ with positive outlook rated. The Board of Directors have recommended a total dividend of INR 51 per share, including 18 special dividend already paid, reflecting our confidence in the business and our commitment to returning value to our shareholders. FY '26 marked the highest revenue, EBITDA and profit after tax in EPL's history. At the same time, I will gloss over the areas where we fell short. These are opportunities we recognize. Our domestic tractor market share stood at approximately 10.9%. The industry expanded faster than we did in the domestic market. We had product gaps particularly in the Paddy segment and 4-wheel drive range of power track. We had dealer health challenges in certain pockets. In South India, supply shortfall during peak season caused us Kubota's market share. These are not excuses. They are diagnosis. And we are addressing every one of them with specific urgency and accountability. That is the standard I hold us towards. What excites me most about FY '27 is a product lineup we are entering with. Farmtrac, PROMAXX are versatile tractor designed for both agricultural and commercial application already contributes 25% of Farmtrac volume. It has helped us to expand into newer geographies and address a wider range of customers. PROMAXX 2.0 is the next step in that journey. Kubota-MU4201 marks our entry into the high-volume 41 to 44-horsepower segment, addressing an important portfolio opportunity for the brand. It combines Japanese engineering precision with a strong understanding of Indian market requirements. Digitrac Series represents where Powertrac is going premium. Technology forward, over 20% of the brand's mix already. Soria, the South special engineered specifically for Paddy, cultivation in the southern part of India, spanning the 39 to 52-horsepower range. This directly addresses last year's product gap. We are now in these segments. This is one of the most exciting chapters in Escorts Kubota Limited evolution because it marks our transition from being an attractive company to becoming a full spectrum agriculture solution company. In harvesters, we are bringing Kubota's world-class combined harvester technology to Indian farmers. Kubota harvesters carry a reputation built over decades in Japan and Southeast Asia, for reliability, efficiency and minimum grain loss. We are now introducing this proven platform to India where the combined harvester market is still in its early stages of penetration and the potential for growth is substantial. This is an area where Kubota and Escorts Kubota Limited partnership delivers something no domestic competitor can replicate. Japanese harvesting precision made accessible for Indian conditions. Under the Farm-Power brand, we have added a more competitive range of wheel harvesters, engineered to deliver higher performance across diverse trims and cropping conditions. And I'm particularly pleased to share that we will be commencing the manufacture of walk behind rice transplanter at Escorts Kubota Limited. India transplants Paddy across tens of millions of hectares every kharif season. The vast majority still by hand. I am proud to say that Escorts Kubota is already the #1 player in dry transplanter market share in India. Beginning domestic manufacturing here in Faridabad is the next step in making this technology available at scale and cementing our leadership in this category for years to come. the KA6 and K8 ride on rice transplanters engineered in Japan, built for Indian conditions are the foundation of this platform. This is what we mean by shifting from selling a tractor to enabling a farmer. A machine is only as good as the support behind it. This year, we took a significant step in our service infrastructure. We moved into a new dedicated warehouse of 300,000 square feet, state-of-the-art in every dimension, automated storage, optimized PIC processes, faster dispatch cycles and real-time inventory visibility. This is not just a logistic upgrade. It is commitment to our customers that when a part is needed during harvest, during sewing, when every hour counts, it will be available. We are building the aftersales backbone that turns a first-time buyer into a lifelong customer. Construction equipment contributed INR 1,686 crores in 15% of revenue. The environment was challenging, high base from prior year, extended monsoons, slower infrastructure execution and emission norm transitions, but we strengthened our position. Pick n carry cranes market share reached 41.4%. Mini excavator share reached 19.5%, and EBIT margin held at 7.9%, and we launched the BLX 75 Stage 5 backhoe loader, positioning us for the infrastructure cycle ahead. near-term volumes are an area of focus. Long-term structural drivers, roads, railways, urban infrastructure, mining are firmly in place. We are ready when the cycle turns. And I want to be clear, we are not waiting passively. We have a strong product pipeline that will further sharpen our competitiveness across backhoe loaders, cranes to compaction equipment. The fundamentals of this business are sound, and we are investing in its future with conviction. Our export volumes grew 33.8% and significantly outpacing the industry. And 60% of those exports moved through Kubota's global distribution network. This is not incidental. It is a proof that the premise of this partnership is working. India as a manufacturing hub for world's basic tractor market. Our engine business is a segment we are actively building with greater ambition. We're expanding our product range and growing our presence with original equipment manufacturers. Customers who require reliable certified powertrains for their equipment platform. India's industrial and agriculture equipment ecosystem is large and growing. And there are multiple OEM segments where our engine capability is both relevant and competitive. We are also expanding into the genset market standby and prime power generator sets are a significant and a stable demand category across industry, agriculture, health care and infrastructure. In addition, we are seeing growing opportunity to export engines to markets in Africa, Southeast Asia and beyond, where demand for robust cost-effective powertrains aligns well with what we make. At this point, I want to invite my colleague and partner, Yuichi Kitao-san, our Deputy Managing Director and the representative of Kubota Corporation. To share his perspective, Cartoon has been at the heart of this partnership evolution. Kitao-san, the floor is yours.

Thank you, Nanda-san. Good afternoon, everyone. I am Yuichi Kitao, Deputy Managing Director of Escorts Kubota and the representative of Kubota Corporation in this partnership. I have experienced Indian markets for almost 7 years. And I would say friendly, India has totally thinks about resilience, adaptability and ambition that I could not have learned anywhere else in every company's journey. Long-term success is often shaped by a hurtful of important decision, decisions that are right for the future and executed with patients and conviction. And I believe we have made 3 such decisions. The first, the Kubota partnership began 6 years ago has evolved into something far deeper joint product development. setup of tractor manufacturing front and India's integration into Kubota's global supply chain. This partnership gets stronger every year. The second, one [indiscernible], the amination of our Kubota joint ventures into a single entity created an organization that is more agile, more efficient and more capable of executing unified 3 brand strategies. The benefits, simplified governance, operational synergies, first decisions are now visible in our numbers. The third, the greenfield, we have initiated a phased manufacturing expansion in Uttar Pradesh. One of the largest Indo-Japanese industrial investments in the states with long adopted secured and 2,000 core committed in the first phase. This is our platform for the next 2 decades, not just for India, for the world. India is not merely our home market. It is becoming Kubota's global manufacturing center of gravity and Escorts Kubota is the entity that makes that possible. Kubota Corporation was founded in 1890 in Osaka. For over 136 years, we have built equipment that service food and water, the 2 most essential needs of human life. When we chose to deepen our partnership with Escorts, we are making a long-term commitment to India. Not a financial position, strategic conviction. Kubota's midterm business from 2030 names India as our global growth driver. That language is deliver it. It means that when Kubota board in Osaka, [indiscernible] Kubota growth over the next decade. India is at the center because India is world's largest tractor market because India has the engineering talent the manufacturing capability and the cost of competitiveness to supply not just its own market, but markets across Africa, Southeast Asia and Latin Numeric as well as basic segment in Europe and North America and [indiscernible]. The combination of Escorts deep India expertise and Kubota's global technology is uniquely positioned to read that. Our R&D partnership with Kubota is deepening rapidly. The India business transformation project includes a dedicated R&D enhancement working group, running Kubota's product development and varidation methodologies and transferring them fully into e-tails engineering teams. The result is a robust product pipeline across all 3 tractor brands and construction equipment aligned with emission norms, precision farming and evolving customer productivity needs. Looking ahead, AGL and Kubota are committed to investing in was R&D infrastructure here in India. This is not incremental spending. It is a deliberate decision to build the engineering capability that will support product development for both the domestic market and Kubota's global export requirements. India will not just the manufacturing hub. It will be an engineering hub, and that is a transformation, I am genuinely proud we are undertaking together with Kubota. The Kubota production system is being implemented across our manufacturing facility. This is not simply an efficiency initiative. It is about strengthening quality, consistency and reliability. The attributes that earns trust of farmer who choose our products year after year, and expect them to perform in the most demanding conditions. We are establishing the knowledge models dedicated profit center responsible for maximizing product profitability for new product development that center estimate target costs and collaborate with relevant functions from the earliest stage of development. As a central function the [indiscernible] center will facilitate cross-functional alignment, set clear cost target and lead structured cost reduction initiatives across the organization. This directly addresses the margin gap between our current baseline and our midterm business aspiration. We are in the process of deploying digital platform across the full customer life cycle. Precision farming apps, Telematics based service diagnostic, genuine parts inventory management across 1,500-plus dealer touch points. We are also building integrated planning tools for our field sales teams, not digital for its own sake, digital in service of execution. And beyond our current digital platforms, I am pleased to share that we have developed an AI road map for EKL, the framework is designed to work within the EKL environment, practical integrated and directed at enhancing both analysis and execution. Escorts Kubota Finance Limited, our wholly-owned captive finance subsidiary is now operational. Together with our banking and NBFC partnerships, EKL is improving great access, approvable turnaround and financing customization for dealers and farmers. This is a direct enabler of retail throughput and long-term competitive advantage. It caused with something simple. The farmers we serve do not wait for the award to improve their situation. They work every day to influence them service, Our job is to be worthy of that effort through the quality of what we build and the reliability of our support. To the Kubota colleague working alongside EKL teams every day. I am proud of what we are creating together. The best of Japan and the best of India in one company. Thank you. [Foreign Language]