V.S.T. Tillers Tractors Limited (531266) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the V.S.T. Tillers Limited 4Q FY '20 Post Results Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities. Thank you, and over to you.

Thank you. Welcome to V.S.T. Tillers Tractors Limited 4Q FY '20 and FY '20 post results conference Call. From the management side, we have Mr. V. T. Ravindra, Executive Director; Mr. Antony Cherukara, Chief Executive Officer; and Mr. Chinmaya, Company Secretary. Management will make brief remarks on the quarterly results and the outlook as of now. And then we'll go for Q&A session. Over to you, sir.

Yes. Good afternoon, everyone. Happy to be on this call with all of you today. As you know, we -- a couple of days back, we have declared the results of the last financial year and the last quarter. From operations, we had a revenue of INR 543.68 crores with other income of INR 23.58 crores, adding up to INR 567.26 crores against previous year operational income of INR 614.8 crores and other income of INR 44.91 crores. Operationally, there is a drop of about 11.5%. And the total income, there is a drop of about 14%. On PAT, we are at INR 18 crores, against the previous year PAT of about INR 46 crores, where there is a drop of about 16 -- 61%. And coming to the volume, we have done 19,302 tillers against the previous year of 22,547 tillers. And on tractors, we have done 7,147 tractors against the previous year of 8,198 tractors. This is with reference to the last year. And for quarter 4 of last year, we have done 4,918 tillers in quarter 4 against previous year quarter 4 of 7,279 tillers. And tractors, we have done 1,470 tractors in quarter 4 against previous year quarter 4 of 2,123 tractors. This is overall figures for quarter 4 and the last financial year. As we have declared, the April, May numbers have been good. We expect the June numbers also to be good. There are supply side pressures. There are issues because of COVID-19, lockdown and migration of labor at our suppliers, but we are working towards resolving these issues. We expect this year to be better than the last year. With this, I would open up and open up the meet and invite questions from all of you. Thank you.

[Operator Instructions] We have a first question from the line of [ Nishith Shah ] from Aequitas PMS.

Sir, I wanted to understand what is the value breakup of tractors and tillers for Q4 and Q3?

Q4 and Q3, both?

Yes, both.

Okay. I'll -- just a minute. Let me just take out the data. I'll first give you the cumulative value for Q4 and Q3, with INR 120 crores for Q4 and INR 123 crores for Q3. Now coming to power tiller, in Q4, it was INR 68 crores and INR 51 crores in Q3. And tractors is INR 44 crores in Q4 and INR 54 crores in Q3.

Okay. And what would be our market share, sir?

Market share in power tillers, we have closed the year with about 46%. And in tractors, in the compact segment, we are at about 11%.

Okay. Sir, what would be the inventory at dealer level?

Dealer level inventory, I will just get back to you. Let me get that -- I mean, the simple answer is, the inventory has not gone up. In fact, the inventory has come down.

Yes. But in number terms, it would be good if you…

Yes. I'll just give you in a minute. In the meanwhile, you can go on to the next question.

Yes. Sir, I wanted to understand how much is the Chinese import for tillers.

0.

But that used to be significant a few years back, right?

It was a long time back, we used to import some percentage of it, but now it is nothing.

Not as the industry?

Industry. Oh, industry per se would be -- I would roughly say it would be about 30%.

Okay. And do you see this coming down?

See, there are a couple of things that has happened in the industry in the last few years. Government of India has made stringent provision for testing of these -- for availing subsidy, they have to test and get a certification. Only then they can sell and get subsidy. So because of which the inventory had -- I mean, sorry, the Chinese percentage has definitely come down. Now how would it play out in the future? I think the same issues continue. And currently, there is -- I mean, April and May, at least, there were some supply issues from China as far as I know and -- because of which the trend doesn't look positive for Chinese imports.

Okay. And sir, we won't be importing significant components from China, right, for us?

V.S.T. don't import anything from China. 0.

And at industry levels, are component import from China significant for tractors and tillers?

Some companies do import certain components like engine parts from China, which we are aware of. Some -- and largely, most of the companies are importing full power tillers from China.

Okay. Sir, in this tractors and tillers, so are the farmers getting fundings from NBFC now?

Yes, NBFC funding is okay, but I wouldn't say it is as high as what it used to be in the normal period. Currently, it is a little -- there are challenges because of the operation and doing a first level investigation by the financier itself is tough because the financier person has to travel to the village and do the FI done. Because of all these factors due to COVID-19, it is slightly low, but I would say, in the month of June, it is definitely better than what was happening in the month of April.

Okay. And sir, in terms of realization, are we facing any pricing issues? How are our realizations for last 1, 2 months?

We have no pricing issues. Our realizations have -- are not under pressure at all.

Okay. And sir in tractor, in which HP are we seeing higher demand?

See, we are predominantly a compact tractor player. So we mainly sell tractors from 18 horsepower to 27 horsepower. As you know, we have in the recent past, launched higher horsepower tractors. I would say, slowly, we are building volume on that. In the compact tractors, we are seeing more demand currently for the 18-horsepower and the 27-horsepower.

Okay. Sir, in other expense this time, so our other expense was higher INR 26 crores -- 26% to INR 33 crores. So any particular reason?

Other expenses -- can you repeat the question?

Other expense this time was higher by 26% than last year.

It is basically because of 2 reasons. One is the bad debt, and the second is because of the fair valuation.

Yes. So you know that fair valuation is roughly about INR 12.2 crores, fair valuation loss. And then there is a higher…

INR 8.1 crores.

Provision for doubtful debt, which is at about INR 8.1 crores.

INR. 8.1 crores. Okay.

[Operator Instructions] We have next question from the line of Nikhil Rungta from Nippon India Mutual Fund.

I have couple of questions. First is, what is our road map for the new product, specifically, like in tractor segment, in compact as well as the new segment, which is more than 30 HP, which we are doing in tie up with Zetor? And what would be our road map for new products in tillers?

So I lost you for a bit in the beginning of the question. So let me just kind of corroborate with you whether your -- line of questions, so I'll just repeat what you asked. You asked me for the road map for higher horsepower tractors, especially regarding the V.S.T. Zetor tie up, that is one. And then you asked for road map for tillers, right?

Right. And also like what would be road map for new product in the existing compact segment of 18 to 27 also. Are we planning any new products there?

Okay. Okay. So in the higher horsepower space, as you know, we have launched 45-horsepower and 49 -- or rather, 50-horsepower segment, we are present now. And we have tied -- and that is under the V.S.T brand of tractors. And now we have also a tie up with Zetor, where we are jointly launching products. Currently, these product plans are being drawn up. And be -- as I have said earlier, we will be in the market by end of 2021. And coming to compact tractors, we have launched a 30 HP compact tractor, also a new variant in the 27 HP for high torque, called the High Torque variant, the 27 HP HT, as we call it. Also, we are feeding 17-horsepower in specific markets. These are the 3 new products that we have launched in the compact space in this month, actually. And in the power tiller space, we have launched the 16-horsepower power tiller. And as I have said earlier, we are working on a product, which would come to substitute for the subsidy that is being offered by the government. That we have not launched it now, but we will be launching very soon. That is the plan in the power tiller space.

Okay. So in this financial year itself, you'll be planning to launch that particular tiller where in subsidy -- it would be subsidiary neutral, right?

Yes. That is right.

Right. And sir, my second question is, are there -- what are the plans for exports in both existing product range as well as in the future product range?

See, as probably you know already, we have set up our distribution network in Europe. And last year and this year, we continued to consolidate on our network in Europe. And further, we want to expand in the Eastern Europe. So that has been our primary focus as far as compact tractors are concerned. For power tiller, we are focusing on the neighboring countries, as I've said before, and we are in the process of appointing distributors in all our neighboring countries.

Okay. Okay. And sir, my last question is what would be our CapEx plan?

CapEx, as we said and declared earlier, we had a CapEx plan of about INR 235 crores, of which we will be completing the complete CapEx spend this year. Also, we will be spending additional INR 25 crores to INR 30 crores on new products this year.

Okay. So for this year, the total would be approximately INR 260 crores to INR 270-odd crores?

No. No. The leftover of INR 235 crores, which will be roughly INR 40 crores and additional INR 35 crores of this year. So roughly, you can take it as roughly INR 275 crores.

We have next question from the line of Arjun Khanna from Kotak Mutual Fund.

A couple of questions. The first one on the power tiller side. In terms of growth guidance, what kind of numbers do we expect for the coming 2 years? If I look at it in the past 5 years or maybe 7 years, we seem to be at the lowest at this year at 19,000 odd units. So what's the sense in terms of subsidy and other payouts and thought process of growth for the year?

Yes, you're absolutely right. Subsidy is a major driver for the power tiller growth because almost 90% of the sales is decided by the amount of subsidy that is being given by the Government of India. So last year was not good on the subsidy disbursement from the government. And hence, we saw the loss of volumes. Also, we had a loss of volume due to the abrupt lockdown in the month of March. And this year, we find that the subsidy is likely to be lower than last year because the funds are likely to get diverted for COVID-19 and other purposes of the government. So we expect the subsidy outflow to be lower. As of now, as I have -- we have declared in April and May, you've seen the numbers, it is looking up, but we are seeing second half, which could be quite subdued because of the subsidy not being there. That is our view on subsidies.

Sure. But do you have a sense on what kind of volumes do we expect for this year?

So we are looking at a volume, which is slightly better than this year because, as I said earlier, we have prepared a subsidy neutral product, which we have not launched it yet. Currently, the demand is there. So we will be launching it in the second half of the year. So we expect to grow better than last year.

Sure. Sir, we also talked about in the previous con calls of how margins should look higher for the company from current levels. So in the first quarter, like you did mention, we had roughly INR 20 crores of one-off and other expenses. So if one adjusts for that, we see margins move closer to high single digits. Sir, what's our outlook for the next year in terms of FY '21?

Sorry to interrupt you. I'm not able to understand what you've just asked. I'm not able to hear you clearly.

Sir, let me repeat my questions. In the earlier conference calls, we had talked about margins trending higher from current levels. Given this COVID-19 environment, do you think that guidance of margins moving up holds?

See due to COVID-19, there is no influence on margins currently because the agri segment is looking up. And this is not only for us, this is for the entire industry, it is looking up. So we are also not under margin pressure, but these are unprecedented times and to predict exactly what would happen in Q2 or Q3 would be very difficult at this point in time. Right now, we don't see any margin pressure.

We have next question from the line of Alok Singh from BOI AXA Mutual Fund.

I have 2 questions. First is, in terms of the competition, which you used to face from the imported products, what is the status of that, if you can put some color? Secondly, when you say subsidy-neutral products, so are these any different kind of tillers? Or you're just trying to rebrand them differently? What's -- can you explain that, please?

Yes. So let me answer your first question. As far as competition import is concerned, roughly, it's about 30% in the country and predominantly being imported from China in the power tiller segment. And there are several players, I wouldn't -- I mean there are several names. And every year, there are some new names because there are some importers who would go and get it from China and then sell it in India. However, with the stringent norms from the government of India, what we have seen, as I said earlier, is that this trend is coming down because it is very difficult now for these machines to pass the government test that has been put in place to enroll themselves in the subsidy. So -- because of which the importing trend we are seeing is definitely coming down. The second -- yes, subsidy. Your second question was on the subsidy-neutral product. Yes, definitely, it is something that we have worked on. There is some amount of innovation to it. But it is the same power tiller, which is completely functional just as the same power tiller that we are selling today. It will be complete value for the farmer. It is only that through strict cost controls and better mechanism and a little innovation on the product front, we are able to bring down cost and hence create a subsidy-neutral product so that we can ensure that this segment of farm mechanization keeps growing in this country.

Hello. Hello, am I audible?

Yes, you are.

So what I -- as a percentage, if you can guide how much cheaper this product would be in terms of the present pricing?

How much? So it will be subsidy relative. We -- I won't be able to mention the price right now because it is of strategic importance at this point. I won't be able to spell that out now. But definitely, I did say subsidy neutral.

But you will be able to maintain your margins in this?

Very -- quite decent margins, I would say.

We have next question from the line of [ Sameer Narayan ] from Invesco.

Could you just throw some light as to how will the HP market that you launched products in last year, which is namely the 45, 50 degree -- 40, 50 HP, how are they shaping up? And how are we facing competition there?

Yes. So the -- last year, we sold about…

229.

229 of our larger horsepower tractors, which was from the previous year, roughly 60, 70 tractors we sold. So last year, we sold about 229. This year, definitely, we want to scale up production of these tractors to above 1,000 tractors. That is how we are going about scaling up these products in the market. The key driver is we have to expand our channel because we have not had presence with our channel in the higher horsepower markets, predominantly higher horsepower markets, like it's Uttar Pradesh, Rajasthan, Madhya Pradesh and the entire Northern belt, we have not been present. So these areas, we are building our network now.

But in case the supply chain is being expanded there, so therefore, would you mean that when the dealer network gets set up, so your working capital cycles will tend to elongate at least in the short term?

So there is no issue on the working capital because our scale-up is very little. And of course, the credit policy remains as strong as ever, and we have not changed that for this new category of play that we are getting in this.

We have next question from the line of Mukesh Saraf from Spark Capital. Sir, I'm sorry to interrupt, we can't hear you very well. Please use the handset.

Yes. Is it better now?

Yes, it is better, Mukesh.

Okay. So the first question is just a clarification. So this INR 12.2 crores plus INR 8.1 crore of mark-to-market losses plus provision for doubtful debt, all of this is being done only in the fourth quarter, sir? Or is there something obviously which was done in the previous 3 quarters?

No, fair to -- loss in fair market valuation is totally dependent on the market fluctuations that you know. So…

No, no, no. Sir, my question was provisions…

If you are asking me about the provision for doubtful debts, out of INR 8.2 crores, roughly about INR 7 crores has been provisioned for in quarter 4.

Okay. No, I understand that. And the INR 12.2 crores is entirely in this quarter only -- in the fourth quarter only?

No, not like that. [indiscernible] has already mentioned.

Yes, it is based on these fluctuation -- quarter-on-quarter fluctuations. The exact amount in quarter 4, I can get you in a minute. Yes, INR 9.62 crores is in quarter 4.

INR 9.62 crores, sir?

Yes.

Okay. Okay. And just a question on the higher HP tractors. Like you said, from about 60, 70 tractors in 2019 -- FY '19, you scaled up to 270-odd in '20. And this year, you're looking to scale it up to 1,000. Apart from the dealer network, what's the USP there? Are you going to be kind of trying to price it lower than the competition because there are a number of players in that segment? Some are priced premium, some are in the low cost. So what's the target there? And how are you looking to scale up these units?

Yes. So I think I have answered this before, Mukesh, because what we are offering from the V.S.T. range of higher horsepower tractors is a value for money product. So you will see this is -- if you look at the pricing at which we are selling the product, we are selling this product at -- with reasonable features like an oil-immersed brake, with power steering, with all the features which normally come in a premium tractor at a value-for-money positioning. So this we are able to manage, and this is what we are doing in the market. And as I've said before to you also, the premium tractors will come from us through the V.S.T. Zetor tie up.

Okay. Okay. Okay. I was just confused there. Okay. I got that. And my last question is regarding the gross margins. So last 2, 3 quarters, we have been mentioning that there are certain prototyping costs involved in that, and hence, the raw material costs are higher. This quarter as well, it is about 67%. So when could this, say, go down to your earlier, 64%, 65% range that it usually was at. So from when can we see that these prototyping expenses, et cetera, will no longer be there?

I am not sure 67% is what quarter 4, but I'm just checking that. But, however, I can tell you, you would have seen a downward trend as far as the raw material costs are concerned, and this will continue. We expect better results in quarter 1. And this is what I had told you a couple of calls before, we will be back to normal levels by quarter 1.

Okay. So we are on track for that?

Yes, we are on track for that. We are roughly at about -- see, to per se say, we are at 64.6% in quarter 4 already. So I just got the figures out, it's 64.6%. Although material costs per se look 62.6% on the results, but there is a valuation adjustment of about 2%. So it is about 64.6%.

Okay. Okay. I'll just look at those numbers. Right. So basically, we are seeing a downward trend there, right?

Yes.

Yes.

We have next question from the line of Kunal Sabnis from VEC Investments.

Just wanted to understand this fair valuation loss is entirely on the equity investment?

Mostly, it is on equity. And there is something on DMF side as well, little.

Okay. And in terms of these bad debts, if you could throw some color? I mean, is this in the normal course of business? Or this is something special related to some specific problem that has happened?

So we have earlier also mentioned to you, subsidy not coming through in certain states, especially in Andhra Pradesh and Assam. So this payment has not come through even in the last year. And this is the reason, based on our policy, we had to provide for this amount.

Okay. So is there any more backlog left in terms of subsidy? If you can provide a number or something?

There is a little more left, but hopefully, we should be able to -- fingers crossed, we should be able to recover this whole thing. But we will continue to follow our credit policy and accordingly look at this. It is not -- we are not saying this money is never going to come, but it is from the government, so it is going to come, but we will follow our policy and accordingly provide for in the doubtful debts.

All right. In terms of the tractor sales, especially on the compact side, have you seen any pickup in Gujarat, Maharashtra which are your major states for sales?

Yes. In the first quarter, we are seeing a pickup in this financial year. In fact, I would like to ask you, what are you hearing from the other players?

So we have heard that the pent-up demand is picking up -- is there. But is -- the sustainability is a big question mark.

That is the same here. I mean I wouldn't differ at all from what they said. Sustainability is a key issue because, as I said earlier, predicting for the next quarter, in this juncture, is very difficult.

Right. But in this pent-up demand, you have seen Maharashtra and Gujarat pick up?

Yes. Yes.

If I could just confirm the higher HP tractor sales numbers, it's 429 for the last year, right?

It's 229.

229.

229?

Yes.

Okay. And finally, sir, on the exports front, how long will it take for us to tap the Zetor supply chain and sell through that?

See, we are already working with them, especially for Eastern Europe. So we should be able to enter into the Eastern European market this year.

In this year?

Yes.

We have next question from the line of Shashank Kanodia from ICICI Securities.

I just wanted a clarification. This fair value MTM is adjusted for -- from other income, right?

Yes.

So your other income of -- that you reported for the year, INR 23.6 crores, is lower by INR 12.2 crores because of the MTM?

Correct. I mean, whatever loss, roughly about INR 6 crores to INR 8 crores from the previous year.

Okay. Right. Second, sir, on the power tiller market share, right, so I think 2 years back, we used to enjoy a 58%, 59% market share. And now we are reporting 46% market share. Could you please help us understand why is such a decline for us?

Yes. I'll tell you, see, in FY '19, we had only 44% market share. In FY '20, in fact, we have improved market share by about 2% at 46%. In fact, until February, we were at about 50%. However, in the month of March, to the abrupt lockdown, we couldn't complete billing compared to some of the other players who could do that. So we -- the final market share was at about 46%. However, I'm happy to say, April and May, we are back at above 50% market share.

Okay. But sir, from FY '17, '18 to 55% plus levels, what led to the sharp decline to 44% in FY '19?

We have shared this before. FY '19, we did a credit control during the year FY '19. And in fact, in some period of FY '20, we continued to do that. Now we have adopted to -- or transitioned to the completely new credit policy that we have implemented. So specific reason in FY '19 is tight credit controls.

Okay. Okay. And sir, lastly, on the margin front, right? So till FY '18, we used to clock healthy 15% plus margins, which dropped to roughly 5% adjusted this year. What's the kind of trajectory that we are looking going forward? And what are the key results for such a sharp decline in margins over the last 2 years?

Yes. As you know already, we had material cost pressure due to several new launches, which I have said before. Now we are kind of stabilizing on that. The one-off expenses that we have had in terms of provisions for debts and also the fair market value loss always should be one time is what we presume. And we expect to be back to normal sooner than later.

So normal rate would be roughly 15% margin range, right?

15%, and this situation is very difficult to predict, but definitely, we should be closer to that.

Okay. And this should start from Q1, this quarter, itself?

Of course, that's what we are working towards.

Okay, okay, okay. Understood. Sir, just last one thing. Sir, supposedly, there's antidumping duty on Chinese imports. So how well are we placed to capture this opportunity? And also, are we open to contract manufacturing for other players who are selling them -- selling under their own brand?

See, we are open to that. In fact, we are in very preliminary talks with a couple of people on that front. So I can't divulge anything at this point. However, antidumping duty, I'm not too sure how it is going to be. Because the power tiller industry has already stopped importing, as I said, because of the stringent test measures that was put in place by Government of India. So I don't know how much influence that will have on the industry going forward.

Right. Sir you mentioned…

One thing I can tell you. As far as Indian consumers are concerned, I'm quite sure being in the rural market for all these years, and people have already tested and tried Chinese imports and most of them are getting back to better quality products. And they clearly understand the difference, and they are kind of recognizing that much higher today than previous. I would say, 3 years back, it was quite different. But I can see today that there is a large amount of awareness among rural consumers about Chinese products.

Right. Right. And sir, just one last thing. Sir, I think the company's CFO resigned 2 years (sic) [ days ] before the company reported the results. Anything that the investors should be worried about?

No. It is coincidental that he left a few days before. It is purely due to his personal reasons.

[Operator Instructions] We have next question from the line of Ritika Gupta from Aequitas Investments.

Sir, I wanted to know what is the share of imports in the tiller market. And have the dealers for the other players started selling in the domestic market, for the Chinese players?

I didn't understand the second part. Can you tell me the second part?

Sir, I want to know whether dealers for John Deere, et cetera, have opened up in the rural market? Like is it import substitution that is currently favoring us?

No, not really. As I said, repeatedly, 30% used to be the imports in power tillers earlier. Now it is coming down. In tractors, there is no imports at all, everything is manufactured in India.

I am talking about only tillers.

Yes, yes, tillers, there is no -- I mean, the trend is lower and lower every year. And I doubt going forward, imports would play a larger role in the power tiller industry. Secondly, are we benefiting from laws of imports? I don't think so because, see, the mechanization in the small and marginal farmer trend is still very low in our country. And a large amount of farmers are -- there is a few hundred million farmers who are involved in farming, but roughly, the tractor population is only about 14 -- 4 million, that is about 40 lakhs. So there is a long way to go in terms of adequate mechanization happens in this country. And leave out the tractors. If you look at only small and marginal farmers, which is roughly about 70% to 80% of farmers in India, still don't have affordable mechanization. So I don't see this dropping, but I see definitely a shift happening towards more affordable machines. And that is where we are talking about subsidy-neutral products, we are talking about power wheelers and stuff like that.

So do you think that down-trading is happening, that's why the tiller market is growing?

Tiller market is growing typically because today, many people are adopting mechanization due to multiple reasons. One is availability of labor is scarce, cost of labor is high. Affordable mechanization in terms of 15 to 10 horsepower range, the only thing that is available is a power tiller. So all these issues put together, that is the reason the power tiller industry will grow. However, the subsidy has played a large role because I've tried to explain this before also in one of the calls because in the rural setting, getting a subsidy is not only about affordability, but it's also about being smart. Somebody who hasn't got the subsidy, he's kind of looked down upon [Foreign Language]. That kind of emotion plays out in rural India. And that is something I don't have a tangible measure or a survey. But definitely, when I go into the rural markets, I get to see this a lot.

And do you think financing is available for the farmers right now in rural India? Is it amply available? Or do you think they're having issues?

No. Financing, as I said, has improved from April to June. Definitely, there is a definite improvement because people have found out -- at least some areas, they have found out digital ways of working to make financing available. But still the FI has to be done physically. So the person has to travel to village. So every company, every NBFC is taking precautions, using masks, using sanitizers, all of that, maintaining social distance and still visiting villages. That is still happening. And I see it improving.

Okay. And what measures are we taking to reduce our bad debt? And could you give us the breakup of bad debt? Like how much of it is pertaining to tiller? And how much of it is pertaining to tractor segment, if we could get that?

Yes. So INR 8.2 crores is our bad debt, as you can see. And there is something from the previous year of about INR 6 crores. Yes, so roughly, I would say, 60% of it is -- 60% to 70% of it is from tillers and 30% to 40% is from tractors.

So sir, what measures would we take going forward, if any, like, so that we can control these costs?

Of course, as I said, subsidy is the major impediment in this where the government -- some of the state governments have not paid their subsidy dues. And this is not only our case. This is a case with every other industry player. So some of the -- like, for example, the state of Andhra Pradesh has not really released subsidy for any tractor player. So -- however, as per our credit policies, we are putting into -- but as I said to one of the previous questions, that we don't see this being completely written off because as the government pays, we will be able to realize it.

I know. But this year is anyway looking tough, right, for the government to pay, to clear subsidy?

Yes. As it is a state subject because -- see, if you -- if this was in Maharashtra, I would have definitely agreed to you immediately. Because I know Maharashtra is fully focused on COVID-19. But that may not be the same story for an Andhra Pradesh because his fight with COVID-19 is not as severe as Maharashtra. But definitely…

Tamil Nadu is focused on COVID.

Yes. Tamil Nadu is. Yes, so that's why I'm saying it is state dependent. So I think we'll have to wait and watch.

[Operator Instructions] We have next question from the line of N. Puranik from ENAM Securities.

I have a question relating to the new product launch you have talked about recently, subsidy-free product. I want to understand about the design engineering, the reverse engineering you have gone through to launch this product. And especially the supply chain, how do you manage supply chain volume and cost? And is it a durable product as far as subsidy battle is concerned?

Yes. So in the last 3 to 5 years, we have been investing heavily on R&D. We have a large R&D team of more than 60 to 70 engineers. We have a complete protoshop equipped with all the softwares that is required. We have all the physical testing machinery, we are upgrading it, including engine testing, transmission also we are putting up. So R&D related, we are -- we have set up a complete end-to-end R&D to roll out platforms from our R&D facility. So that's your first -- and as far as all the products that we build are durable and looks at unique value proposition that we want to offer to our farmers. For example, in our 30 HP Compact, this is the most technologically advanced compact tractor in the 30 HP segment, which is a complete synchromesh gearbox, which is fully indigenously developed by V.S.T design engineers. We have developed our own hydraulics, both in the 500 kg and the 750 kg category. Also, in the higher horsepower products, we have a complete range of tractors, in the higher horsepower, which is a 45 HP and the 49 HP, which is also indigenously developed. And we have also tied up with Zetor to joint develop products, wherein the product will be jointly developed between the engineers of V.S.T. predominantly and with input from design engineers from Zetor.

From a BOM cost perspective, how is that faring, the product economics?

As far as the BOM cost is concerned -- considered, we are quite competitive every -- of course, but every new product, as you know, moves from development stage to a proto stage to a production stage. Some of our products in initial quarters were in the proto stage and we had launched into the market, and that is why I kept mentioning that we are under pressure on margins due to proto cost. And now those products have moved to the production stage. And you can see like I mentioned to the previous caller that the material costs are coming down, and it will continue to come down. But as long as we continue on this journey, what is more important is we will have a continuous line of products and unique value proposition, which is being offered to the farmer continuously from V.S.T.

And what's the current volume on this product, this tiller?

Tillers, we make about -- last year, we sold about close to 20,000 tillers. Exact number, I've told in the beginning of the release, it's about 19,500-odd. And this year, we expect a slightly grow in that segment. Tractors, we sell about close to 8,000 tractors. And we expect to grow…

What's the volume on the new launch that you have made, the tiller, that new launch we talked about, the 0 subsidy product?

Tiller, we are launching in this year. So this will be launched this year. So the volume, we will declare it properly in the subsequent calls. And also the new tractors also we have launched early in the first quarter, so we will -- probably in the subsequent calls, we can revert to you.

In a period of 2 years' time, do you think the whole company will move towards the low-cost emission product portfolio?

Yes.

Yes, we are working towards ensuring that we are up to mark in terms of emissions. And in fact, that definitely doesn't look at like a problem to us at all.

And the receivables, your selling terms are getting better now?

Definitely, yes.

So what are the credit terms you offer today?

Credit terms…

How many days your receivables are getting right now?

No, it is based on the security of what is being in the credit policy. We have talked about bank guarantee and deposits and security. So we don't want to extend any free credit. It's all securitized credit we will be offering in the market.

We have next question from the line of Ronak Vora from AUM Fund Advisors.

I joined late into the call. Can you give me the volumes for the tractors and the tillers for the current quarter and the year basis?

Yes. Just a second, I'll just open it up. Just a minute. But we can -- if you have a second question, you can ask that in the meanwhile.

Okay. And secondly, I also missed, what are the new launches that are coming up for the quarter?

We have launched the 30 HP, 17 HP and 27 HP High Torque variants. These are the 3 products that we have launched in quarter 1 in the compact tractor space. And on the power tiller, we have launched the 16 HP power tiller. So these are the launches in quarter 1. And also, I have said that we are ready with the subsidy-neutral product in the power tiller segment. But we have not launched it yet. Now coming back to numbers for you. Last year, we did 19,302 tillers cumulatively and 4,918 tillers in quarter 4. And in tractor, we did 7,147 tractors and 1,470 tractors in quarter 4.

Okay. And for the current year?

Current year, we have declared April and May figures. For April, the figure of tractors is 328 and May is 633. And for power tillers, 762 and 1,750.

Ladies and gentlemen, due to time constraint, that was the last question. I'd now like to hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities for closing comments. Over to you, sir.

Yes. We thank all the participants. We thank V.S.T. Tillers management for sparing time for the call and providing us the opportunity to host the call. Thanks.

Thank you very much. Thank you.

Thank you very much, sir. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.