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

Ladies and gentlemen, good day, and welcome to V.S.T. Tillers Tractors Limited Q4 FY '21 Earnings Conference Call, hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Hitesh Bhargava from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.

Thank you, Steve. Good afternoon, everyone. Welcome to V.S.T. Tillers Tractors Limited 4Q FY 2021 Post Result Conference Call. From V.S.T. Tillers management, we have with us today, Mr. V.T. Ravindra, Managing Director; Mr. Antony Cherukara, Chief Executive Officer; and Mr. Pankaj Khemka, Chief Financial Officer. I will now hand over the call to V.S.T. Tillers Tractors management for their opening remarks to be followed by Q&A session. Over to you, sir.

Yes. Good evening, everyone. I'm Antony Cherukara, CEO of V.S.T. Tillers Tractors Limited. And with me is Mr. Ravindra, Managing Director; and Mr. Pankaj Khemka, who is the CFO of the company. So for the year-end results of financial year '21, we had an income from operations of INR 764 crores, INR 764.24 crores, which is a 40.6% year-on-year growth. And with an operational EBITDA of INR 105.26 crores, which is 13.77%, which is excluding the extraordinary item, which is the employee VSS of INR 13.49 crores. And in the quarter 4, we had an income of INR 194.74 crores with an EBITDA of INR 21.33 crores, percentage of 10.95%, which again excludes the extraordinary item of employee VSS, which is at INR 13.49 crores. So this is in brief the results of the company for the last financial year. Some of the highlights, which I would like to present to you. The company achieved the highest ever turnover of INR 764.24 crores, previous high was INR 763.95 crores in FY '18. The EBITDA percentage increased to 17.01% compared to 7.2% previous year. As I said earlier, the operational EBITDA is at 13.77% compared to 3.19% in previous year. The PAT is at INR 19.78 crores, which was previously at INR 18 crores, which is a growth of 479% year-on-year. Coming to the highlights of quarter 4. The company achieved a turnover of INR 194.74 crores in quarter 4 FY '21. EBITDA increased to 10.57% compared to minus 1.28% in the previous year. So operational EBITDA is at 10.95%, which I shared with you earlier. And the PAT for the quarter is INR 12.93 crores against previous year negative INR 3.38 crores, which is a growth of about 483% year-on-year. This is a brief of the performance of the company of FY '21. Now we are open to any questions that you may have. Thank you.

[Operator Instructions] The first question is from the line of Hitesh Bhargava from Batlivala & Karani Securities.

Sir, you have indicated that there is a one-off of INR 13.49 crores for the VRS provision. Where exactly is this is under employee expense or other expense?

This is under employee expense. If you see the P&L, you will see INR 81. odd crore employee expense, it includes this INR 13.49 crores.

Okay. Sir, when we talk about 4Q performance in 4Q, other expenses are a bit higher than your average -- I mean, normal average. Is there any one-off? Or how -- why is it a bit higher?

Yes. In quarter 4, if you see it at about INR 25 crores, there are 2 things in that. One is the CSR expense of about INR 3 crores, which has come in this quarter. And then there is about INR 2 crores, which is interest that is not received and which has been written off.

Okay. So any more write-off pending at this particular item or all the provisions?

No, it is not pending. Nothing is pending.

Okay. And coming to your VRS scheme, which you have started, post this VRS scheme, what could be our average employee expense for quarter?

The employee expenses gone. I mean, with the Bangalore operations shutting down, it will be a INR 30 lakh expense, which will come down per month.

Okay. Okay. Sir, can you help me a few bookkeeping questions, Tiller and Tractor revenue? And also what is our market share for FY -- I mean, 4Q and FY '21, Tiller market share?

Tiller market share, Q1 FY '21, we are at about 58% as of now. Sorry, you're talking about FY '22, right?

No, no. I'm asking about 4Q and overall FY '21.

Overall, FY '21, we closed at about 53% market share for tillers. And the revenue from tiller was cumulatively at INR 387.4 crores, and quarter 4 was INR 105.84 crores.

INR 105.85 crores?

Yes. 84.

Okay. And tractor revenue and space?

Tractor revenue was at INR 288.63 crores for the year. And for quarter 4, it was INR 67.41 crores.

Okay. Okay, sir.

Parts at INR 82.68 crores for the year and quarter 4 was INR 20.16 crores.

The next question is from the line of Chetan Cholera from Pragya Equities.

Yes, congratulations for a good set of results for a full year. Sir, I just wanted to know what kind of area we have at Bangalore land?

Land, you're asking for the area of the land?

Yes, area of the land and how much square feet we can construct on them and how we want to go whether we want to go is it -- we want to develop as JV we will develop of our own?

We have about 20 acres of land, but we have no plans of developing it at the moment. And you would perfectly agree with me that this is not the right time for any development.

Okay. And this VRS spend, which we did need like INR 13.49 crores that is all over or there will be some more in first quarter also?

It is all over.

Okay. Can you elaborate more on the tractor development horsepower you suggested more than 36 horsepower. But any more comes under agreement and time frame and...

Yes. So we have -- currently, we are in the product development phase. This MoU was signed about a year back with Zetor. There's a lot of work going on, product finalization, product design. All that work is happening simultaneously. Now we have proceeded. We have put pen-to-paper on the product development agreement. The first phase -- the first platform from V.S.T. Zetor will be launched in next financial year, which will be followed up by at least 2 more platforms in subsequent years. So cumulatively, in the next 3 years, we will be launching anywhere between 6 to 10 tractors from this JV alone. We also have, as mentioned in the MoU, we worked together with them for various opportunities with include sourcing from India, which also includes exploring the European East European market, along with them. for V.S.T. tractors. So this is in brief the work with Vitol.

How much cash or -- we have at our mutual fund window at end of the year '21?

Mutual fund investment total cash in hand -- cash and cash -- I mean, investment is at about INR 283.4 crores as of 31st March. And cash and cash equivalent is about INR 28.82 crores.

That one loan [ reshape ] of interest is what exactly is it?

That is an overdue interest from dealers, which is related to the subsidy outstanding that we have spoken to you about earlier as well.

The last follow-up question, like what exactly we want to do of that land, whether are we going to develop our own [ debt ] or you might have decided sell?

No, we will see, there's a potential land we'll have to unlock its value. Definitely, we will do it. But the only point I'm saying is that this is not the right time, so we are -- we will, at the opportune time, definitely look at it.

But development or selling land itself or how?

We have not decided that yet.

The next question is from the line of Mukesh Saraf from Spark Capital.

So my first question is on the tillers business. Could you give some sense on the last FY '21? How has the...

Mukesh, your voice is not clear, Mukesh, can you probably -- you're wearing a mask or something?

Just a second, sir. Yes, is it better now?

Yes, better, better.

Yes, sorry. So on the tiller, see the sales that we are doing without the subsidy, how has that panned out, say, in the last quarter? And in general, how is that situation, do you see that continuing irrespective of the state government subsidy, do we still see the sales of tillers still doing well?

Yes. The subsidy has been going down and the story has been the same last year as well. Subsidies did not -- and most of the state governments diverted all the funds to fight COVID. That story continues. But as I've said before, there is a trend change in the market that continues. The retail sale is increasing. The cash sale is as high as 40% to 50% now. And finance sale is about 5% to 10% on a monthly basis now, and it has become kind of consistent now.

So we can assume 60% of the tillers are sold without any subsidy right now, sir? 60%.

Absolutely. Absolutely. As I've repeated before, Mukesh, the customers, it doesn't mean that the customer doesn't avail subsidy. He definitely applies for subsidy. But unlike earlier, he doesn't wait for the subsidy to come to purchase anymore.

Understood. Right right. And secondly, the other B2B kind of business that we were targeting on the tiller side because of the Chinese -- the restriction on Chinese tillers. Any update on that? You said that by year-end, you were leading to tie up with some more?

Yes, Mukesh. We have tied up with 2 OEMs, and we have begun supplies already.

Right. And what volumes do you think we can do, say, for the whole of the next year on this B2B business sir?

We are looking at something like 3,000 number.

3,000. Okay. But this should still be less than what they were earlier importing from China?

That's why I said we are conservatively looking at 3,000 numbers. It could be higher as well. But minimum, I'm looking at 3,000 numbers.

Right. Right. Okay. Got that. And secondly, on the tractor side, I mean, last year also, we had launched some of our higher HP tractors on the 47, 39, 45, that HP. We're still seeing that greater than 30 HP segment for us is maybe last 4 months has been on an average around 50 units a month. So what is the situation there? It had touched 100 a month earlier, so we're expecting some scale up there. So is there any kind of hindering for that scale up?

There is no hinderance for the scale-up. We have just moved from Bangalore to Hosur. So very soon, you will see the numbers crossing 100.

Okay. But on the product side, the feedback, et cetera, there is no changes that is required, et cetera, that you -- from the customer side of view?

No, absolutely. The product is very well accepted in the market. I'm very happy to say that last year, we have done close to 1,000 number of these higher horsepower tractors compared to previous year of about 260 numbers.

Got it. Right. I think this is what I want to check right now. I'll get back into the queue.

The next question is from the line of Nishith Shah from Equitas Capital. Mr. Shah, if you can take the phone off speaker, please?

Yes. Is this better now?

Yes, yes.

Yes, sir.

Sir, I wanted to understand what kind of price hike have we taken in Q4? And what are our plans going forward?

Cumulatively, we have taken a price hike of about 4% to 5%. But in Q4, precisely, we have taken only about 1.5% to 2% the balance we have taken in quarter 1. And we are watching inflation closely. So we will keep watching that. And of course, we have -- as I said before, we have a lot of cost reduction projects going on. We are trying to see that how we can manage this inflation based on those projects.

Okay. And the second thing I wanted to have a clarification that our tillers value number is INR 106 crores for the quarter, right?

Correct.

And this includes the sale to the OEM guide?

That was very little in quarter 4, but more numbers are happening going forward in this financial year.

That will be included in tillers and not the other part also going forward, right?

It will be included in tillers.

Okay. And sir, that will again be counted in our tillers monthly sales, which we give...

We will include it in the monthly sales, but we will not include it in the market share calculation.

Okay. Understood. I wanted now a few data points. Can you help me with our dealer addition for the quarter?

Cumulatively, we have added 155 dealers in the power tiller business and about 110 dealers in the tractor business last year. Out of that, about 60 odd dealers in the tillers has come in quarter 4 and about 30-odd dealers in tractors have come in quarter 4.

Sir, can you help me with the inventory at dealer level?

Inventory at dealer level is at about 40 to 45 days.

This is for both tractors and tillers?

Tiller will be at 45 days and the tractor will be slightly lesser at about 30 days.

In general, this -- so now there is no inventory concern for the industry also right now, right?

Absolutely not. We don't have any concern on inventory.

Okay. And sir, last thing, how many higher HP tractors did we sell in Q4?

In Q4, we sold 207 tractors, 2-0-7.

The next question is from the line of Kaushal Shah from Dhanki Securities.

This is Kaushal Shah from Dhanki Securities. Sir, I had 2 questions. If you can share some thoughts on the weeder product that we had. If I remember the last few calls, you had mentioned that the response has been very good. And so if you can just share some more color on that? And -- yes.

So power weeders was last year was the first year, and we have done close to 1,800 numbers last year, which is good for the first year of our business. This year, we definitely will be growing exponentially in that business.

And the other question was on this -- in response to an earlier question, you were regarding the Chinese tiller and the B2B business. If I remember, you had mentioned that the per annum numbers can be significantly more than the 3,000 that you just mentioned. So are we being a little conservative? I think if I remember the number that you had shared earlier. So that...

You know very well given today's circumstance of COVID, we are not comfortable in giving any forward-looking numbers. But I think 3,000 would definitely happen. So because we have orders and we are kind of processing it. So that is why I said the minimum of 3,000 definitely would happen. But given the situation today, giving a forward-looking number is quite difficult.

Right. And one final question, sir, on the subsidy-neutral tillers. So we were trying to push that product also. So if you can just share maybe some numbers on that out of our total tiller volume, what was that percentage?

Yes. So if you remember, I had very clearly said we'll keep a close watch. And if the subsidy dependency doesn't go down, we will push that more. But interestingly, what has happened last year is the subsidy dependency has gone down, like I mentioned to one of the previous callers that almost 60% in sale is happening without subsidy now. So we have done only about 300 numbers last year of the subsidy-neutral product. And the only reason for that is we didn't feel the need for it to go for it.

The next question is from the line of Devanshu Sampat from Yes Securities.

Sir, just on this Bangalore value unlocking, can it be expected in FY '22?

I don't think so. FY '22 will be too early and the market is totally down. So I don't think so in FY '22, we'll be doing that.

Okay. And can you give a sense of the outlook or possible contribution in the current year or next year from your nontraditional businesses, right? So you have your non tiller business or the noncontact tractor business. What can be a sizable business that we can expect maybe in this year or next year?

Yes. So apart from tractors and tillers, definitely, the distribution business is something that we are growing. And the international business for tractors also, we are growing rapidly. So these are the areas, I mean, to give you a percentage, we would like in the next 3, 4 years, this should grow to at least 20% of our revenues.

Okay. And just coming to your working capital data, I mean from what it is seen that there's been a great amount of release on working capital. So what can be expected over here because you're looking at better days coming down. So is it because of tightening of credit terms? Or is it subsidy payments dues have become less over here? That is one. And how is this different from -- if we have done any telecom tightening, how would it be different from what had happened a few years ago before that thing back fired?

Yes. One of the most important things that we have done is our entire supply chain is working on a theory of constraints models. So that is why our inventory is down at the dealer level and the receivables are brought under control. So we are working purely built on consumption. And the inventories are managed based on that. And the receivables, of course, the credit quality continues. And we have been able to bring more and more channel financials for our dealers to manage working capital better. So these are some of the things that have brought down the debtors last year. And I think it is only getting better with our supply chain, working to a totally different mechanism based on theory of constraints.

Okay. Sir, when it comes to your payable days, what's changed over there also? Is this something that is sustainable as that?

Payable is definitely sustainable. Earlier, we were at a very less number of days. Now I think we are kind of at an optimal level. So we will definitely be able to sustain that.

Okay. Okay. And sir, if I remember correctly, we were paying interest on dealer deposits, which is part of your other current liabilities, and this figure was expected to go down. But if I look at the number -- I mean while it's reduced as a percentage of sales in absolute terms, it's somewhere around the INR 43 crores, INR 46 crore mark, which is -- which was the figure 2 years ago also. So what can we expect over here?

Yes. So actually, the interest component that is shown there or the finance cost that is shown has 2 components to it. One is the interest paid to the dealers, which has definitely come down with as I told you earlier. The other component is a certain bill discounting that we do for our vendor. So there is a charge that we pay to the banks on that, and that is also appearing there.

Okay. And given the -- if you're saying the working capital is going to remain the way it is right now, any change in dividend payouts that we can expect, given that we are in a fairly strong cash position?

We have declared our dividend, which is at 200%. Yes, recommended 200%, which [ suppose as to ] that the AGM approves. So right now, that is where we are.

So what will be the CapEx requirement this year?

Roughly about INR 17 crores.

INR 17 crores. This will be towards?

Dividend.

No, no. I'm saying your CapEx, CapEx.

CapEx is about INR 60 crores.

INR 60 crores. And this will be towards?

Product development.

The next question is from the line of Shashank Kanodia from ICICI Securities.

Can you share some color on the growth outlook for FY '22? How do you see the power tillers sales volume and tractor sales volume for us as for the industry?

Yes. Currently, all the demand drivers are favorable. The monsoon is on time. The minimum support is in place. the cash in hand given by the government to the farmers right on time. So the demand is good in the market, although April and May, there was a scare because of COVID Wave 2. Right now, that seems to be subsiding pretty fast and the rural demand has picked up quite well in June. And we see going forward, this trend to continue, unless, of course, which we might have some of the experts talking about a third wave or a fourth wave. So that's still totally unpredictable. So I mean I can't talk anything about that. But as of now, things are looking good.

So at best, we can do something like 32,000 or 33,000 [ units ] of power tillers sales, is it a realistic resumption to meet?

I don't see any reason why we won't be able to do that. But as I said, this whole issue of the COVID, it is not behind us yet. So it is very difficult to predict any number right now.

Okay. Because we have additional 3,000 volumes coming from contract [indiscernible] as well, right?

Yes, yes, yes. Given that -- yes. So that's why I said there is no reason why we shouldn't be able to do it. But giving a number out with the pandemic still not behind us is very difficult.

Right, right. And sir, on the margin trend through the last 2 quarters, it's been a sufficient decline for us, right? This quarter, the adjusted budgets are up 13.5%. So going forward, what is the sustainable range that we foresee for this given that there will be increase in volumes and operating revenue benefits coming in?

As I've said earlier, we would be at the 12% to 14% range.

Okay. So sir, last 2 quarters, you have done much ahead of...

Yes. So we are on the higher side of the range. And probably, we'll have some quarters which we are not too eager to, but we might have a few quarters where we will be at the lower side of that range.

The next question is from the line of Anand S from B&K Research.

Sir, can you just touch upon the precision implement performance in FY '21, apart from readers, how has the performance been? And just a brief on the outlook for the next year.

Yes. So last year was the first year that we moved to precision implement division in Mysore. So we have set up the division. The manufacturing is fully set up. The rotovator has started selling from our manufacturing unit in Mysore. And this year, we are looking at some exponential growth in that segment. Last year, the number has not been significant. It was in the tune of about INR 4 crores to INR 5 crores of sales because we literally started operating only towards the end of the year in Mysore.

Okay. Sir, over the last few years, the tractor industry has grown significantly, but tiller has remained broadly flat. Why is the preference of tractors over tillers? Any reason?

Yes. Tillers have been looked at as a small farmers machine. And one of the key reasons of the tractor industry growing is easy availability of finance, and that is not the case for tillers because tiller is an item which cannot be registered. So we are working with banks to overcome that and presumably, my take is that in the small farm mechanization in the next 3, 4 years, you will find very good growth. It may not be necessarily in the tiller space it could be in the weeder space or the smaller implement space. And some new varieties of tillers are also likely to grow, which we are also innovating we will also be launching in the market.

Okay. Sir, just a follow-up, what is the share of financing in tillers?

5%.

Is there any possibility of increasing it comparable to...

It was earlier at 1% or 2%. Now it comes to 5%. I strongly believe that with the new banks coming up and the tie ups that we have, for example, with [indiscernible] Bank and other new age banks, we are driving very hard to increase the retail financing in power tillers.

Okay. sir, who are the major players in financing currently?

Almost all the banks are financing, the big nationalized banks are financing. But if you look at the percentage of finance for tiller vis-a-vis tractors, the tiller percentage is very low, as I said.

Okay. And just one last question. What is the CapEx plan for FY '22?

We have a INR 60 crore CapEx plan for FY '22.

The next question is from the line of Kush Gangar from Care PMS.

So all my questions have been answered just last question on the capital allocation. So we have around INR 300 crores of CapEx -- cash plus investment. And you mentioned about INR 60 crores of CapEx for next year. How do you plan to use this cash on any acquisitions in mind? Or any thoughts on that?

Yes, we are looking at growth opportunities, and we are working on it. And definitely, we'll let you know as things prosify.

The next question is from the line of Saket Kapoor from Kapoor & Company.

Sir, firstly, sir, you articulated the fact that INR 60 crores would be spent for this year in CapEx, and that would be attributable to the product development. Sir, if you could throw some more light money, how is this going to catapult going forward? How are you going to reap the benefit of this INR 60 crores into product development, which are the areas in new [ money ] how is this spend going to be benefited to us going forward?

Yes. So we have product development happening, as I said, in both the small farm mechanization area as well as the tractor area. So we have some projects going on with Zetor. We have some projects which is being developed for the compact tractors. And in the coming years, we are looking at at least 3 to 4 product launches every year in both these small farm area as well as the tractor area. So the investments are being done in this direction.

Right, sir. Sir, in the precision component part sir, 2 years earlier also sir, this unit was contributing around INR 7 crores to INR 8 crores, sir, and we invested around INR 24 crores for the modernization. Sir, how are things set up today for the precision unit at Mysore? And what are the likely contribution, sir? I missed your comment, which you spoke about commissioning in the month of March. So correct me sir, this unit was contributing earlier also?

Yes. So this unit was set up mainly to contribute to the internal requirement of V.S.T. and that still continues. So it continues to support V.S.T. in terms of the major precision components like connecting rod, [indiscernible], camshaft, all this material is still coming from Mysore. The machining is done in Mysore. That continues. However, we want to develop it as a profit center and for which we have decided to look at precision implement also from Mysore. And that is the direction and we have set up rotovators manufacturing in Mysore to begin with. And we are also building this division to get into balers to get into sprayers, which also complements our compact tractor, which is mainly used in the vineyards and orchards. So we are getting into sprayers. We are getting into balers. We are getting into rotovators. All these operations are out of Mysore.

So sir, basic understanding the product portfolio is going to improve when we are selling that tractor. The other requirement which the people would have to knock some other's door that would also be available at the same umbrella that is...

Correct. Correct. Correct. You're right.

So going forward, what is the potential for this Mysore unit next year since you must have done the work. So how are we seeing the current year contribution from this unit, sir?

In FY '22, we are looking to grow the rotovator business to begin the baler business and the sprayer business. So the -- last year, as I said, we did about INR 4 crore to INR 5 crore. We are expecting an exponential growth this year on the rotovator business front. So my best estimate at this point would be we should be able to do about 2,000 to 3,000 rotovators from Mysore.

In value terms, sir, how much it will translate into?

Each rotavator costs about INR 50,000 to INR 60,000. So you can...

INR 50,000 to INR 60,000 and 2,000 at best?

Yes, yes.

Sir, now coming to this raw material basket part. I think so steel, what portion that steel contributes towards our raw material basket?

Steel contributes -- various forms of steel starting forging, though it contributes at least 40% to 50% of the tractor and tiller.

And sir, there has been a steep escalation in the steel prices, and they are not abating as of now. So sir, how has this pass on happen? And what is the impact on the industry with this steep steel price -- increase in steel prices which are still continuously rising and not abating.

Yes. So far, the increase has hit us to about 9%. And we have -- most of the players in the industry have managed to pass on a portion of it 4% to 5%, depending on which company, I don't think more than this, the farmers will be able to afford in terms of increasing price of the tractor or the tiller. So I think the focus of every company is -- one is to optimize costs, cut costs wherever possible and manage this inflation at the moment.

Right. So we spoke about this JV also currently about we doing a JV, something we brought to the stock exchange and developing the product profile in the tractor segment. I missed the Idea committee, if you have spoken for these Zetor tractor from Czech Republic. Sir, what is the game plan here? What is the investment going to be? And how is it going to contribute to the top line and bottom line going forward?

Yes. So we, as a company, have got into -- earlier, we were only in power tiller and compact tractors. Now we have got into the higher horsepower space. And in the higher horsepower space, Zetor is a very well-known brand worldwide with very strong lineage even in India with their earlier JV with SMT if you remember. So Zetor has a brand recall in the higher horsepower tractor space and a good technology. So we decided to work together with them and develop tailored track for Indian requirement. So that product development is going on. And as I said before, we are launching the first phase of products next financial year, that is in FY '23. And subsequently, every year, we would be launching a range of tractors in FY '24 and in FY '25. So we have at least 3 phases of products that we have conceptualized. Phase 1 product work is going on right now.

So this INR 60 crores [Foreign Language] what you have told about this 60 crores, what portion will go for this [ detour ] tractors, particularly if you could quantify I just wanted to understand the percentage that will go...

So it is a bit of a confidential question you're asking, but you can -- I can roughly tell you that it is about 10% to 15% of our CapEx plan.

10% to 15% of our annual CapEx plan, sir?

Yes.

Sir, I missed on your earlier commentary. So pardon me, sir, you told that on the base of 30 -- what was our annual numbers in the tiller segment for this year, sir?

This year, the tiller number was -- just a second. 27,318.

And tractor?

Tractor was 8,835.

So sir, on the tiller part, if I'm not correct, you say 32,000, 33,000 is the level we are looking if there is no further impact of this pandemic? This is what the likely number?

Yes, you're right. The number you said is around what we are looking at, yes.

And for the tractor part, sir?

Tractor part also, we expect to grow at least 10% to 15%.

Okay because the tractor industry has been moving sir on the upward trajectory. So the base is moving up every year. And on top of this incremental base we are small in the market share...

I will take some time and explain to you. Actually, we operate only in 10% of the tractor industry. See, there is a 900,000 tractor industry. Out of that, the compact segment that we are in, up to 27-horsepower is only about 90,000 tractors. So in that 90,000 tractors, we sell about 10,000, 11,000. So it is only now that we have gone into the larger horsepower space. So that is what I said. We are just entrants in that space. So actually, we are a player only 90,000 of the 900,000 tractor industry.

Right, sir. So we have an addressable market of 90,000 only where the growth numbers would be looking at.

Yes. So here, we are definitely continuing to grow. We are looking at global push on the combat tractors as well very happy to say we are growing very well in the international market. And we will continue to do that. Also, we want to be a part of the larger pie, which is the balance 800,000 tractor industry. That is why we have gone into the joint venture with Zetor because we want to accelerate our entry into that area very fast.

Right, sir. And very small 2 points, sir. Please explain to the benefit of the VRS that we have gone through. And what is that unit now going to be utilized for, the Bangalore unit, where we have spent INR 13 crores, INR 14 crores?

Multiple benefits, I would say. One is the tractor, higher HP tractor plant needed a larger capacity, earlier capacity was limited in Bangalore, so we had to move to Hosur. That is number one. Number two, as some of the other peers have asked me there is a certain value to be unlocked from this land. It may not be the right time for us to do it. So we are -- we have not decided anything on that right now. But at an opportune time, we will be doing that as well.

And what should be the ballpark figure, sir, the value of land you must have done valuation lastly?

No, I don't have any value. I know it is in -- I mean, it's in the city, so it has got good value. I don't have a valuation to give you a correct value at the moment.

Right. And lastly, on the capital -- yes, yes. Capital work progress, if you could throw some light, I'm coming in the queue, sir. I got your point. Yes. Please throw some light on capital work in progress of INR 25 crores. How much is needed to get capital.

Capital work in progress are some of the projects that we have undertaken, which is yet to be completed, which is -- which we are -- we have issued the purchase order for and which is in progress right now.

The next question is from the line of Keshav Garg from CCIPA.

Sir, I wanted to understand that our operating profit in FY '21, even after adjusting for COVID and the INR 13 crores VRS, et cetera. Sir, it is the same as we did 7 years back in FY '14, which was around INR 120 crores. Sir and during this period, we have done a CapEx of INR 250 crores and our net worth has doubled. So I'm trying to understand that we are -- it seems we are running constantly to be at the same place. And sir, if we adjust for inflation, then our EBITDA in the last 7 years has actually hopped. So basically, when do you foresee us getting out of this range that we are stuck in?

Yes. So it is a 7-year view, vis-a-vis is a 1-year view or a 2-year view that you are looking at. So -- but yes, your sentiments are right, but we have clearly stated our vision for growth now, and we have started the journey. Within a year, you have seen that we have turned around our business completely to the original level, which were there in FY '18. So I see that the plans and the strategy that we have put in place for growth is shaping up. And forward-looking numbers is something that are avoiding, but I'm sure that you will see us progressing on the growth path in the coming years.

Okay, sir. And also, sir, I wanted to understand, our pricing on both sides, tractor as well as tiller for the same horsepower, same to same if you compare with competition, how do we stack up in terms of tractors and also tillers in terms of pricing, whether we are at a premium or a discount?

In both the areas, we are very competitive. In tractors, we have both the positioning, especially in the combat space, where we are one of the leaders. As I said, we operate in only 90,000 numbers of the tractor industry. And in the compact space, we have been leaders for a long, long time with around 11%, 12% market share, especially the 4-wheel drive compact tractors. Here, we have both positioning. We have a value for money processing. And in the last year, we have launched products in the premium positioning as well. So we'll continue to have both the positioning in the compact tractor space. And even in the higher horsepower tractors, we will have both the positioning in -- with the V.S.T. higher horsepower tractor, we will take the value for money positioning. And with the V.S.T. Zetor products will be the premium [ positioning ] products.

The next question is from the line of Chetan Cholera from Pragya Equities.

Are we on track of the INR 3,000 crores target for March 25. And that how much will be from tractors and tillers and other products?

Yes. Both these businesses would have to be upwards of INR 1,000 crores for us to get to the INR 3,000 crore mark. And last year was the first year of our journey. And although we are slightly short of the benchmark, we have put for ourselves due to COVID and all that. But I think the company and the team has done very well. Given the circumstances, almost 2 to 3 months were lost to COVID and then after that, we had the supply disruption. If the supply was there without any disruption, I would like to tell you that we would have easily crossed that milestone that we had put for the first year. But unfortunately, supply disruptions was a fact last year. And unfortunately, even in the first quarter, we are facing those challenges. But I think we are better off because we have had 1 year of learning, and we have done a lot of correction. And yes, in short, we are right on the way and we are working very hard towards ensuring that we get to that vision of INR 3,000 crores.

Yes. Sir, just let me try finally since land is quite valuable area. And currently, the depressed [indiscernible] the ballpark per acre figures. So we can...

We can -- if not right on my part. I mean you want to -- Yes, it's a board decision and I'm sure we will see, as I said, we will be unlocking the value at an opportune time for sure. But right now, as you and me and all of us know that is not the right time for any real estate development to do. And we are not planning anything and we have not decided anything.

Prestige people come on TVs and they say Bangalore is doing quite well. So I don't know.

I mean, I can't comment on that, but yes, you know the situation rate right now, especially after the COVID wave 2.

When can we expect to reaffirm from you.

I don't have an answer for that right now. But we will definitely let you know once we decide.

The next question is from the line of Hitesh Bhargava from B&K Securities.

Sir, a couple of bookkeeping questions. Can you help us with industry tiller volumes for FY '21?

Industry, just a second, I'll have to -- it was roughly about 53,000.

Okay. And also what is our subsidy neutral tiller volumes for FY '21?

Roughly about 300 numbers.

Okay. Sir, if I'm not wrong, the price of subsidy neutral tiller, is somewhere around INR 135,000 and the normal tiller is around INR 150,000. Am I right?

More or less, yes.

So I mean -- and also the subsidy neutral tiller is a little lower than lower HP around 12 HP, right?

Yes, correct.

So in this case, I mean, I mean like what is the rationale behind we believing that subsidy neutral tiller may gain traction if the subsidy is being removed. So I mean trying to understand there is only difference of INR 15,000 and the HP is also lower in KisAN, I mean, our KisAN brand, which is a subsidiary neutral tiller. So what is the rationale here? Like because you are spending only INR 15,000 and you will get a higher HP, which is used in multiple places. So can you explain?

Yes. So 2, 3 things. One is, what are the kind of -- we look at what are the kind of products which the customers buy without subsidy. So we saw products being bought at the top range of about 130 to 135 to 140. Beyond this, the customers were not growing. And your price of a regular tiller is not the MRP. The MRP in the market is at about 170, 175. So the difference is not INR 15,000. It is almost INR 35,000 to INR 40,000.

Okay. So do you think that the INR 30,000 to INR 40,000 the difference will be mitigated by the applications, which can't be used [ by ] subsidy neutral tiller?

No. Subsidy neutral can do every application with other products.

Okay. Fine, sir. One last question, sir. How is the supply side situation. Like if I'm not wrong Bosch is supplying for us and Bosch saying they are facing issues with semiconductors. Do we have any impact on supply side currently?

We don't have any semiconductor issues, so we don't have any problem from Bosch. But there are, of course, April, May was a big challenge because of the lockdowns that was there.

The next question is from the line of Davis Shah from Pragya Equities.

Congratulations for a good set of numbers. Sir, my question is regarding the other income. This year, we have shown the other income is INR 46 crores versus INR 23 crores. So is it any onetime or what is the composition of other income?

Air value increase is about INR 28 crores.

Okay.

And that is the bulk of it. And roughly other operational -- I mean, other income, for example, we spoke about something like bill discounting, which is about INR 1 crore. Then we have some write-backs which we had provisioned for it will be about INR 7 crores to INR 8 crores to INR 10 crores. So it's all adding up to about INR 45 crores, INR 46 crores.

And sir, once again clarification regarding VRS. As I understood from your answer that VRS of INR 13.49 crores. That's all that we have provided in financial year '21. So after year ending, there is no VRS for April and May. So it is full and final?

Full and final.

And how many employees were there for VRS?

70-some numbers, 72.

So these are the final figure. Now we will not get VRS in first quarter, right?

No, no, no, no.

The next question is from the line of Devanshu Sampat from Yes Securities.

Just another follow-up. Just wanted to check with you on the plans or the expectations or the game plan with regards to Monarch.

Yes, we are supplying the hardware from India, except the electric motor and the electric batteries. So the supply has started. Right now, the genuine products are in demonstration in piles in California. The production is expected to begin by the October quarter in California the assembly will start there. And the supply will start -- our last quarter, that is quarter 4 of this year, there would be -- if everything goes well, we'll be commercially launching in California. That's the plan on that.

Okay. So full impact should come in FY '23, if everything goes as planned?

Correct.

Okay. And I'm sorry, I think I missed this earlier, but can you tell me about the contribution from weeders this year? And what is the expectation in FY '22?

Weeders, we did about 1,800 numbers last year. In FY '22, we would like to grow that business exponentially, roughly, let's say, about 3x at least.

Did you say 1,000 in FY '21?

1,800.

Okay. Okay. We're looking at 3x of that. Okay. Okay. And does -- has there been any development on the tie-up with Pubert in France?

Yes, we are continuing to work with them. Unfortunately, the physical meeting has not happened. So currently, we are getting SKD units assembling and selling in India.

Okay. And does the long-term plan even include manufacturing for them and exporting for them as well.

That is what we are hoping for, but it's not concluded. Nothing has been put on paper.

[Operator Instructions] The next question is from the line of Vikas Vardhan from Value Research.

I wanted to know the status on regarding the share purchase agreement and investment of Zimeno Inc. had -- and how do you look at this segment as an opportunity?

Yes. Zimeno, Inc. is nothing but Monarch Tractors where we have invested in the company. We have invested about INR 11.07 crores in Zimeno, Inc. This is both in terms of being in the forefront of technology of electric and autonomous factors and also the fact that we are kind of supplying the entire tractor other than the battery and the motor from here.

Okay. So we already made this investment?

We have made this investment of INR 11.07 crores. Yes, we have done that.

The next question is from the line of Mihir Parik from Tamara Investment.

I had a couple of questions on the higher HP tractors. So just wanted to understand that in FY '21, which new states or markets we have entered. And what is the plan going to be in FY '22?

Yes. So last year, we have entered the Northern markets, Madhya Pradesh, Uttar Pradesh and Rajasthan. So we are at about 60 to 70 dealerships today which we would want to expand to more than 200 dealerships in the current financial year.

Okay. And what is the estimated volume in the higher HP we are targeting this year?

This year, we are looking to -- right now, we are kind of ramping up the volume in our new plant in Hosur. Now we are looking at doubling the volume from last year.

We are expecting to cut about 2,000 number in FY '22.

Yes, yes.

Okay. And sir, one last question is on the new product launches. So sir, what is the pipeline for the current year with respect to tillers, compact tractors and higher HP tractors?

Yes. New product launches in this year, we would be launching at least 2 range of compact tractors. We would be looking at getting our own technology in engines as well as hydraulics. So these are the major things in tractors. In the small farm machine space, we will be launching -- in fact, we have already launched 2 wheelers in the month of May. We will be launching 9 HP power tiller. We will also be launching a range of brush cutters in the coming months.

Okay. And sir, we are also looking for some tie-up in Precision division, implement division. So do we have any update on the same?

Yes, we are in talks with a few companies, but nothing has been finalized yet.

The next question is from the line of Dipen Shah, an individual investor.

Most of the questions have been answered. I just wanted to summarize the next couple of years. If I understand correctly, the growth in the current year would likely come from the OEM supplies which we do for the Chinese manufacturers for the new weeders and precision equipment, which we will be implementing. And the next year would be Zetor tractors, which should start coming in. Is my understanding correct, sir?

See, there are multiple levers of growth you have kind of highlighted some of the new product launches or categories that we are returning to. Apart from this, see there is a large expansion in the dealer channel that we are doing. There are several sales acceleration projects that we are doing. So I mean, multiple levers are being pushed to ensure that we hit the milestone that we have set to achieve the vision.

Yes,yes, I understand that. So as I was talking about the new products, which should drive growth in...

New products are more or less right, yes.

Okay. And sir, when we are looking at a number of 30,000 to 33,000 from 28,000, if at all, there is no third wave, would that include the 3,000 OEM volumes which we will doing?

Yes, it will include that.

Okay include that. So on an organic basis, the tiller business, you think should grow at maybe sub 10% or 10%?

Yes, yes.

The next question is from the line of Govin Lal Gilada, an individual investor.

Only one question regarding this land. So you told that at right time you'll develop [ based on unlock ]. I just want to understand that is -- that land is specific for the industrial purpose has been allotted to us or nothing is needed to convert to -- it to develop. That's what I wanted to -- suppose we want today to develop. Hypothetically, I'm asking. -- if you decide you want to develop.

Yes, it is allocated for an industrial purpose.

So yes. So then is it feasible to unlock by selling or developing? That's what I want to understand, sir, what is the procedure because it is a...

We haven't studied that yet. We'll definitely come back to you on that.

Okay. Then one more last question, sir, regarding this margin neutral 12% to 14%. This margin is including of other income? Or this is before other income or after other income, this is?

This is operating margin that I spoke about.

Operating margin is...

Without other income. Thank you. I think it's kind of time now. Yes. So let's go for the last question.

Okay. Sure. The last question is from the line at Saket Kapoor from Kapoor & Company.

Sir, in the power and fuel mix, are we planning any renewable investment building this solar segment as the changes in the solar policy by the government, anything in...

We have already done that for all our plants.

Okay, sir. So what portion of our power requirement is drawn from the solar energy?

I'll let me get back to you on that. I don't have a figure right now, but I'll have to get back to you on that. Roughly about 20%, you can say.

20% of our requirement?

Yes, yes.

And the rest is drawn from the grid?

Yes. The rest is down from the grid, yes.

Sir, more investment are we planning to improve the percentage going forward?

Yes. Yes. Yes.

Sir, what kind of CapEx are you looking into it, sir, going forward?

It will be an OpEx model.

It will be an?

OpEx model. Operate and -- we will be paying per unit charges. I'll ask my CFO to explain it.

So this is an OpEx model wherein the entire investment will be done by the service provider and there will be an agreed rate and we will be paying per unit rate to him. So there's no CapEx on [indiscernible]. We only have to providing the rules.

It would be a rooftop arrangement?

Yes, yes. You're right.

Sir, one bookkeeping question on the current asset part. The investments have gone up from INR 121 crores to INR 258 crores. So is it on the revaluation front also or more investment have been done from the cash approval for this year also?

There are more investments.

More investments being done for this year?

Yes, right.

Sir, only a small request, sir. If with our number just the volume part and some introductory statement, it could be made with the -- in the press release for investors, that would be very fruitful if that could be considered, sir going forward. Elaborating how the quarter was.

We will cover this by next quarter and look at this.

Ladies and gentlemen, that was the last question for today. I will now hand the conference over to the management for closing comments. Over to you, sir.

Yes. Thank you very much and -- for giving us this opportunity to share our results with you and stay safe and look forward to interacting you the next time. Thank you.

Thank you. Ladies and gentlemen, on behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.