Escorts Kubota Ltd (ESCORTS) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (361 Capital Market Private Limited): Ladies and gentlemen, good day, and welcome to the Q2 FY '27 earnings conference call of Escorts Kubota Limited, hosted by 361 Capital Market Private Limited. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Doshi from 361 Capital Market Private Limited. Thank you, and over to you, sir.
Manish Doshi (361 Capital Market Private Limited): Yeah. Thank you, Ishika. Good evening. On behalf of 361 Capital Private Limited, I welcome you all for Escorts Kubota Q2 FY '27 earnings call. I take this opportunity to welcome the management team from Escorts Kubota Limited. Today, we have with us, Mr. Bharat Madan, Whole-Time Director and Chief Financial Officer; Mr. Neeraj Mehra, Chief Officer, Tractor Business Division, Farmtrac and Powertrac brand; Mr. Sanjeev Bajaj, Chief Officer, Construction Equipment Business Division; Mr. Rajen Sood, Chief Officer, Tractor Kubota brand and Agri Solution Business Division; Mr. Sanjeev Garg, Head Finance and CPMO; and Mr. Prateek Singhal, Investor Relations and ESG. Now I hand it over the call to the management for their opening remarks. Thank you.
Bharat Madan (Escorts Kubota Ltd): So thank you Manish. Before the call I would like to highlight something, some of the statement that we make in the concall are subjected to the forward-looking and as per the risk that we have mentioned in the our investor lease and the presentation. With this, I will start. With the, good evening everyone, and thank you all for joining us today. India macroeconomic environment remained broadly resilient during the quarter, supported by domestic consumption and sustained economic activity, although inflationary pressure caused by the global geopolitical headwind continue to weigh on the operating environment. Across our businesses, the demand environment was mixed. The agriculture industry saw some moderation, reflecting monsoon-related disruption to rural sentiment as well as high base from the last year on the account of pre-GST-led GST-led cut demand, whereas the construction equipment industry continued to maintain healthy momentum and delivering a strong performance during the quarter. On the cost side, commodity and the input cost inflation remained a significant headwind to the margin. Calibrated price increase, supported by focused cost control and
Bharat Madan (Escorts Kubota Ltd): efficiency initiative helped partially mitigate the impact. Giving the large lag behind between cost acceleration and its recovery through price action, margin pressure are expected to continue in H2. The pricing measures taken along with the ongoing cost control initiatives should help progressively mitigate the inflationary impact and support margin improvement from Q4 onwards. Among this backdrop, we remain focused on disciplined execution, strengthening our market position, and driving profitability growth across businesses. With this context, let us return to our quarterly performance. We trust you have reviewed the results and earning presentation filed with the stock exchanges. Let us begin with the company standalone financial performance for the quarter ended September '26. Operating revenue from continuing operation at Rs. 3,231.4 crores, up by 16.3% YoY. EBITDA at Rs. 292.4 crores. EBITDA margin in Q2 stands at 9.9% as compared to 13.1% in the corresponding quarter and 11.2% in the sequential quarter. Margin during the quarter were adversely impacted by commodity cost inflation and higher manufacturing overheads. PBT from continuing operation came at Rs. 344 crores as compared to Rs. 431.1 crores year-on-year. Net profit came at Rs. 255 crores as compared to Rs. 321.2 crores YoY. EPS stands at Rs. 23.18 as compared to Rs. 29.19 YoY. For the first half ended September '26, operating revenue from continuing operation came at Rs. 6,410.3 crores, up by 21.9% YoY. EBITDA at Rs. 647.8 crores and margin at 10.1%. PBT from continuing operation before exceptional item came came at Rs. 837.9 crores as against Rs. 849.0 crores YoY. Net profit from continuing operation stood at Rs. 642.4 crores. Please note that in H1 of the previous is year include an exceptional gain from the sale of land and building of Rs. 76 crore. Excluding this, net profit grew by 2.2% YoY. EPS from continuing operation at Rs. 58.38 as compared to Rs. 63.07 YoY. Please note that H1 FY '26 previous year include RED business divestment impact. Therefore, the reported PAT for H1 FY '27 is not directly comparable on a year-on-year basis. Moving on to the segment-mental business performance. Following the strong industry performance in FY '26 and Q1 FY '27, domestic tractor industry witnessed some moderation in Q2 FY '27. Industry domestic industry volumes stood at approximately 2.66 lakhs tractor as compared to 2.75 lakhs tractor in Q2 FY '26, a decline of around 3 odd percent YoY. The quarter was influenced by monsoon related disruption in some market and high base of the previous year due to GST cut and delayed festive season this year. Our domestic tractor volume stood at 32,628 tractors as compared to 32,329 tractor in FY Q2 FY '26, registering a marginal growth despite the industry decline. This resulted in 48 basis point improvement in the market share during the quarter. Market share gain was supported by our refreshed product portfolio, recent product launches and continuous focus on channel effectiveness and retail execution. From a product standpoint, the response of our new product continued to be encouraging, building on the launches undertaken over the last few quarters, including the Shourya series under Powertrac brand, ProMax under Farmtrac, expansion of DigiTrac range and the new star series under Kubota brand. Our newer offering are helping strengthening our presence across customer segment and geographies. We will continue to enhance our portfolio across core, premium and application-specific segments to improve our competitive positioning. On the export front, industry volumes stood at a roughly 29.6 thousand tractors in Q2 FY '27, up by 16% as compared to 25.6 thousand tractors in Q2 FY '26 last year. Our export volume stood at 1,389 tractors as compared to 1,548 tractors in last year corresponding quarter, down due to industry being concentrated in the higher HP segment, where our currently presence is relatively limited, coupled with key key export market where we have a strong presence are undergoing market correction. We continue to work closely with Kubota to strengthen our export portfolio and progressively expand our presence across target international market. Looking ahead, we remain optimistic on the mid-term tractor industry outlook supported by underlying fundamentals of the agriculture economy. In the near term, however, the tractor market is witnessing some moderation due to high base effect, lower subsidy support in certain market, El Nino, monsoon caused disruption and the cost escalation due to commodity price, neglecting the GST reduction benefit largely. Despite these near-term industry
Bharat Madan (Escorts Kubota Ltd): Broader demand fundamentals remain supportive for EKL. Demand Regional dynamics and that traction from our recent product launches are supporting an improvement in share of market and we remain focused on sustaining this momentum. Non-tractor revenue of comprising of agri-solutions business, engine business, and spare parts and services business in Q2 FY '27 constitute 22% of the agri machinery segment revenue as against 17% in the corresponding quarter and 19% in the sequential quarter. Agri machinery products segment revenue came at ₹2,690.1 crores, was up by 10.6% as against ₹2,432.9 crores in the previous year. EBIT margin for the agri machinery segment business came at 7.8% as against 12.8% in the corresponding quarter and 10.8% in the sequential quarter, impacted due to product mix, inflation inflated commodity costs, and higher manufacturing overheads. On profitability, pricing action and ongoing cost efficiency initiatives are expected to progressively mitigate commodity pressures and support margin recovery from Q4 onwards. We will continue to closely monitor rural sentiments, post-festive demand trends, commodity inflation, and geopolitical developments while maintaining our focus on market share improvement, cost discipline, and growth. Coming on to the construction equipment business, in Q2 FY '27, the served industry volume across crane, backhoe loader, mini excavator, and compactor grew approximately by 20% y-o-y. Our construction equipment business total volume came at 1,764 machines, up by nearly 54% as compared to 1,146 machines in the corresponding quarter last year. CE segment revenue came at ₹536.2 crores, up by 58.6% as against ₹338.1 crores in the corresponding quarter. EBIT margin for the quarter ended September 2026 for the construction equipment segment came at 7.9%, up by 411 basis points as compared to 3.8% in corresponding quarter and up by 250 basis points as against 5.4% in the sequential quarter, mainly led by operating leverage and timely price increase to recovery commodity cost inflation. The construction equipment industry delivered healthy growth during the quarter, supported by continued momentum in the infrastructure development and project execution. Government infrastructure and other development initiatives continued to provide a supportive demand environment for the sector. While the underlying fundamentals remain encouraging, we expect the pace of growth to moderate going forward, particularly considering the high base and the increased cost leading to high-teen growth in FY '27. At the same time, improved project availability and continued infrastructure investment provide us confidence in medium-term prospects of the industry. During the quarter, we also strengthened our product portfolio with showcasing of new product BLX 75K backhoe loader powered by a Kubota engine and developed jointly through R&D effort between Kubota Corporation, Japan, and Escorts Kubota Limited, along with 25-ton F25 Fighter and 16-ton Hydra 16 Plus pick and carry cranes. These additions help strengthen our presence across key construction equipment applications and position us to participate more effectively in evolving requirements of the market. We remain focused on expanding our product offerings, improving our market presence, and maintaining operational agility while staying watchful of the broader geopolitical and commodity environment. With this, now, I will request the moderator to open the floor for the Q&A.
Moderator (361 Capital Market Private Limited): Thank you very much. We will now begin with a question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Gunjan Prithyani from Bank of America. Please go ahead.
Gunjan Prithyani (Bank of America): Yeah. Hi, team. Thanks for taking my question. My first question is on the margins for this quarter. I mean, there's, of course, commodity pressure, which you called out. It just seems a very, very steep decline when I look from Q1 to Q2. And this has come even when, I think, we took two rounds of price hikes in the last quarter. So can you give us a little bit more color on what how much was the commodity impact, what was the net price hike taken, how do we see that going into next quarter, you know, some more color on how should we be thinking about the margin for this quarter and and forward?
Bharat Madan (Escorts Kubota Ltd): So thanks, Gunjan. This is Bharat Madan. So I think as we mentioned in last quarter call also, like in first quarter, we'd seen the inflation pressure was there to the extent of almost 5% on the commodity side. And by H1 end of quarter 2, we are getting it almost at 8% to 9%. This is I'm talking about in terms of the exit of quarter 2. Now
Bharat Madan (Escorts Kubota Ltd): said, we have taken two price increases. One we took in April, which was a very small increase of 1.5%. And then another increase was taken sometime in Q2, which was towards almost towards the end of August, which was again, I think, about roughly about 2% to 2.5% sort of increase was there. So, overall, 3.5% increase is there. So, against your inflation, which was almost 8% to 9%, so, there is a 5% drop which you're seeing in this margin on the tractor business. Now, having said that, I think, in Q3, you're seeing further pressure is building up, especially on the steel and rubber prices have further moved up. There is another 2% to 3% inflation which has hit us from Q3, and now, we announce another price increase, which will get effective after the festive season is over, from this month. But, obviously, this border impact will be not much because most of the major volumes have already happened by the time the festive season is over. So, really, you will see the impact coming in from Q4. So, Q4, we expect maybe see some recovery will start happening, because with these price increases, maybe the impact will be significant, which will be fully realized in Q4. But Q3 may remain under pressure because of these reasons.
Gunjan Prithyani (Bank of America): And and just to be clear, you said 9% commodity hit is already reflected until the first half. And this 9%, I'm assuming, is gross margin headwind as a percentage of net sales. And you're saying incrementally, 2% to 3% more to come in Q3.
Bharat Madan (Escorts Kubota Ltd): Yeah. That's right. And this is not just commodity, because there are, like I said, manpower cost increases also which has happened in in our state. And then there's also process and conversion cost, you know, which is also going up. So, commodity, obviously, is a major component, but that's only, I'll say, 75%-80%. But 20% is also coming from manpower and process cost changes which have happened this time.
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