"On a standalone basis, while the industry has been quite stagnant we have improved our EBITDA margins, because sold consciously and strategically more premium products with greater margins," Rajan Nanda, chairman and managing director, Escorts said in an interview to CNBC-TV18.
Escorts expects its farm machinery business to perform better going ahead. "We are going to get much stronger on our EBITDA from farm machinery. Our growth rate is going to be fairly good," he added.
The company aims to improve its market share from current 11 percent to 13-14 percent in the future.
Below is the edited transcript of Rajan Nanda's interview with CNBC-TV18.
Q: Give us the key highlights with regards to the consolidated performance of the company as well as the standalone numbers?
A: On a standalone basis, while the industry has been quite stagnant we have improved our EBITDA margins, because sold consciously and strategically more premium products with greater margins.
At the same time, we are doing product up gradation on a balanced rate, so we are growing on market share. But considering it was a non-growing market, a flat market, we are better prepared to grow our market share based on the preparations we made in product and in markets.
Q: The agri machinery division of yours has also given a big boost to the numbers. What kind of contribution have you seen there and what are the plans going forward?
A: We are going to get much stronger on our EBITDA on farm machinery and our growth rate is going to be fairly good. This is because we have now got the product mix which has rich revenue than in the past. So, agri division is our locomotive business. We have built our company’s business returns and stakeholders’ dividends from the earnings of this business.
Q: It was a bit of a sluggish year for tractor sales in terms of volumes which are down around 4 percent this year. Where exactly does domestic market share stand with regards to the tractor volumes and what can you possibly clock in the coming fiscal?
A: We are ambitious and have a strategic ambition based on new product introductions which will add to the market. We are at 11.6 percent and are hoping to add 2-3 percent market share, which will add about 22,000-20,000 volumes in this fiscal. That will make a big difference to our bottom-line, because we have done very well cost compression jobs.
We have done a lot of re-engineering and value engineering on products. So, we are prepared for a low-growth business, but with a high technology change and more application specific and beneficial to farmers’ farming practices. We are very focused on what we are doing. You will see a change with that positivity with which we have developed, created products and are cultivating the marketplaces.
Our directors today have declared the dividend despite a little lower profit than last year. But our capital has changed 20 percent up through the merger of the construction business into Escorts. Despite all that and the higher cost of dividend the positivity of the directors was to maintain last year’s dividend enlarged capital.
Q: Your construction division too came out with lower sales on a sequential basis and there was also a bit of EBITDA loss of Rs 7.8 crore. What would be the outlook with regards to construction equipment and how exactly is it looking in terms of the next fiscal?
A: A lot of growth is in progress and I can’t be more specific than that. There is again an opportunity for entering new markets with new products and also enlarging volumes on existing products. We are trying to spread our root field into the market in a manner that we have a direct understanding with our contractors, customers.
Q: Do you think you will be able to maintain these margins, improve them? Is there any guidance that you can leave us with?
A: I cannot give you guidance. All I can say is our goal and our commitment is to improve margins and keep improving them. We want to be a cash rich company at the end of the day.
We want to be able to navigate in a difficult economy and for that we are making every effort. We have a very good team that is highly focused on the future.