See margins improving on new products demand: Escorts

In a continuing trend, auto companies posted weak sales numbers, for the eighth consecutive month. However, Sameer Tandon, chief of sales- service and spares, Escorts expects the company to post better margins in the days to come.

Tandon expects the company's margins to improve on the back of new products and a rising demand for them. Like most auto companies, Escorts expects the volume growth to be in the range of 9-10 percent. Also read: Tata Motors June sales down 18% at 52,708 units
In an interview to CNBC-TV18, Tandon says the company will not hike prices anytime soon. This is after the company upped product prices in May. Below is the edited transcript of Tandon's interview to CNBC-TV18. Q: A word on your tractor sales – given what you tracked for the month gone by what do you think you could finish the calendar year with in terms of a number that you intend to sell?
A: The market has shown buoyancy. October to September is our financial year and we would be closing the year at around 9 to 10 percent growth. Q: How much traction are you seeing in terms of prices because on that it looks like the environment is very sticky for most auto companies? With this 9 to 10 percent volume growth do you hope to keep your margin performance intact?
A: Our margin performance should be better because we have new products and they have done very well and the demand for the new products, specifically in market of central India and northern India have been very good. On the margin side, we have a very good story. From almost about 6 to 6.5 percent EBITDA we have reached to about 10-10.5 percent EBITDA. I think we should be doing much better as we go forward. Q: You had undertaken some price hikes in the quarter gone by what is the average selling price currently and are there any more price hikes that you guys will undertake in your products?
A: We have taken a price increase effective in May and as of now, we are feeling good with that. We don’t expect any further price increases as we go, because inflation may not change too much in the coming quarter. We should be able to hold the prices this quarter.  Q: The average realisation that you have clocked in last quarter was around Rs 5 lakh a unit because of the hike in prices and the improvement in terms of sales how much do you think you could better this average realisations?
A: The realisation as far as the tractor prices are concerned it should remain very consistent. What could change is a little bit of product mix because we are trying to sell on the premium end of the market more and that has been our strategy. We are seeing a good traction there. If we are able to move the product mix better to that side of product mix, we should improve further again. Q: Both you and Mahindra & Mahindra have been quite bullish on the prospects for tractor sales. At this point any change in market share as well for you guys along with the sales you are clocking?
A: At this point, we are very similar on the market share. We haven’t gained or lost, we have grown with the market right now but surely we would look at. We are actually not participating in the discount war which is going in the market today. Our new products are doing very well. We would take a steady approach where we would bring value and let’s see how the market share responds to it. However, at this moment, we see that we will consistently be able to get our newer products into the market.