Retail numbers all-time high, expect trend to continue: Escorts

He said that the total tractor sales in FY17 likely to be 62,000 versus 51,000 units in FY16.Below is the verbatim transcript of Bharat Madan’s interview to Latha Venkatesh, Anuj Singhal & Sonia Shenoy.

Latha: You have posted outstanding number in October. What is it, is it a two year high, a three year high?

A: If you talk about the retail number, I think you have seen the wholesale numbers to the market. However, retail numbers has been almost all time high, life time high actually.

Latha: Your retail number, if you can tell us what it was?

A: It is close to 13,000 plus number. It is beyond what we even expected. We expected retail sales to be pretty good this time but the numbers have surpassed our expectation also this time.

Latha: What is the prospect looking like, sustainable?

A: I think the numbers look good. So, overall if you look year-to-date (YTD) numbers, the industry has grown almost 25 percent now. So, we expect I think the same trend probably will continue for this full quarter whereas October was one of the main months where the numbers use to happen and if that is delivered, we expect the quarter will also get delivered. So, I think overall for the full year we will up our guidance from 12-15 percent to upwards of 18-20 percent.

Sonia: What will the absolute figure be for the growth by the end of the year?

A: We expect the industry should be anywhere between 595, 000-600,000 sort of number against 494,000 last year.

Sonia: What about Escorts?

A: We also expect it will be somewhere between 60,000-62,000 tractors for the full year basis.

Latha: Versus how much last year?

A: Last year was 51,000 tractors.

Sonia: What has led to such a big surge in the numbers in just the last two months?

A: The expectation of good monsoon, good expectation of the kharif and even the rabi crop is going to be good so I think the season till at least next June is likely to be pretty good for the tractor industry overall. The sentiments have improved, there is a lot of pent up demand is there in the market.

Anuj: In terms of financial performance, would this be the best year in company’s history and even for next year will you have positive outlook?

A: I would say for tractor business definitely this will be one of the best year for us, in the history of the company. Overall the outlook looks positive, so as I said till June, at least you see the rabi crop, the season looks good and obviously next year will again depend on what the monsoon outlook is for next year and if monsoon happens to be good, probably you will see a big peak happening next year for the industry.

Latha: Would you be able to expand margin simply because we now still see finance costs falling and I guess even your other metal and raw material costs have not raised?

A: We have given a guidance of double digit margin for the tractor business and we will maintain that outlook even for the full year basis. So, this quarter as well as for full year, we look at double digit margins for the tractor business.

Sonia: You are almost at double digit now, 9.5 percent for the tractor business, so, do you think you can do in high teens as well by the end of the year if the volumes pickup as expected?

A: I don’t think it will be high teens this year, maybe next year we can look at. Only this year it will be in the low double digit.

Latha: Any progress in the railway equipment division, I know it is a small one for you but are orders flowing, are prospects improving?

A: We expect only H2 is a good deliverable execution months for railways. So expediting the second half should give us good 20 percent odd growth on railways sides. We got good order book of Rs 110 crore which will get executed.

Sonia: I also wanted to ask you a little bit about the construction equipment business which continues to be loss making. You guys did a very good thing by selling the loss making auto ancillary business or divesting stake there. Do you plan to do anything similar with the construction equipment business say in the next one year?

 A: In construction we don’t have any plans like out of business. So we will continue in that business and we expect that the infrastructure story is still to unfold and we expect a lot of growth should happen in the construction development space. We have already seeing the growth happening in the first six to nine months in this year, almost 40-50 percent growth is happening on that space. The projects really go off the board and they start getting executed. However, we will like this business to turnaround and probably grow it from there.