Sales will pick-up from Jan; 20% growth likely: Escorts

Sameer Tandon, chief of sales- service & spares, Escorts Agri Machinery says the company is investing into developing new products in order to bring comfort and style to Indian farmers.

Speaking to CNBC-TV18, Tandon says the agricultural products firm is likely to see sales growth of 10-12 percent in December-January.
However, he is more optimistic going into 2014 and says sales will pick up from January and sales growth of around 20 percent is likely.
"Our presence in the southern part of the market has not been very good so we are focusing there. As and when we start adding up volumes from those markets as well, we should start growing much faster," adds Tandon.

Below is the edited transcript of the interview to CNBC-TV18. Q: The last time when we had spoken with your colleague, he indicated that the volume growth or rather the guidance for volume growth stands at 18 percent for FY14. Do you think given the way things have improved because of monsoon etc; you may have to revise your volume growth guidance higher?
A: I do not know which guidance and who gave the guidance of 18 percent but we maintain that the monsoon has been very good and the last festive season, which is Dussehra and Diwali, has gone well with about 25 percent growth.
Usually the December-January months are very linear months so there we should see growth of about 10-12 percent at the most but as we go forward and get into the next season, which starts March, we should start looking at a growth of about 20 percent. Q: Last week we spoke to the Chief of the agricultural prices commission, Dr. Ashok Gulati and he was pointing out that there has been such a secular rise in rural wages, almost 18 percent compound annual growth rate (CAGR) for the past five years that farm mechanization has got a huge fillip. Would you agree to this analysis?
A: Yes, to a very large extent. The commodity prices have been going up, the food inflation has been higher and that means there is a disposable income in the hands of farmers as well, which is much higher. Wages too are going up. The labour shortage and also the Indian agricultural productivity today is still much lower as compared to the advanced world.
If one sees America or South America is very low. So, I think there is a huge scope of mechanisation and as we go forward we expect farms to get consolidated. We would require much more mechanisation and we are seeing it in the places where people were still very orthodox with farming practices, specifically in the eastern part of the country- it is seeing mechanisation going on at a very fast pace. Q: What can you tell us in terms of your own revenue growth or volume growth? Would it be heightened compounded annual growth, would it be closer to 20 percent or 15 percent. Give us some idea of how much better it will be from the past three-four years?
A: We have been growing steadily. If one sees, for the last two years, we have been growing to a tune of about 8-12 percent and as of now our plans are to grow with the market as the market grows.
Unfortunately for us, our presence in the southern part of the market has not been very good so we are focusing there. As and when we start adding up volumes from those markets as well, we should start growing much faster.
Our new products, which we have brought in, in the last two years, have been doing very well and that has reflected enough profitability. So, profits have gone up substantially with the new products because the customers have accepted these products very well. As we go now further, the market keeps growing up, people would have need of new technology, people would have need for higher horsepower products and with that we should start registering much better growth. Q: A word on the cost reduction programme that the company has undertaken. How much will this help you in terms of improving your margins going ahead?
A: The cost reduction programme is a continuous improvement process which we keep doing in. What we are doing is trying to get the best practices from the globe and trying to put in India and with this and also trying to leverage the huge vendor base, which this automotive industry has created. As the automotive industry hasn’t been doing so well, the prices have been in check . We have gone in for TPM in our plant, which is a huge initiative to improve on the cost and to improve on the quality standards both.
There are lot many initiatives which we have taken in. I think it would go in. We should look at a better profitability through these actions we well. Q: There is such a quantum leap in demand, aren’t you in capex mode?
A: At this point of time, we are investing into developing newer products. The philosophy of the company has been to bring the best of the world to India and to take the best out of India to those countries and that is what we have been doing it. So, our whole investment has been into trying to work with global partners to design newer and newer products. Along with higher productivity product we are talking about how we could bring more comfort to the farmer who can work more hours.
We feel that for long in the country the farmer has been deprived of comfort. People always thought that he has got a utility machine and he need not have comforts. So, we are trying to bring in that he has to have comfort, he has to have style. So, we have tied up with one of the best designers in Italy and in Europe to bring in those comforts, style and to bring in those products which he always dreamt of but couldn’t afford till now in India.