See 20% volume growth in Q4: Escorts

Escorts Q1 net profit was up at Rs 25.5 crore versus Rs 23.4 crore, year-on-year, YoY. Its net sales were up at Rs 827.8 crore versus Rs 600.2 crore, YoY.

In an interview with CNBC-TV18, Rajan Nanda, CMD, Escorts, spoke about the results and his outlook for the company. Below is a verbatim transcript of his exclusive interview with CNBC-TV18's Udayan Mukherjee and Mitali Mukherjee. Also watch the accompanying video. Q: Your operating margins have come off about 3% in the quarter, can you take us through the pressures you have witnessed and whether this pressure is likely to continue? A: Inflationary trends are very disturbing between rubber and steel. I think it is a global phenomenon. There is also a huge pressure on supply chain to provide materials for the growth of auto and two-wheeler segment. But it is primarily inflation pressure of suppliers where we have not been able to price all costs that have got added to products. As and when we do, we find it adds up further. Also, the tractor industry has got to meet our regulatory requirement of emission norms, which adds further cost to product. But all-in-all, we have new price change that is planned in early March that will recover all the costs we have added and margins would be totally restored by then. It is also the season period when the business volumes grow. So, we do see agriculture to be on a very positive growth trend. Even in the offseason period, the industry has grown 20% and we matched that growth. We would like to do better. Only way we plan to do better is to bring in new products, which will have new application opportunities for farmers to help them improve the yields of product of crop. We think these introductions in the coming season should be a benefit to our volume growth. Q: What kind of volume growth do you think you can hold because this quarter saw about 20%, but that was also in a large part to do with the Tanzanian order that you had? A: No, I think the domestic market demand is quite strong. Looking at the kinds of crop prices, the back up of government MSP holding out attractive returns is the first time the farmer is getting a good return for his effort. That effort is getting converted into improving and increasing his inputs because we have to accept that our farms have lower yields than corresponding farms of Europe and Latin America. So, we have to do a lot more to improve our yields. Therefore, there is a huge potential for farmers to increase and expand their earnings. We are delighted and very optimistic about the growth opportunities in this sector with government also backing it for better GDP for the economy and therefore there is going to be growth. We think that 20% growth of this quarter would be sustained and partially improved. Q: What kind of price hikes would you look to effect over the next few months because you have already raised prices in January? A: 2.5-3%.