Ladies and gentlemen, good day and welcome to Q3 FY 2025 earnings conference call of Escorts Kubota, hosted by Batlivala & Karani Securities India Pvt. Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your dashboard. Please note that this conference is being recorded. I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Limited thank you, and over to you, sir. Thank you, Ms. Kim. Good evening. On behalf of Batlivala & Karani Securities India Private Limited, I welcome you all for Escorts Kubota Limited Q3 and nine-month FY 2025 earnings conference call. I also take this opportunity to welcome the management team from Escorts Kubota Limited. Today, we have with us Mr. Bharat Madan, Whole-time Director and Chief Financial Officer. Mr. Neeraj Mehra, Chief Officer, Tractor Business Division. Mr. Sanjeev Bajaj, Chief Officer, Construction Equipment Business Division. Mr. Sanjeev Garg, Head Finance and Tax, a nd Mr. Prateek Singhal, Investor Relations from Escorts Kubota. We will start the call with a brief opening remark from the management, followed by a question-and-answer session. Before we start, I would like to add that some of the statements made by the company in today's call will be forward-looking in nature and are subject to risks, as outlined in the annual report on investor relations of the company. Over to management for their opening remarks. Over to you, sir. Thank you, Mr. Jayaraj. Good evening, everyone, and thank you all for joining us today. Please note that from quarter-ending December 2023, Railway Equipment Business Division profitability is shown separately at discontinued operations. The financial statement for the prior period has been adjusted accordingly. Continuing operations now consist of Agri Machinery and Construction Equipment segment. Few highlights of the company's standalone financial performance for the quarter-ending December 2023 are as follows: Operating revenue from continuing operations at INR 2,935.4 crores, up by 8.5% year-on-year. EBITDA at INR 335.3 crores, up by 3.6% year-on-year. EBITDA margin in Q3 is at 11.4%. EBIT from continuing operations at INR 380.2 crores, up by 6.4% year-on-year. Net profit from continuing operations at INR 290.5 crores, up by 7.7% year-on-year. Net profit including discontinued operations at INR 323.2 crores, up by 8.5% year-on-year. EPS stands at INR 29.39 as compared to INR 27.14 year-on-year. The Board has approved the sales and transfer of approximately 33,000 plus square yards of the land adjacent to Railway Equipment Business Division to Sona Comstar for a total of INR 110 crores. This industrial plot is currently being used for the spare part business division of the company. We will reallocate the spare part division to a new location before finalizing the sale. The Board declared interim dividend at 100%, i.e., INR 10 per equity share. On a consolidated basis, the company's financial performance for the quarter ending December 2024 is as follows. Revenue from continuing operations at INR 2,948 crores, up by 8.1% year-on-year. EBITDA at INR 332.8 crores, with a margin of 11.3%. Net profit from continuing operations at INR 287.9 crores, up by 6.5% year-on-year. Net profit including discontinued operations at INR 320.6 crores, up by 7.4% year-on-year. Moving on to the segmental business performance, starting with the Agri Machinery business. On tractor business in Q3 FY 2025, the total tractor industry domestic plus export was at 2.89 lakh tractors, up by 12.7% as of the corresponding quarter last year. Our total tractor volume was at 32,556 tractors, up by 4.5% as against 31,155 tractors in the corresponding quarter. On the domestic front, the tractor industry in Q3 FY 2025 was at 2.67 lakh tractors, up by 13.5% as of the corresponding quarter last year. The industry in the north and central region grew by 2.5%, while the rest of the country saw a substantial growth of 28.6%. Our domestic volume stood at 31,585 tractors, up by 6% as of 29,784 tractors in the corresponding quarter. We also reduced our channel inventory, and our domestic market share in Q3 FY 2025 stands at 11.8%. Continuing with our strategy to offer innovative products, recently we have launched ProMaxx Series under Farmtrac brand in 30 to 50 HP category. ProMaxx Series delivers exceptional performance with advanced technology and a sleek design, offering superior comfort and versatility for various applications. We currently have around 1,540 exclusive dealers for our Kubota, Farmtrac, and Powertrac brands. For FY 2025 full year, we expect the domestic tractor industry to continue its growth trajectory with a growth of around 6%-7% for the full year. On the domestic front, the tractor industry in Q3 FY 2025 came at 221,000 tractors, up by 3.9% as against 213,000 in the corresponding quarter. Our export volume came at 971 tractors as against 1,371 tractors in the corresponding quarter. During the quarter, the sales to Kubota Global Network accounting for approximately 27% of our total export volume. Non-tractor revenue comprised of Agri Machinery business, engine business, and the service and the spare part business in Q3 FY 2025 constitutes 21% of the Agri Machinery revenue as of 19% in the corresponding quarter and 18% in the sequential quarter. Agri Machinery product segment revenue was up by 9.4% to INR 2,416.6 crores as against INR 2,209 crores in the corresponding quarter. EBIT margin for the Agri Machinery business was at 10.4% as against 12.1% in the corresponding quarter. Coming on to the Construction Equipment business, in Q3 FY 2025, served industry volume for crane, backhoe, loader, mini-excavator, and compactor was up by approximately 14% as against the corresponding quarter last year, mainly led by the backhoe loader industry of around 18%. Our total volume for CE business was at 1,989 machines as against 2,008 machines in the corresponding quarter. CE segment revenue came at INR 515.7 crores, up by 4.1% as against INR 495.4 crores in the corresponding quarter. EBIT margin for the quarter-ending December 2024 for the Construction Equipment business was up at 11.11% as against 8.1% in the corresponding quarter. CE industry has moved to higher emission norms from January 2025. During the quarter, we have introduced a range of Stage V emission standard compliant products and also showcased a new entry-level Hydra crane and a new BLX-75 backhoe loader product. This is a new addition under the E-Kubota brand, featuring a sleek design and cutting-edge functionalities. Looking ahead, we anticipate a temporary volume impact due to price escalation within the Construction Equipment industry due to the transition to BS V standard. Despite this short-term impact, we remain optimistic about the mid and the long-term growth perspective driven by government initiatives in infrastructure products such as road, smart city, railway, and education systems. Moving on to the Railway Equipment Business Division, that's the discontinued operations, revenue from the quarter-ending December 2024 came at INR 200.4 crores, down by 2.2% as against INR 205 crores in the corresponding quarter. Order book for the division at the end of December 2024 stands at more than INR 890 crores. This order book, however, excludes BMBS orders for freight wagons for approximately INR 380 crores, supplies for which have temporarily been held by RDSO. Now, I will request the moderator to open the floor for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchscreen telephone. If you wish to remove yourself from question queue, you may press star and two. Participants, I request that you use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Gunjan Prithyani from Bank of America. Please go ahead. Yeah, hi. Thanks, team, for taking my questions. I just wanted to get your thoughts on the market share because if I look at the industry as a whole, it seems to be doing quite well. But I think our growth has been lagging the industry across regions. If you can just share some thoughts on what is it that is dragging the performance and how should we think about market share improving from here on? Hi, Gunjan. This is Neeraj Mehra. Thank you for your question. Actually, for quarter three, the geographic growth of the industry is a bit unfavorable from EKL's perspective. As you heard in the opening comments, the growth has been to the tune of about 28%-30% in non-strong EKL markets. That is one of the factors that has impacted the quarter three market share. Also, secondly, our retails are substantially higher. Our retail market share is better than what is shown in the wholesale market share. Thirdly, what we have done is in quarter three, we have, to a certain extent, reduced the channel inventory of our dealers. All these three combined, to a certain extent, give the performance that you're seeing at the moment. Where does the channel inventory stand now? The reason I'm asking this is because I thought when this whole Kubota, once the Kubota entities were merged, there were a fair bit of product interventions that were due and even the captive Finco. So when do we see the impact of all this start to reflect in terms of market share improving and growth coming back? So there's a lot of questions in one question. So the impact of various product integrations and the captive finance, to a certain extent, you will see in the next fiscal year, that too in the second half of the next fiscal year. As regards to your initial question, at what level the inventory levels are? Currently, the inventory levels are at about four weeks. Okay. Okay. Maybe just a follow-up, and I'll join back the queue. On these product interventions, if you can share more, what is it that we are doing in terms of the Kubota portfolio as well as your own portfolio? How can that help in terms of bringing back the growth? And again, captive FinCo, is that a big lever? If you can touch on that. I'm just trying to get comfort on when this integration plays out, how should we think about market share? You heard in the opening comments, Gunjan, that we have very recently launched a new product range in Farmtrac, which is known as the ProMaxx Series. ProMaxx Series is primarily for the western market, that is Gujarat, Maharashtra, and certain markets where we are not present currently, that is basically Chhattisgarh, Odisha, and some parts of MP. Of course, we will sell it across the country, except south, but with the introduction of this range, which wherein the models are primarily from 37 HP category to 47 HP category. The range actually caters to the mass segment, and it has a variety of models, two-wheel, four-wheel. There are a lot of product gaps. We see our market share improving. Again, it will take time. It's not going to be overnight. Over the next couple of quarters, you will see the Farmtrac market share going up. As regards to the captive finance, it has been initiated in some states. Pilot is going on. We have identified certain dealerships and certain districts where it has got started. But the new impact of the captive finance will actually come into play in the second half of next fiscal year. Okay. Got it. Thank you so much. I'll join back the queue. Thank you. The next question is from the line of Mitul Shah from DAM Capital. Please go ahead. Sir, thank you for the opportunity. Sir, similar to the previous question, sir, if you can quantify, as you highlighted, the retail market share were much higher in terms of the number as against 31,500 wholesale number, what would be the approximate difference between retail versus wholesale, or how much retail were higher? So as I've shared, one aspect is that we have reduced our stock. So one way to look at it is the stock reduction that we have done. So we are currently at about four weeks of dealer stocks. The second aspect is that to quantify it, it will be on the retail side, it will be a bit difficult for me. But the growth is, if I might say so, the growth is pretty decent in terms of retail. Okay. So second thing on this, again, adverse geographical mix, which is impacting overall performance. But it seems that even that is also not so bad. For example, for month of January or last few months, north seems to be, as an industry wide, more or less flattish, whereas our volume, instead of flat, declining in double digits. So what is exactly happening is either it is in terms of the product-related challenge or what we are hearing from the channel is that post new management, it's a stricter norms on the credit side, or we are reducing our debt than on those types of initiatives, which has some impact. So if you can give some qualitative perspective here, that would be more helpful. So, [inaudible] you are to a certain extent right. It's a combination of all these things that you have mentioned. It is a combination of all these aspects. There is no issue pertaining to the product aspect as such. But the other aspect that you have mentioned, it is all those things, all those corrective actions that we are taking. Sir, and lastly, again, on the market share side also, as we earlier also as a standalone Escorts entity, we reached to about 6-7% market share in our opportunity markets like AP, Telangana and all. But after the amalgamation, where the Kubota was even more stronger, still our market share seems to be about just 4-5% in those markets. On the other hand, Gujarat and Maharashtra, where it is even higher than our blended market share, it's about 13% types. So despite that, why the adverse geographical things should play out? I'll take a couple of minutes to explain this. In my previous two or three conversations during these quarterly calls, I had mentioned that our initial focus was in north and in the west because these two markets actually together contribute about 70%-73% of the total industry. For the past three, four years, we had been continuously dropping our market share in our stronger markets. Our intent was to first get back that market share. In the last 12 months or so, we have been working on that, and our market share gains have been pretty decent in our stronger markets. In the west, though this year we have not gained market share, we have not dropped market share as we normally do when the industry grows substantially. West also, there are certain channel-related issues, channel capacity-related issues. So because as the industry grows exponentially, the capacity of the dealers to grow with the industry is a little limited. So that aspect is there in the western part of the country. Yet, what has actually happened is the industry growth post September has been phenomenal in south, in west, and in certain opportunity markets like Chhattisgarh, Odisha, Jharkhand. And the growth was so phenomenal that it was unforeseen, and we have a lot of white space available at these locations. So post September, we have started working on these opportunity markets on how to cover the white space. The product has come in for these opportunity markets. So I believe over the next three to six months, you will see a gradual improvement in terms of market share. Now, coming to the Kubota aspect that you have mentioned as regards to Kubota being strong in south and in west, you are right. But as you already know, that for the past 12 months or maybe more, the industry was in a very declining trend in west and south. So the dealers' viability and the dealers' profitability got impacted severely. Yes, they are a strong player, but relatively still, with respect to the industry, they are still comparatively smaller. So the dealers and the brand is slowly limping back. They have done reasonably well in the quarter three, and we will see if the industry keeps up its momentum of quarter three. In the west and south, we will see a growth in Kubota market share and overall EKL market share as well. Understood, sir. Thanks, and all the best. Thank you. The next question is from the line of Jinesh Gandhi from Ambit Capital. Please go ahead. Yeah, hi. My question pertains first to any update on the Greenfield plant which we are looking for. What are the hurdles there? Because it's now almost more than six months since we canceled the Rajasthan location, so any update on this? Yes, I think as you mentioned in the last call, so we had already given expression of interest to UP Government for the land, a nd now it's the government who has to acquire the land from the farmers. So earlier, they had told us they'll be able to complete the acquisition by January end, but since there's been some delay in the acquisition process, so it's still going on. I think once they complete the acquisition, they will ask us to complete the balance formality. So we're waiting for government to allot once they complete the acquisition for the land. Okay. Okay. Got it, a nd secondly, in the non-tractor machinery which we are talking of, which contributed 21% to revenues, how much of the non-tractor machinery would be from non-tractor farm machinery? See, like in the Agri Machinery, we mentioned there are three, four verticals, like you've got engines, spare parts, and then you've got this agri solution, which is essentially the implement business. So the larger business obviously is the implement business in this. So out of the 21%, I would say spare parts and engine give about 8%. And balance really comes from 12%-13% comes from the agri solution, which includes harvester, transplanters, and other implements. Okay, and wouldn't it be fair to say some, given that implement business has been seeing a reasonably good ramp-up, faster ramp-up than other categories, it will be having some negative impact on our margins given it could be either lower margin or loss-making business at current scale? Yeah. So that's the reason you're saying there's a dip in the agri business margin, even though the top line has grown. And even the harvester business has done very well in this quarter, and we've seen almost 30% plus growth. But since it's a traded item right now, and we are importing, so the margins are not similar as you do in the manufactured component or manufactured parts in India. So which is why you're seeing the dilution is happening, even though the growth and downturn will continue to be there. I think once you start localization of a certain part, then you'll see the margin improvements that are happening there. But first, I think the objective is to capture market shares. As you know, Kubota and the tractor harvester has got significant market share in India. It's almost 30% plus. The other categories, the numbers are not that high. The transporters and other implement, the volumes are low. Harvester is the one which is driving the entire growth right now. Got it. Got it. And lastly, on the Construction Equipment business, given that emission norms have been implemented from January 25, what would be our outlook for FY 26, and what kind of price increases we have taken in this segment? Yeah. Yeah, Sanjeev is at the side. So it has come into effect from first of January. And our intent initially is to pass on the cost to the customer, and we will try to recover that cost. It will be slightly difficult because in about three and a half years, it has been the second emission norm changed, and the cost to the customer is going up consistently without much of an increase on the rental rates. So there will be a pressure in terms of recovery of that cost, but that's how every time when price increase happens, it takes a bit of a time for price recovery. So we will increase in line with what is our contribution margin on the increased RMC. And we will see that in the next three, four months, we will try to recover it. But however, given the condition that we are also approaching monsoons in Q1, so it might take a little longer. So that will be dependent on the market conditions at that time. Okay. But what will be the total cost increase because of the emission norm? We may take it in standard manner the past two, but the total cost increase because of norm, and in that context, would FY 26 be a flattish year, or will you see a decline? So we are not expecting a decline. It will be a flattish year. But in terms of cost, it varies from product to product. So there are certain products which are moving from BS3 straight away to BS5, where the cost increase for the customer is to the tune of 10% or so, or slightly more than that, a nd products which are moving from BS4 to BS5, it is about 5%-6%. So it's quite a steep increase for the customer, a nd therefore, we are not very bullish of a huge jump in profitability, but over a year of period, I think we will be able to recover the cost, and we're slightly positive to flattish kind of profitability growth. Got it. Got it. And lastly, you are possible to share railway business PBIT for the quarter? It's about INR 44 crores, and this is about 22%, 21.9% in this quarter. Got it. Great. Thank you [inaudible]. Thank you. A reminder to all participants here in the place to ask questions. The next question is from the line of Vijay Pandey from Nuvama. Please go ahead. Hi Seth. Thank you for taking my question. I just wanted to check about the industry outlook both for the fourth quarter and for the next year after the recent government budget announcement. So if you can just give us a brief overview about how the industry looks like, what will be the growth like in FY 26 and in three to four years' time frame, that would be very helpful. We're looking at about 14%-15% of growth in quarter four. This quarter is going to be a robust quarter. We're looking at a growth of about 14%-15%. For quarter one also, we are looking at a pretty decent good growth in industry. For financial year 26, actually, it's a little bit early to comment. It will actually depend on the monsoons. What actually has happened, if you see in the current fiscal year also, we were a little bit pessimistic before the monsoons, but as the monsoons were very, very good, the industry has taken a sharp upturn post September. To comment on financial year 26, as of now, will be a little bit premature. We can look at it post the monsoons for the entire year. Okay. Okay. Thank you. Thank you. The next question is from the line of Mumuksh Mandlesha from Anand Rathi Institutional Equities. Please go ahead. Thank you so much for the opportunity. Firstly, just on the inventory correction, I just want to understand, are we done with the inventory correction as of January, or do you see more correction ahead as well? No. So we are almost through with the inventory correction. So I will not call it an inventory correction. It's more of rationalization, bringing it to a level primarily to look at the profitability of our channel partners. So that is what we have done, and we are more or less through with the correction. Got it, so mostly, sir, basically, for a company going ahead, mostly the four weeks would be like a normal range, that is, a five to six earlier we used to have, right, sir? Earlier, we were at about five weeks, five and a half weeks. Prior to that, we were at six weeks. So the last year, we have, to a certain extent, operated a little more than at five weeks. So we brought it down to about four, a little over four weeks kind of a thing now. That should be the normal levels going ahead for us, right, sir? Yeah. Got it. Got it. Also, in the export side, we have seen a recovery, very good recovery in recent months. I just want to understand what is driving the recovery and any outlook for the exports tractor, sir? So this is essentially the export to Kubota has started. As we indicated earlier, that from this quarter, the numbers will start improving. So that's what we've seen now, a nd in January, also, we saw good numbers, and we're expecting similar numbers will continue. So the growth has started there. So hopefully, things should only continue to improve from this level. Sir, which market generally we are exporting now for Kubota, sir? Mostly Euro. Europe. Got it. And there, the new products have been launched, sir? Yes. They have been introduced. So that will also go along with the product volumes. Got it. And also, in this quarter, we have seen a notable gross margin change, Q and Q, around 350 basis points change in the gross margin. Can you just help us understand what has happened Q and Q, sir? The major reason was because in the second quarter, there was an inventory build-up which happened because the production levels were high, and in third quarter, the sale number is high, so all your overhead absorption actually gets addressed in second quarter itself, which is the reason you're seeing a swing happening. So the production benefit has come in the second quarter, while in Q3, that impact is missing, which in a normal quarter, your production sale would have been equal, then you would have seen a better margin, but this major swing is because of that. Second reason is also because of some inflation on commodity we have seen in this third quarter, which hopefully in Q4, we are seeing again softening, so Q4 should be better than Q3, and then in the season time, normally the discounting levels in the industry are higher. But most of the schemes really get floated in this festival season time of September to November, which is also the impact which is there. So which probably will not be there in continuing businesses. So maybe we'll see better margins coming forward because of these two reasons. Got it, sir. Sir, on the component exports, sir, can you share some details? How is the current run rate for the component exports? And you have the new warehouse there also. So how is that ramping, sir? So it takes some time. They are already talking to the suppliers now and building up the product inventory which they need to really start exporting. So obviously, this is subject to a lot of quality checks. So Kubota team also will be visiting the suppliers and approving the suppliers before they start sourcing. So we expect I think the pickup will start happening from next year. So we've taken some targets for next year for the sourcing team, a nd the numbers should start looking up from next year onwards. This year it will not be much, really. Got it. So a notable term, next year, something we can expect from a INR 250 crore current run, right, sir, yearly? That's right. It will really depend on how the Kubota's requirement for global market really start picking up. If the demand picks up there, then we expect the sourcing from India should also start picking up for this component. Got it, sir. Thank you so much for this opportunity. Thank you. The next question is from the line of Harsh from Marcellus. Please go ahead. Yeah. Hello, sir. My question was with respect to margins in the agri machinery business. There has been a 160 basis points impact on a year-on-year basis. So is this impact largely because of the production swing which happened from Q2 to Q3, or is there something more to it, the margin decline? So I said three reasons. One, obviously, is the production swing. Second was the inflation in this quarter, which you've seen on the commodity side, which is roughly 0.5%. And then there's also the discounting, which is slightly higher this year in the September to November festive season time, which is in line with the competition. So that also has some impact. But this was only for the season months. So going forward, this will not be there. So we'll see that swing if there will be a positive impact going forward on the margins. But shouldn't the production swing in the festive season impact last year's Q3 margin as well? That's right. Again, it depends on which month the festive season falls in. So this time, since everything happened in October, so the inventory build-up was more till September, the benefit of which came in the Q2. Last year, it was spread between October and November. So the production continued in the Q3 also. So those swings will always be there, but depending on the seasonality, how the season moves, so these swings will be normal. Okay. Got it. And on a sustainable basis, do we hold that initial guidance of margin improvement in the control entity? Yeah. So, like I said, we are continuously working on improving the margin in this business. So, this similar trend will continue even in next year. So, you will see the gradual improvement will be there. But we don't see a significant jump suddenly on the margin front. So, unless you see a major operating leverage playing out and the volumes start picking up. Otherwise, at the normal level, the kind of inflation which is there and then the kind of commodity price we have, we expect we'll have marginal improvement over the current year levels next year, and we'll continue to work on cost line items to see where we can have further improvement possible. Okay. Got it, and secondly, on the exports bit, with us getting access to the Kubota network, especially in the European market, can you give some guidance with respect to how you see the export business growing in FY 26? So I expect the next year should see double-digit growth and very high double-digit growth. It could be anywhere between 20%+. 20%-25% growth should be there. One, because the base is also very low. They say we're not going to do much numbers. I think overall export will be close to 5,000-odd numbers. So that base is, in any case, very low. So I think once your European markets start picking up, the export numbers should start looking good. So we expect next year should be a good level of growth. Okay. Thank you. Thank you. A reminder to all participants, you may press star and then 1 to ask a question. The next question is from the line of Nandan Pradhan from Emkay Global Financial Services. Please go ahead. Yeah. Hi. Thank you for taking my question. So since we've followed from the export bit, we had talked about introducing some specialized products for the European market. If you could just please talk further on that aspect as well. Thank you. Yeah. So, like I mentioned, the product has already gone into production. So the export is starting from this quarter, so which is going to be part of the volume which we'll see coming in. Hi. Can you hear us? Yes, yes, sir. That answers my question, and sir, in terms of margins, how would this break up? Would it be better than our domestic exchange, or how would that work out? So generally, export margins are, I think, more or less similar to what we have in domestic. Even though contribution is slightly lower, your relations are better in export. But now with the exchange rate the way it is, I think the margins are more or less in line with the domestic market. Okay, sir. Thank you, all the best. Thank you, a nd since that was the last question. I now hand the conference over to the management for closing comments. Over to you, sir. Thank you, ladies and gentlemen, for being present on this call. For any feedback or query, feel free to write us on investor.relations@escorts-kubota.com. Thank you very much, and have a good evening. Thank you. Thank you. On behalf of Batlivala & Karani Securities India Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.