💰 Financial Performance

Revenue Growth by Segment

Agri Machinery (AM) revenue grew 30.3% YoY in Q2 FY26 to INR 2,264.9 Cr, driven by strong tractor demand. Construction Equipment (CE) revenue declined 17.8% YoY to INR 338.1 Cr due to extended monsoons and lower infrastructure mobilization. Total consolidated revenue from continuing operations reached INR 2,791.6 Cr, up 22.6% YoY.

Geographic Revenue Split

Domestic tractor volumes grew 12.9% in H1 FY26, while export tractor volumes surged 50.0% YoY, significantly outperforming the industry export growth of 3.6%. The company is expanding its global footprint, exporting to 80+ countries, with a major boost expected from upcoming exports to the U.S. market.

Profitability Margins

Standalone Gross Margin stood at 30.7% in Q2 FY26 (Material cost at 69.3%). EBIT margin for the AM segment improved significantly to 12.7% in Q2 FY26 from 10.3% in Q2 FY25 due to operating leverage. CE segment EBIT margin compressed to 3.8% from 9.3% YoY due to lower production and inventory adjustments for emission norms.

EBITDA Margin

Consolidated EBITDA margin for Q2 FY26 was 12.9%, representing a 279 bps YoY increase. Standalone H1 FY26 EBITDA margin was 13.1%, up 168 bps YoY, driven by softening commodity prices and better operating leverage in the tractor division.

Capital Expenditure

The company generates annual cash accruals of INR 800-1,000 Cr, which are utilized to fund incremental capex, including a dedicated engine manufacturing line for Kubota and the expansion of manufacturing facilities in Faridabad and Poland.

Credit Rating & Borrowing

Maintains a superior credit profile with CRISIL AA+/Stable for long-term facilities and CRISIL A1+ for short-term limits. The company is largely debt-free with negligible borrowing costs and cash/liquid investments of approximately INR 4,800 Cr to INR 6,000 Cr.

⚙️ Operational Drivers

Raw Materials

Steel, pig iron, and rubber are primary raw materials. Material costs represent 69.3% of total revenue as of Q2 FY26, down 32 bps YoY due to softening commodity prices.

Import Sources

Sourced primarily from domestic suppliers in India, with specialized components for Kubota-designed products potentially involving Japanese or global supply chains through the Kubota partnership.

Key Suppliers

Not specifically named in the documents, but the company manages a vast vendor base for tractor and construction equipment components.

Capacity Expansion

Current tractor capacity utilization is ~75-80%, while Construction Equipment utilization is lower at ~30-35%. Expansion plans include a dedicated engine line for Kubota and scaling the CE segment product range.

Raw Material Costs

Material costs were 69.2% of revenue in H1 FY26 compared to 70.2% in H1 FY25, a 101 bps improvement. Procurement strategies focus on cost reduction initiatives and leveraging Kubota's global sourcing network.

Manufacturing Efficiency

Operating leverage in the Agri Machinery segment is a key driver, with EBIT growing 51.7% YoY in Q2 FY26 on a 22.6% revenue increase, showing high efficiency in scaling production.

Logistics & Distribution

Selling expenses, including logistics, freight, and forwarding, are variable and part of 'other expenses' which totaled INR 287.0 Cr in Q2 FY26.

📈 Strategic Growth

Expected Growth Rate

15-18%

Growth Strategy

Growth will be achieved through: 1) Leveraging Kubota's global network to boost exports (specifically to the US); 2) Expanding the domestic dealer base; 3) Scaling the newly commissioned captive NBFC, Escorts Kubota Finance Limited (EKFL), to support product financing; 4) Increasing the share of non-tractor agri-products like rice transplanters and harvesters.

Products & Services

Tractors (25-100+ HP), Backhoe Loaders, Pick-and-Carry Cranes, Soil Compactors, Mini Excavators, Rotavators, Harvesters, and Rice Transplanters.

Brand Portfolio

Farmtrac, Powertrac, Steeltrac, and Kubota.

New Products/Services

Launched the mass-market BLX 75 backhoe loader and new Kubota-engine variants for the CE segment. Non-tractor agri-revenue has already increased from 10-12% to 17-19% of AM revenue.

Market Expansion

Targeting the US market for tractor exports and expanding presence in South and West India where market share is currently limited.

Market Share & Ranking

Holds ~10.1% domestic tractor market share. Mini excavator market share increased by 151 bps to 18.5% in Q2 FY26.

Strategic Alliances

Strategic partnership with Kubota Corporation, Japan, which holds a 53.5% promoter stake. Divested Railway Equipment Division to Sona Comstar in Q1 FY26.

🌍 External Factors

Industry Trends

The tractor industry is seeing a shift toward higher HP and specialized machinery (rice transplanters). The CE industry is transitioning to BS V emission norms and increasing mechanization in rural infrastructure.

Competitive Landscape

Faces intense competition from Mahindra & Mahindra, TAFE, and John Deere. A drop in market share below 7-8% is cited as a downward rating factor.

Competitive Moat

Moat is built on the 'Escorts' brand trust (80+ years), Kubota's global technology leadership, and a robust distribution network. Sustainability is high due to the 53.5% Kubota stake providing long-term strategic support.

Macro Economic Sensitivity

Highly sensitive to agricultural GDP and monsoon performance. CE segment is sensitive to government infrastructure spending and interest rates.

Consumer Behavior

Farmers are increasingly adopting mechanized solutions beyond just tractors, such as harvesters and sprayers, to counter labor shortages.

Geopolitical Risks

Trade barriers in export markets could impact the 50% growth seen in tractor exports.

⚖️ Regulatory & Governance

Industry Regulations

Compliance with revised emission standards for off-road vehicles and safety standards for cranes (Safe Cranes).

Environmental Compliance

Transitioning product range to BS V emission norms for Construction Equipment; ESG profile is noted by CRISIL as supporting the credit risk profile.

Taxation Policy Impact

Effective tax rate impacted in H1 FY25 by a INR 91 Cr charge due to changes in long-term capital gains tax provisions and brought-forward losses from merged companies.

Legal Contingencies

Not specifically detailed in the provided documents, though standard corporate and tax litigations are managed within the 'unallocated' segment costs.

⚠️ Risk Analysis

Key Uncertainties

High dependence on the cyclical tractor industry (76% of revenue). Potential for sharp deterioration in market share if competitive intensity increases.

Geographic Concentration Risk

Revenue is concentrated in North and Central India; limited presence in South and West India markets remains a weakness.

Third Party Dependencies

Strategic dependence on Kubota for technology and global market access. Weakening of Kubota's credit profile would be a downward factor.

Technology Obsolescence Risk

Risk of falling behind in EV/Alternative fuel tractors; mitigated by Kubota's global R&D capabilities.

Credit & Counterparty Risk

Superior liquidity with INR 6,000 Cr in cash provides a massive buffer against counterparty defaults or working capital cycles.