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Thursday, Nov 27, 2003

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Escorts tractor unit pegs Rs 175 cr profit in 2 years

Neha Kaushik

New Delhi , Nov. 26

RIDING on intensive cost reduction initiatives and better monsoons this year, Escorts' agri-machinery division expects to bring about a multi-fold increase in its profitability in the coming years.

The division targets sales of more than 50,000 units and a profit of Rs 175 crore in the next two years.

It also hopes to capture a market share of 20 per cent next year.

Though sales of the company were affected this year due to a vendor strike (DCM Shriram), corrective steps undertaken by the company have helped to decrease the break-even sales level from 32,000 tractors to 27,500 tractors.

Escorts had undertaken cost-cutting initiatives in various aspects including manpower, material costs and so on.

"We have managed to reduce costs (per unit) by Rs 7,500 in the last three years. In the current year, we would be able to reduce costs by a further Rs 7,500. Out of this about Rs 2,500 would come from manufacturing a principal component in-house", Mr Rakesh Chopra, Business Head-Agri Machinery Group, Escorts Ltd, said.

Though the company has suffered a 20 per cent loss in tractor retail sales this year due to the strike, its feels that the cost reduction initiatives have put it in a comparatively advantageous position.

Mr Chopra emphasises that in addition, its inventory too is at a manageable level.

Further, Escorts has charted out aggressive marketing initiatives and plans to launch newer variants to drive sales.

It has recently signed on Bollywood stars, Amitabh Bachchan and Sunny Deol, as brand ambassadors.

The newer tractor variants include a special edition series called Sunny limited edition (christened after Sunny Deol) equipped with a canopy, silver metallic colours, new series of engines, higher lift capacity and so on, and a 25 - HP tractor called `Jawan' targeted at the entry-level of the market.

In addition, keeping in view the specific needs of different geographical regions, Escorts would be launching customised tractors.

For instance, for the southern region where the company has a relatively lower market share, Escorts has come out with a tractor that caters to the specific requirement of paddy growers.

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