Escorts Kubota Ltd (formerly Escorts Ltd), a leading manufacturer of tractor and other farm machinery and construction equipment has unveiled its Mid Term Business Plan (MTBP 2023-2028), in which the key elements are investments of about ₹4,000 crore and increasing exports of its products.

On the BSE today, perhaps in sympathy with the company’s announcement, the company’s share price rose ₹164.90 (8.12 per cent), to close at ₹2,196. The volumes traded were also higher – 1.35 lakh shares compared with a two-week average of 20,000.

The stock has grown at 24 per cent CAGR in last five years from ₹700 in November 2017, vastly outperforming Nifty Auto, observes ICICI direct, a retail stock broker.

The management indicated that Escorts Kubota aspires to grow its overall revenue by 2.5 times in FY28, up from ₹9,068 crore in FY22, supported by the expansion of its network, widening of products across segments, and growth in exports.

Eye on exports

Escorts Kubota aims to increase contribution of exports to 15-20 per cent of total revenue by FY28, up from about 6.4 per cent in FY22. The management said that even a 5 per cent shift in total components sourcing globally to India would mean about $500 million worth of potential exports. The company aims to capture a part of this potential by FY28.

It aspires to secure a leadership position in India-led tractor exports while creating a strategic hub for global sourcing. The company would focus on key high-volume markets - USA, Europe, Thailand and Brazil, leveraging its presence there. It said it would also work with multi-brand vendors in markets such as Africa and South America.

The company at present has five manufacturing facilities and plans to add one more, which will be a greenfield factory, which will increase capacity for tractors and engines from about 1.7 lakh units to about 3 lakh units.

Ramping up dealer network

It intends to ramp up the dealer footprint by 50 per cent from the current network of about 1,400 (Escorts has 1,100 and Kubota has 300 dealers. However, the dealers will now have an opportunity to retail multi-brands of the company.

The management said it will invest up to 5 per cent of its net profit in R&D & innovation and 40 per cent in shareholders’ return.

“We believe that the strategic partnership between Escorts and Kubota will likely create synergies to help the company create world-class technology driven products, better production system, and build large scale operations,” said a report of brokerage services firm Prabhudas Lilladher,

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