Tractor and construction equipment maker Escorts is planning a capital expenditure (capex) of ₹225-250 crore this fiscal in view of some favourable business prospects.
The company will be spending the proposed capex on new product development, and capacity addition in the machining division, which is meant for both Escorts and its JV with Japan’s Kubota Corporation, the company management said during the Q1 earnings conference call.
Upbeat on Bharat
The 40:60 JV between Escorts and Kubota is meant for producing premium tractors and a new manufacturing unit is being set up with an initial capacity of 50,000 units. The new factory is expected to commence production during the third quarter of this fiscal. Meanwhile, the company management expects stronger growth in tractors in the domestic market during the second half of this fiscal as the overall rural sentiment is positive due to the record Rabi harvest and a good early monsoon. Escorts has guided a low single-digit growth for the domestic tractor industry in FY21.
“Amidst the challenging environment, while we have witnessed a faster revival in our agriculture business this quarter, our construction and railway business have been impacted because of lockdown and related issues across geographies,” Nikhil Nanda, the company’s Chairman and Managing Director said in his message to the investors.
Focus on dealerships
Due to supply-side constraints for certain components, the company is operating at 50-60 per cent tractor capacity (down from more than 90 per cent level in June). However, it hopes to scale up to full capacity by mid-August with the expected smoothening of supply chain and labour constraints.
Escorts has 1,070 dealerships across India and is working towards adding 150 dealers in Q2 and Q3 of this fiscal.
The company is also hopeful of boosting its exports to 8,000-10,000 over the next three years from 3,000 units.