Tractors and the construction equipment business account for 98 per cent of the revenue for Escorts Ltd. The last year or so has seen a quiet transformation happening in the corridors of the six-decade-old company, spearheaded largely by joint managing director Nikhil Nanda, son of CMD, Rajan Nanda. About a year ago, the company undertook an elaborate restructuring exercise, and merged two of the most important businesses under a single entity. It decided to focus on the premium segment in tractors — a move that has played an important role in pushing its EBITDA margins up from 4 per cent to 9 per cent in the last three quarters. Also, to the chagrin of many senior employees, the company appointed a woman in a position of power.
In Pune to announce Escorts’ partnership with Italian speciality tractors maker BCS S.p.A, Nanda spoke to Business Line , coming across as a very approachable person who sees himself as the custodian of a legacy, and one who takes his role in preserving values very seriously.
Last year, Escorts had embarked upon a major restructuring exercise. How far have you progressed?
The restructuring aims at making Escorts lean and intelligent. We are merging activities (of the agri-machinery and construction equipment companies) that were duplicated — HR, Materials and Finance. The process is under way and, for the first time, infrastructure and agriculture are coming together in a listed company. The value will be seen in the months to come.
We are also consolidating the infrastructure for tractor manufacturing and combining three facilities — all at Faridabad — at one place. This will free up 30-40 per cent land for new, allied businesses and many more levels of excellence in the business.
You have made a major foray into earth-moving machinery. Can you elaborate on this?
We will increase capacity, import robots and expand this construction business. Escorts has also been approached by a multi-billion dollar company for distribution of our backhoe loaders in select markets around the world.
Another area we are working on is improving the look and feel of tractors, reducing the NVH (noise, vibration, harshness) — an area in which tractors are the worst. We are roping in European agencies, including a car designer agency, to help finish the tractors and achieve this integration.
What is your vision for the years ahead?
We want to stick to our core competence and be the most formidable, valued and respected engineering company in the country. We want to bring in world-class practices, both software and hardware, for the country’s farmers, and help them improve productivity. Nearly 70 per cent of our capex is going into developing technology and new products.
I want to create an institution and people who will ensure continuity. My job is not to build Escorts around myself but create the robustness to build the company.
We want to be the most profitable tractor company in the next three years and No 2 in the tractor space by 2020.
Are you open to growing inorganically?
Yes, but we will acquire for the right reasons, not for the sake of ego or to tell the world we are large. I think collaboration is the way forward.
How has the recent appointment of a woman as head of HR been received?
Initially, there were reservations. But we want to hire more women — right from the Board of Directors to the shop-floor, and I would like a significant proportion of our workforce to be women. We don’t want to be seen as a male chauvinistic company, and would like to bring in gender diversity. Actions are being put into place for this and this will transform the way of thinking in the future.