VST Tillers & Tractors Ltd is preparing to launch its premium range of tractors under the Zetor brand by the end of this quarter, a move that may not only help the company become a pan-India tractor player but also boost its tractor volumes and revenue.
The company has established itself in the compact tractor segment, where it commands a low double-digit market share. But, its higher HP business, which the company entered in 2020, is relatively small with a volume contribution of 10-15 per cent to overall tractor sales.
To strengthen its play in the higher HP markets, both in India and overseas, the company tied up with Zetor Tractor of the Czech Republic. The company will be launching its VST-Zetor brand of higher HP tractors by the end of this quarter.
“With this, the share of high HP in our tractor volumes is expected to reach 20 per cent in FY24 and 30-40 per cent in the following years, Antony Cherukara, CEO, VST Tillers & Tractors, said during the company’s Q3 FY23 earnings call.
In the higher HP tractor segment, it will sell value-for-money tractors under the brand name VST and premium products under Zetor. It has already built capacity for the higher HP tractors and its overall tractor capacity is about 40,000 units a year.
In the small farm equipment businesses, the company has a strong network comprising 650 dealers across the western, southern and eastern regions. But, its tractor network consists of about 350 dealerships, spread across the southeast and western regions.
To support the growth of premium tractors, the company will be ramping up its network in the northern market, which is a strong market for higher HP tractors.
In the northern region, where currently, it has 30-odd dealerships only, the company will be adopting a cluster approach. It has started with Madhya Pradesh and Rajasthan where the company had reportedly seen initial success, and so will carry forward the model in the coming months.
The Zetor tie-up is also expected to strengthen the company’s exports further as it will be looking at higher HP markets like Africa and Latin America.
Meanwhile, the ₹854-crore company will also be doubling its current annual R&D capex of ₹40-50 crore to ₹100 crore in the next couple of years to support its future growth objectives, which include achieving revenue of ₹3,000 crore by FY26, transitioning from power-tiller centric operations to a strong small farm mechanisation company and strengthening its position further in the compact tractor segment, among others. The company carries a dominant market position in the domestic power tiller segment, with a share of 58 per cent.