• Strong growth in sales for the period was largely due to higher sales of Agri machinery products (AMP) and railway equipment (RE) even while that of Construction equipment (CE) business was subdued. While segment revenue of agri machinery products (AMP) business wasup by strong 33% to Rs 1322.18 crore (or 81% of sales). Similarly the segment revenue of railway equipment was up by 26% to Rs 160.21 crore (or 10% of sales). The segment revenue of CE was down by sharp 22% to Rs 156.92 crore (or 10% of sales).
• Higher sales reported by AMP was largely due to strong pent up demand as well as steady underline demand. Sales volume of AMP was up by 24% to 24441 units and that together with 7% increase in unit realization, the sales jumped by strong 33%. However the sales volume of CE business was down by 13% to 821 units and that along with lower realization dragged the sales of CE.
• EBIT more than doubled (up 127%) to Rs 300.01 crore driven by strong jump in segment profit of AMP segment as well as higher profit of RE business. Segment profit of AMP jumped up by 158% to Rs 264.78 crore driven by higher sales and 970 bps expansion in segment margin to 20%. The segment profit of RE was up by 26% to Rs 160.21 crore driven by higher sales and 120 bps expansion in segment margin. Segment profit of CE was down by 49% to Rs 2.73 crore hit by lower sales as well as 90 bps contraction in margin to 1.7%.

Half-yearly performance

Standalone sales were lower by 2% to Rs 2701.33 crore. But with 580 bps expansion in OPM to 15.6% saw the operating profit was up by 56% to Rs 420.46 crore. The PBT before EO was up by 74% to Rs 428.93 crore after accounting for higher other income, lower interest and higher depreciation. The EO for the period was nil compared to an expense of Rs 9.22 crore in the corresponding previous period. Thus the PBT after EO was up by 80% to Rs 428.93 crore. With taxation stand higher by 134% to Rs 106.86 crore, the PAT was up by 68% to Rs 322.07 crore.

Management Comment

Nikhil Nanda, Chairman and Managing Director of the company said, "The Agri sector has been on an unprecedented boom. Maintaining highest safety measures and working closely with our partners to work around supply chain challenges, the demand for our tractors has so far outpaced our supplies. We think the momentum in Agri sector will continue supported by positive macro-economic factors. We also hope that supply chain challenges would subside after a month or so. We have also started witnessing some positive development in the construction and railway equipment space now and hopefully we will see a full recovery soon. In all our business segments, we are optimistic for the coming quarters."

Other developments

Order book of railway equipment division, at end of September 2020, was more than Rs 350 crore that would get executed in the next 6-8 months.

In terms of Share Subscription Agreement and Shareholders Agreement dated March 20, 2020 and requisite approvals the company has allotted 12257688 equity shares of the face value of Rs 10 at an issue price of Rs 850 (including premium of Rs 840/equity share) to Kubota Corporation of Japan on July 16, 2020. The Board in its meeting held on July 16, 2020 has also approved selection reduction of its share capital by cancelling and extinguishing 12257688 equity shares, held by the Escorts Benefit and Welfare Trust and the company is in the process of taking requisite approvals for completing the same.