Escorts Kubota Limited’s management, in its post-results concall, struck a cautious tone on the overall tractor industry for FY27 while expressing confidence in the company’s ability to outperform the broader market through new product launches and channel expansion.
The management guided for the tractor industry to remain largely flat in FY27, with a possible variation of 2-3% in either direction. A subdued second half is anticipated, driven by high base effects from the prior year, below-normal monsoon forecasts, and the potential impact of El Niño on rural demand. Despite this, the company said it expects to deliver positive volume growth and improve its market share in tractors regardless of how the industry performs.
Shares of Escorts Kubota were trading sharply lower on May 8, down 3.30% at ₹3,235.40 on the NSE, making it one of the top losers on the exchange during the session.
What is Escorts Kubota’s capex plan for FY27?
Capital expenditure guidance for FY27 is substantial. The company projected normal capex at ₹350-400 crore, with an additional ₹500 crore earmarked for a greenfield manufacturing facility, taking total FY27 capex to approximately ₹850-900 crore. The greenfield project is part of a longer-term investment programme of over ₹5,000 crore planned over a 7-10 year horizon.
On the financial services side, management said it plans to infuse an additional ₹500 crore into its captive finance division over the next 12-15 months, following an initial ₹200 crore investment. The long-term return on assets aspiration for the finance business was stated at 1.5-2%.
Which segments does Escorts Kubota expect to grow fastest?
The non-tractor agri segment, comprising farm implements, emerged as the standout growth driver in the management commentary. The company guided for this business to grow at a CAGR of over 20% over the next three years, backed by an expanding product pipeline and deepening channel reach.
The construction equipment segment, however, faces near-term pressure. Management acknowledged short-term headwinds from macro factors but expects a recovery in H2 FY27, citing medium-term demand tailwinds from public infrastructure spending.
On costs, commodity price increases are expected to exert a pressure of around 5-6% as a proportion of revenue in FY27. A price hike of 1.5% has already been implemented across tractors and construction equipment, though management acknowledged this is insufficient to fully offset the anticipated input cost rise.
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