VST Tillers Tractors Ltd
NSE:VSTTILLERS
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VST Tillers Tractors Ltd
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Ladies and gentlemen, good day, and welcome to V.S.T. Tillers Tractors Limited 4Q FY '23-'24 Post-Results Conference Call, hosted by B&K Securities. Apologies for the delay in starting the call by 15 minutes.
From V.S.T. Tillers management, we have with us today Mr. V.T. Ravindra, Managing Director; Mr. Antony Cherukara, Chief Executive Officer; and Mr. Nitin Agrawal, Chief Financial Officer. [Operator Instructions]
Also, may I remind you of the safe harbor, the company may be making some forward-looking statements that has to be understood in conjunction with the uncertainty and the risk that the company faces.
Over to you, sir.
Good evening, everyone. My name is Nitin Agrawal, and I welcome you to this call. First, I'll present the performance of the company with the slide, and then, we will open for question and answers.
So on the financials, first, I'll talk about the highlights for the financial year '24. So this year, our net profit is at INR 121 crores, which is one of the highest ever net profit. EPS, basic, is at INR 140 per share, which is also highest ever. Cash flow from operation is INR 48.61 crore, which is better than the cash flow from operation over the previous year. Also, export of tractors has been good for us. There has been growth of around 16% over last year.
On this slide, I'm covering the sales volume for our SFM as well as tractor businesses for the quarter 4. I will also cover the annualized volume later. So in quarter 4, for our power tiller, 11,560 units have been sold. For tractors, we are at 960, power weeder 1,385 and reapers 150. The growth or degrowth over there compared to last year is mentioned over here.
In terms of profit and loss statement for Q4, the revenue for this year, revenue from operation is INR 273 crores versus INR 322 crores over last year. Our EBITDA for the current quarter is 17.6%. Operational EBITDA, which is basically we exclude the other income completely and only cover the revenue from operation and related expenses, so it is INR 39.8 crores. As a percentage, it is 14.57%. PBT as a percentage is 15.16%, and PAT is at INR 35 crores for the quarter.
These slides talk about the annualized volume for FY '24 when compared with the previous year FY '23. So for power tiller, in current financial year, we have sold 36,480 power tillers, tractors are at 5,338, power weeder and reaper at 4,567 and 1,964, respectively.
Coming to the profit and loss statement for the entire year. The revenue from operations in FY '24 is INR 968 crores. And as an EBITDA percentage, annualized is 17.96% compared to 14.75% in the previous year. Operational EBITDA, as I mentioned earlier, after excluding other income completely, we are at 12.83%, which is better than the last year of 12.64%. At PAT level, we are at INR 121 crores for the financial year.
Apart from financial, we have a few other updates as well in terms of businesses. I thought I will cover that in this presentation. So first is about the product launch of V.S.T. Zetor, which is the joint venture between V.S.T. Tillers Tractors Limited and HTC Investments, which is the owner of the brand Zetor. So on 6th May 2024, we did the product launch, where the 3 models of the company, namely 5011, 4511 and 4211 were launched. These are in the segment of -- in terms of horsepower, these are within the segment of 41 to 50 horsepower segment.
There is an update, which has been informed to the stock exchanges at the respective time, but because we are meeting for the quarter, I thought I'll cover this as well. The company on 25th of April 2024, has incorporated a wholly owned subsidiary in the name of V.S.T. Americas, Inc., in the United States to assist the company in augmenting the growth opportunities by catering to the needs of the U.S. market in tractor and farm machinery segment.
Also, we have incorporated a step-down subsidiary of the wholly owned subsidiary in the name of -- which is basically an LLC, the name of the LLC is V.S.T. FIELDTRAC LLC. This is also in the United States.
So with this, we'll move to the question-and-answer segment.
[Operator Instructions] The first question is from Keshav Garg.
Sir, which did all-time high volumes of 11,367 units in FY '18, which have now less than half to 5,388. And sir, if we see it is less than what we did 10 years back, which was 7,500 roughly. Sir, whereas if we see that during this period, the tractor industry possibly would have doubled in India. Sir, so basically, when will we accept that probably things are not working out and maybe we can think on the lines of hiving off this -- our tractor division into a joint venture with some foreign big player, sir, like what Escorts has done with Kubato?
Sir, because clearly, we are struggling since more than a decade. And, sir, sometimes we have to face reality that we are unable to succeed in this part of the business. Sir, so is it not better to induct some global partner, which can help us scale up this business?
Yes, it is a very good question and a very interesting one. I'm Antony Cherukara, CEO of V.S.T. Tillers Tractors Limited. See, we have explained that the fact is that we are operating only in the compact tractor segment, and we are not operating in the higher HP segment. And what we are seeing is our growth in tractors. We have said is -- first focus is in terms of capacity utilization. And apart from making tractors for the domestic market, we are looking at supplying drivetrains to the U.S. market, which we have begun successfully.
We have also launched the V.S.T. Zetor higher HP from the same manufacturing facility. So the key focus is in terms of driving profitability in the tractor business, which we have improved even in this financial year.
With the entry into the U.S. market, which is the largest compact tractor segment market, which is 10x almost -- not 10x, sorry, 3x of the Indian compact tractor market or less than 30 HP segment, which is almost 300,000, is the industry size of compact tractors in the U.S. market. We are hopeful that we will be able to create volumes over the next 5 years in the U.S. market after launch in FY '26.
Plus, we are also scaling up the higher HP business, which we have not been in, number one. Number two, the drop last year has to be seen from the context of compact tractor market, wherein the compact tractor industry has dropped in Maharashtra and Gujarat while the tractor industry overall would have dropped only 7% to 8%. The compact tractor industry has dropped more than 30% to 40%, and that drop is in line.
But with the monsoon picking up, we are expecting that the volumes will pick up, and we will be able to increase the volumes to earlier year levels. So 2 aspects to this, geographical spread, going geographically to -- across compact tractors industry. Second, look at utilization with various joint ventures, which we are already in. Third, drive profitability in the tractor business.
On all these 3 fronts, we are progressing as per plan. Looking only at the volume and concluding that these things are not progressing at all in the tractor business of V.S.T. Tillers Tractors Limited may not be the correct conclusion.
Sir, so if we see then, again, in April, the announcement that you have made, sir, on an already low base of last year, again, in April, tractor volumes have halved. Sir, so...
We work only on consumption. We don't push bill inventory into the market. We expect with the monsoons the industry will pick up, April, definitely the monsoon hasn't come. You will see, except for 3 or 4 players, nobody else has registered growth in April. And we all know very well from channel check what exactly is happening in the industry.
Sure, sir. Sir, even our agreement with Monarch Tractor, U.S., sir, even they are getting their tractors manufactured by, I understand, Foxconn instead of V.S.T. Sir, so why aren't we even able to contract manufacturer for others?
We are supplying the powertrains. I think we do not have complete information when we are coming to conclusions. We supply the powertrain to Monarch. And apart from the powertrain, there is the -- sorry, the drivetrain to Monarch. And apart from the drivetrain, there is the powertrain that needs to go in, which is being assembled at the Foxconn facility by Monarch.
So the drivetrain essentially includes except the power bank that is the battery and the motor, everything else practically. I have said this before in an earlier analyst call, value-wise, it is almost equivalent to a tractor unit that we sell in India. So we expect that business to grow in future, so that contract manufacturing is continuing, and we expect to continue to supply. Of course, we are exploring other opportunities also for contract manufacture.
Sure, sir. And sir, lastly, sir, in your best judgment for the current financial year FY '25, sir, what kind of volumes do you expect in tillers as well as tractors?
We do not give any forward guidance of volumes, but we expect to grow in both the segments with the normal monsoon happening. We will continue to follow our rigor in terms of following a consumption model. We expect the tractor business to grow by 10% to 15% and the tiller business to grow 15% to 20%.
Sure, sir. And, sir, lastly, sir, we used to mention in our investor presentation about INR 3,000 crore revenue target by FY '25, sir, but in the latest presentation, I don't think there is any mention whatsoever. Sir, so that target has been postponed to which year?
In no investor presentation, we have given any guidance on Vision 2025. I have said earlier that we are targeting 2026, that is FY 2026 for Vision 2025. We have not changed that milestone. We are working on it with a normal monsoon and all the projects that we have put in place, each and every one of them is coming into monetization. And we are expecting with tight controls, better profitability, better earnings per share, this company will give growth and more returns to the stakeholders.
Sir, I just wanted to highlight that our EBITDA is the same more or less in past 10 years that around, sir -- last year, we did INR 130 crores approx, and in FY '14, we did about INR 120 crores. So, sir, we are not even able to keep pace with the inflation. In real terms, our EBITDA in FY '24 is probably 1/3 of what it was 10 years back. Sir, so I hope that going forward, sir, the things change, and sir, your efforts bear fruit.
I think your statement is wrong. EBITDA is not 1/3 of what it was 10 years back. So I would request that the right statement is kindly looked at.
Sir, the EBITDA is flat since 10 years in nominal terms. So adjusted for inflation in real terms, the EBITDA would be like 1/3 only. If you see in past 10 years, if something is flat, that means in real terms it is down to something like 35% or 40%?
Okay.
Next, Mr. Neel Doshi.
My first question I had on basically with the elections coming in and there has been some temporary stoppage on cash spending. Do you see this kind of a temporary hiccup impacting your tractor or even the small farm machinery volumes in FY '25?
In FY '25 due to elections, I don't think there is any impact because we don't see any elections in the near future after quarter 1. There is definitely -- in the last quarter of last financial year, we were expecting certain schemes in states like Assam, which did not come through due to the model code of conduct. But we don't see such events happening in FY '25.
Okay. And the second question I had was on exports. So I just wanted some kind of a color on what geographies do we export these V.S.T. Zetor tractors. And how our mix could improve going forward? I mean what percentage right now we are standing, at what percentage comes from higher HP tractors and what would be next 2 to 3 years? Any color here would help us, please.
Can you kindly repeat that question? I couldn't hear you properly.
Yes. So my question is on exports for V.S.T. tractors. Wanted to know basically what kind of geographies you are exporting these kind of tractors? And going forward also, I mean, what would be the change in mix? How can we see our realizations jump up because we are eventually going into higher HP tractors?
Yes. So this -- let me make one thing clear. This higher HP strategy is very clear. It is separate from the compact tractor segment, like I spoke to the earlier analyst who had spoken. The compact tractor is mainly sold in the Europe market, and now, we are planning to sell that in the U.S. market as well.
The compact tractor sales predominantly happens in France, Germany, Netherlands, Spain, Portugal, Belgium and France and Italy for us. Also, we have ended U.K. in the last year, so typically Western Europe. And we also expect to enter the U.S. market in FY '26.
Next is Mr. Pranay.
Sir, am I audible?
Yes, you're audible.
Great. So I had a couple of questions. And my question is pertaining to the product of power tiller. And when I say power tiller within the SFM division, I'm not talking about weeders or threshers, specifically the tiller, which has been your core product. So there was a press release by V.S.T. back in March 2023, where there was a statement mentioning that the tiller industry is expected to grow from 60,000 to 1 lakh by 2025. From what I understand, this statement was in reference to only this tiller product and not the other farm machines. So can you help me understand what are the key assumptions or key triggers that will drive this growth? Or is it still valid?
Yes, it is definitely valid because what we are seeing is specific markets growing considerably. For example, Orissa, in the last 3 years has moved from -- for example, our sale has moved from about 3,000 numbers in Orissa to over 11,500 numbers. We are seeing that pickup happening in several states. We expect this growth to continue in the northern market as well because there is a lot of emphasis for growth in the northern market with power tillers now where we were not present earlier.
We can see growth happening in Northeast markets as well. So last year was an exception in terms of rainfall and the customers unable to buy. There was an effect of demand due to the rainfall. So there is a slight degrowth. So that -- we are pretty confident that this power tiller industry will continue to grow. One is it is due to nonlabor availability. Second is due to various product innovations that is happening in terms of creating more convenience for the farmer to operate these machines.
New product launches that is happening in the segment, which is happening from our side, which we have also said that we will be looking at, even electric tillers, first to start with complete electric start tillers.
And then eventually, in this financial year, we will be looking at electric tillers also in India. So this segment is definitely set to grow, and we are still confident that FY '25-'26, we'll see 1 lakh industry happening or close to 1 lakh happening. That is our kind of call on this industry, and we expect that to happen.
Next caller, I will call Mr. Arjun Khanna.
Question is on V.S.T. Zetor, we have seen that notification where the company has launched 3 tractors. Going forward, given that we seem to be heading towards a normal monsoon. What is the outlook for this JV? I know we don't talk about exact volumes. But given that this is a new segment for us, and we are entering into the core of the market over a 4, 5 lakh target segment. How do we see market shares?
Market shares is significantly small considering we are -- like you rightly said, we are entering a segment 40 to 50 HP, which is almost 5,50,000. But the key for us is to -- in the next 3 years -- get to about 5,000 volume in the next 2 years and in the next 3 years to about 8,000 tractors.
This is under V.S.T. Zetor.
Correct.
So 5,000 would be 1%; 8,000, probably 1.5%.
Yes.
In terms of regions where we sell, so I understand that we are looking at the north currently, UP, et cetera, could you just talk about what would our strategy be for selling these tractors? And would there be commonality between our compact tractors and the V.S.T. Zetor brand in dealerships, et cetera?
There is no commonality between the compact tractor and the V.S.T. Zetor higher HP tractors because this.
In terms of dealers.
Dealers, definitely, there is commonality. Well, that is what we are doing to enter into the northern markets because compact tractor was not in usage in the northern markets. With the launch of higher horsepower, we are able to enter into the northern markets. Commonality definitely is there.
Sure. So -- but since we were not present there, so have we appointed new dealers in the northern markets? And how many have you appointed, sir?
In UP alone, we have about 20-plus dealers currently. We will be extending them to about 50 dealers this year. And the idea is to consolidate and grow in each crop cluster segment. So we have identified crops and clusters in which we'll be focusing because we are very clear, and we are one of the late entrants into the higher HP segment, so we are focusing crop-wise and cluster-wise.
Sure. So in terms of milestones, you have given us maybe 5,000 units at the end of 2 years. We have just launched 8,000 at the end of 3 years. In terms of profitability, do you have milestones in mind? Would this be generating, say, 10% EBITDA margin?
Definitely, that's what we're looking at.
Sure. Perfect. Sir, the second question is regarding...
Just one point, Arjun, like I said earlier also that our focus in the tractor business is to become a profitable tractor business, so that will not be compromised.
Right, sir. No, the reason I ask this is because initially, there would be a lot of start-up costs given that we will be subscale. So I was just curious in terms of what margin profile the business would have. I assume that on stability, obviously, margins would move north.
Absolutely.
Sure. Sir, the second question in terms of manufacturing capacity. So V.S.T. Zetor, while we have talked of 36,000 and 60,000, I just wanted to understand what's our capacity for V.S.T. Zetor?
V.S.T. Zetor with the current installed capacity, we can meet our 3- to 5-year plans.
Sure. And this is aside from the 36,000, which we talk about for compact tractors?
Correct.
Right, sir. And in terms of -- we've mentioned in the previous con call that we were setting up manufacturing facilities for power weeders, maybe 6,000 units capacity. How is that coming along, sir?
This will be launched in this financial year.
So the construction would probably be on then?
Installation of capacity is on. There is no new civil construction.
Okay. Sure. It's an older shed.
Yes.
Right. And lastly, sir, just on the previous question, we talked of Indian market going to maybe 1 lakh units. We have 60,000 capacity, though we have done this year sub-40,000. Are we looking at augmenting capacities of power tillers?
I will be augmenting capacity for power tillers in FY '26.
Sure. So '25, not much. In '26, we assume we'd be closer to that 60,000.
Yes. We'll have to start working towards augmenting capacity because we are looking at newer models, newer products, export markets, including Bangladesh.
I will ask some questions from the question chat box, sir. One question is despite higher cash flows and excessive cash, why have we reduced the dividend?
Last year was a special dividend of INR 25 per share. This year, we are at INR 20 per share, which has been the previous year's before last year dividend. And it is in line with what we have discussed in the Board.
How much have we invested, capital employed in the higher HP segment so far?
The capital -- CapEx investment in terms of V.S.T. Zitor is sharing between V.S.T. and Zitor. I won't be able to get into the details of that. But it is -- I can say one thing is that V.S.T. Tillers Tractors Limited focuses and works on a frugal approach in terms of CapEx. So we are considerably much lower, and we are also in a position to utilize the testing facilities and the development facilities of -- which is quite modern and most advanced, which is based out of Czech Republic. We have been able to use it freely. So that kind of creates a lot of cost-effective development of these tractors.
Okay, sir. Another question is what is the share of financing in power tiller sales, sir? Why hasn't this taken off if financing availability was the issue earlier?
3 to 4 years back, it was at 0%. Now we have entered several tie-ups. Today, it stands at about 4% to 5%. We expect that to continuously grow. We are tying up with various banks and various NBFCs, and this will definitely go up. We are expecting to take it up to 8% to 10% this year and higher in the coming years.
There are some more questions. I'll come back in that, sir. Next, I have unmuted Pranay.
Firstly, apologies I had asked the question on tillers going from 60,000 to 1 lakh. And I had muted while you were answering, but I was not allowed to unmute again for some reason. So I'll just continue from where I left off.
So point taken on the points you mentioned around Orissa growth and product launches. So I did some work around this power tillers industry. So back in 2005, I think the industry of power tillers was 17,000 -- 1-7,000 in India. And over the course of 10 years, 2005 to 2014, FY '14, it reached 55,000. This is from the annual report of the government department. So this was a quite a healthy double-digit growth. And in this time, the government had a very simple subsidy scheme. At that point in time, this was like a direct subsidy.
After that, in 2014 or '15, it got replaced by the submission for agricultural mechanization, SMAM scheme, which along with the subsidy, there were other aspects also, right, for like increasing awareness, demonstrations, agri machinery banks, hiring centers and whatnot. Since this has happened, the volume of the industry is still at 50,000 to 55,000 in FY '23. This is the official data from the annual report.
Now, in this period also, we saw the reliance on subsidy coming down because of that DBT, and you also mentioned, right, the farmers are not waiting for the subsidy anymore, but still the volumes are flat. Now, if you pick out any 1 year in the last 10 years when the volume is stagnant, there could be different reasons by which the market has not grown, right, ranging from monsoons, subsidy issues, et cetera.
But if I look point-to-point, right, from a period of amazing growth, 2014 to 2024, what do you think the key challenge has been in this decade versus the preceding decade of growth, which seems to be changing now, right? Because you said that you want to enhance capacity as well and the market will go up rather. How up is not the question. The question rather is, if the market is going to go up, basis this context, then what really is changing right now?
Yes. So I will -- very good question. I'll answer it in 2 parts. First, I'll say what happened between 2014 to now where it kind of remained flat. Apart from one thing that you already said, which is the subsidy to direct benefit transfer, that is one big structural change that happened.
Second thing that happened, which is quite big, is complete ban of Chinese imports. So a large amount of imports were happening, almost 20% to 30% of industry was Chinese imports, local level, regional players with local network were able to penetrate and supply. So this stopped all of a sudden. So in the last 4 to 5 years, what we have seen is a flattish industry. So these are the main 2 reasons.
Now what we're seeing is this is picking up. Several states have shown very positive indications and that we expect to continue. 2 big changes we see, one is the labor demand. There is no labor available in the market, and the demand for available labor has gone up. So that definitely is driving people towards mechanization.
Secondly, the price of tractors are continuously going up. So number one is the prices, which is commodity inflation, design. Horsepower wise, it's going up. Second thing is in April '26, there is going to be Stage V implementation on tractors upwards of 25 horsepower or up -- yes, upwards of 25 horsepower, which will increase cost level 20% to 30% for each tractor from current prices, which will drive towards alternate modes of mechanization in various parts of the country, which we expect also to aid the tractor industry.
Third, what I feel is with more people looking for machines to operate, they are looking at machines with less fatigue and more comfort. And with our development of these kind of machines, which is electric start, which is with seat, which is with less fatigue, which can be turned around 360 degrees, various engine options, various horsepower options, multiple applications, which -- these -- all these 4, 5 factors is what makes me confident that we will be able to grow this industry.
So point well taken. Sorry, go ahead.
Yes, this is -- that's it.
Okay. Okay. So just 1 quick follow-up. That makes a whole lot of sense. Just one follow-up on the initial point you made on the Chinese guys suddenly going away, who obviously had 1/3 of the market. And from the data that -- some of the data that I'm seeing, they are probably low single digit right now.
So I'm just trying to think, right, suddenly Chinese tractors, which are obviously the cheaper options going away, did that actually lead to people not buying tractors because that -- from a very theoretical point of view does not explain why the industry will not grow, right? So is it that the domestic players, right, us and the other guy from south, KAMCO, they were not able to expand the dealerships to that extent that quickly so you can sort of, one, like-for-like replace those guys and also grow incrementally. So I'm just trying to understand that.
No, I'm -- yes, it took time to fill the gap definitely because the network, the coverage and reaching every single nook and corner. Like I have said before, we used to be at -- in 2020, we were at about 175 dealerships for small farm machines. Today, we are 750-plus for small farm machines. So that explains the amount of work that has gone into building the network and reaching -- and it will continue to grow. The network will continue to grow.
So that is one definite reason what you rightly said. Second, I said is the customers are looking for comfort. Five years back, the customers would view it slightly differently because it used to come to them with subsidy, and they were hardly paying for it. And they would just get the machine, and then, they work with it.
Today, I'm not depending on subsidy, and I'm going buying paying cash of INR 1.8 lakhs to INR 2 lakhs or INR 2.25 lakhs depending upon the variant, then definitely, I want comfort. So that is -- these are the shifts that is happening in the industry.
I will read 1 or 2 questions from the chat box, sir. Is there any update on the Kobashi joint venture? What kind of additional revenues can we expect from this JV? Any growth targets for guidance for Precision Components?
So the Kobashi business is going as per plan, and we expect to begin manufacturing the blades in India in 2026 with 1 information that the JV is not yet signed. So once the JV is signed, typically, we are expecting that to happen in the next 1 or 2 months' time. And from then it takes typically about 9 to 10 months to start production. So we are looking at FY '26 to start full-scale production of VST Kobashi. And I don't have a guidance figure for revenues now at this point in time.
Secondly, on the Precision Component division, I'm very happy to say that the company is looking at enhancing component supply to various manufacturers. And there is a plan drawn out to make advantage of the China Plus One opportunity that exists for us in India. And we have made considerable progress. And once things are getting more certain and finalized and signed off, I will be making those announcements in the coming quarters.
Next in the question queue is Mr. Romel.
Sir, one question is the revenues for the full year that we did, INR 968 crores. Can you give what break around between -- so we obviously will know the tractors and tillers, but we just wanted a little bit more depth on what would be the revenues on rural distribution business, the Monarch JV that we have and probably a little bit on the weeders and the reapers, if you can give some data on that?
Yes. So Nitin Agrawal here, in terms of breakup of distribution business, it will be around INR 100 crores roughly out of the overall mix. And in case of SFM, we do not segregate between tillers, weeders and reapers. All put together, INR 575 crores is the SFM revenue.
Okay. This does not include the tillers, right?
This includes tillers, weeders, reapers, all put together, INR 575 crores. Distribution is around INR 100 crores. So the balance is tractors.
Okay. And any sense you can give on the Monarch JV, sir? Roughly how much we should expect in terms of revenue?
Yes. So there is no JV with Monarch. We have an investment in Zimeno Inc., and we are suppliers of the drivetrain, as I explained earlier. I can't divulge numbers because there is a nondisclosure agreement that I have signed with the company, with Zimeno Inc., but I can say it is going as per plan.
Okay. Okay. So in terms of the rural distribution business and the SFM business, if we were to take separately, what kind of growth outlook can we see in the next 2 years in order to reach the FY '26 target that we have? So I'm just trying to understand more on the driver's side, what will drive.
So like I said, INR 3,000 crores is the plan that we have created for FY '26. The visibility currently is at about INR 2,000-plus crores. There are other projects that we are working on. Like I said, on the Precision Component division, on the distribution scale up on the V.S.T. Zetor, which is just launched on May 6, the scale-up will happen. Similarly, several new categories of products, then the U.S. entry, the growth in the Nordic countries, in Europe, apart from Western Europe.
So multiple projects are in place for which a team, leadership, et cetera, is established and progressing. So current visibility for FY '26 is INR 2,000-plus crores. We expect, as we progress through this year, we will be able to add on and monetize several of these projects and able to make progress. Of course, with a caveat that the monsoon, et cetera, in core market should be normal.
Okay. Sir, I just missed the earlier participant when you answered on the higher HP Zetor JV, the 5,000 and an 8,000 number that you gave, what was that exactly, sir?
So in the next 2 years, we're looking at about 5,000 numbers is what I said. And in the next 5 years, about 8,000 numbers.
Okay. Okay. Got it. Got it. When are we going to start manufacturing on the weeders and the reapers side? Any sense on that? And whether we are planning more products, like there are cutters and so many other products are there in the farm mechanization space?
Yes. In the small farm machine space, we are manufacturing weeders from this financial year. There are multiple new products that is -- that will be launched throughout this year in small farm machines.
Okay. So this will all lead to a better margin profile maybe 2 to 3 years down the line, if you can give some idea on that?
On the margins I have said before, we are sticking to a guidance of 11% to 13%. And we have maintained the guidance figures in the last 3, 4 years continuously. We are looking at growth. There is -- as you would appreciate that there is considerable OpEx involved in entering new geographies in terms -- and also in terms of product development, apart from capital expenditure in terms of testing, et cetera.
So there is a considerable amount of money that the company is spending to make these things happen. Hence, we are saying that we will maintain that 11% to 13%. And one thing I would like to highlight to you for this financial year is despite the fact that revenue has dropped by about 3% we have been able to better our profitability from 12.6% to 12.8%. This I'm purely talking from operational EBITDA. So the company is running a very tight ship, and at the same time, focusing on investment for growth.
Yes. Sir, this quarter, I think we did roughly 14% plus margins, okay, on the EBITDA side in spite -- as you rightly mentioned, in spite of a not so great year on the tractor side, right? So I'm just trying to understand what in next 2 years, when the -- assuming the markets are good, growth trajectory is good...
I can just answer you in 1 sentence. The sentence is even with this low volume of tractors, our contribution is better than last year.
Correct. So why doesn't there is more confidence on the margin side? I'm just trying to understand.
Yes. That's what I'm saying, but we are investing for growth. So there is a lot of OpEx coming in. That is why I'm still continuing to give you a guidance of 11% to 13% very confidently.
And due to lack of time, we'll take the last caller from Saket Kapoor. You restrict yourself to 1 or 2 questions, sir.
Sir, when we look at the raw material to our revenue, I think it is lower at 53%, 54% for the quarter, whereas for the year, it is closer to 64%. Correct me if I'm wrong on that number. So what should be the raw material to revenue mix going ahead? And how are the raw material prices fairing?
And then, sir, if you could give the detail of the other income, the other income has shot up from last year's comparable number of INR 25 crores to closer to INR 61 crores. So if we eliminate the INR 40 crore gap -- rather INR 35 crore, then the -- our profit before tax would be rather flat for this year, so if you could comment on the same. And then I have a small follow-up, and then, I'll join the queue, please.
Yes. Saket, Nitin Agrawal here. So first, on the question of other income, for the full financial year, the other income total is INR 60 crores. As you can read in the note, around INR 46 crores is the unrealized gain. So the rest, INR 14 crores, is all realized gain, maybe from investment, but more from the operations as well.
As far as operational EBITDA is concerned, you have seen -- must have seen on the slide, which will be hosted on BSE and our website also. When we say operational EBITDA, I'm completely ignoring that INR 60 crore of other income, not even taking a rupee from there, and still our operational EBITDA is 12.8%, which clearly indicates the profitability of the business, ignoring the other income completely.
On coming back to your first question on the raw material consumption, for the full financial year, we are close to 68%, and that's a number which is down about 2% from the full financial year last year. So there is a drop in the raw material cost for the year.
Sir, for this quarter, it is at 54%. So just wanted to understand what led to this significant reduction. And for the year, what number should we be pensioning in?
And also, sir, I think, sir, you have alluded to some electric pumps distribution work earlier. Does this INR 100 crore distribution income or the turnover is from that? Or what does this INR 100 crore number which you gave is about?
And also, if you could give some number about the spare business, how much we have done on the spare business part?
Yes. So the distribution business overall is INR 100 crores. And the electric business -- electric pump business is just the second year, and we are operating only in 6 states, and we have crossed INR 10 crores.
And what includes the distribution income, sir, INR 100 crores? If you could...
It includes parts, lubes, electric pumps.
Okay. So barring -- I mean, deducting INR 10 crores, then INR 90 crores business is from the spare...
Parts and lubes.
Parts and lubes. And that is a higher profitable business -- margin business than the 12.8%, which we have done.
Correct.
Okay. And for the raw material, sir, if you could give a number. We have a benefit of 54% of raw material consumption to turnover for this quarter. So what should be the likely number as an overall we should look for the year?
Yes. So, Saket, on the quarterly raw material consumption, I think you are only taking a select line of cost of metal consumed. You need to consider purchase of stock in trade, which is the second line item and also change in inventory in finished goods and others. So all 3 lines put together will be the raw material consumption, which is at 67.4%, which is in line with our annualized number as well. So there's no drop out -- in the current quarter.
Okay. Right, sir. And last point is on the Mysore Precision Plant also and the Bangalore land parcel. What are the updates? I think, sir, the Mysore Precision Plant, we were planning some CapEx. And I think, sir, you've did -- alluded to that fact earlier also that it is contributing -- the precision unit is contributing to the top line and bottom line. So what have been the contribution from that? And also for the land parcel at Bangalore, what is the thought process? Where are we -- if any monetization we can expect going ahead?
Yes. So let me answer the Mysore part, then I will hand over to the Managing Director to talk about the land parcel. The -- in Mysore Precision Component division, as I said, we are working on the opportunity that is generated through the China Plus One that is happening. And there will be some announcements that will happen from our end in the coming quarters. We are -- the CapEx had happened 2 years back, and we are able to take benefit out of it. And it will be announced in the coming quarters.
And I will hand over to Mr. Ravindra to answer on the land parcel.
Yes. On the Bangalore land parcel, as of now, we don't have any plans. We are continuing to use it for our warehousing. As and when the Board takes a decision, we will definitely be looking at monetizing it at some time, but we don't have a timeline as of now.
On behalf of B&K Securities, we thank all the participants for joining the call. And special thanks to V.S.T. Tillers Management for taking time out for the call and giving us the opportunity to host the call. Have a good day.