The Indian tractor industry is expected to witness moderate growth in the rest of FY27 after a strong performance at the beginning of this fiscal, noted tractor maker Escorts Kubota‘s management.
The management attributed the moderation to a high base, unpredictable monsoon and increasing farm input costs, which have begun to weigh on demand.
“While the industry has seen almost 20 per cent growth in the first four months, sustaining that momentum will be difficult because the base becomes much higher from August onwards,” Bharat Madan, Chief Financial Officer of Escorts Kubota, told ETAuto.
The company anticipates the industry to end the ongoing fiscal year with mid-single-digit growth. Overall, the industry is expected to remain positive this year, but growth will moderate, the top executive noted.
For Escorts Kubota, the Madan expects industry growth to mirror the company’s growth, becoming muted in the second half of FY27, with a few months potentially registering a year-on-year decline due to the high base of the previous year.
Apart from the high base, monsoon variability is also expected to play a key role.
“The monsoon distribution has been below expectations and delayed in several regions, which could impact kharif sowing and the subsequent harvest. Rising input costs for farmers are another factor that could affect demand,” he said.The tractor and agricultural machinery major’s profitability came under pressure as commodity prices remained high amid geopolitical uncertainties.
Despite that, Escorts Kubota reported a 4.4 per cent YoY increase in net profit from continuing operations at ₹385.94 crore for the quarter ended June 30, 2027. The growth was driven by both its tractor and construction equipment businesses.
Price hike on cards
The company said the industry conducted limited price increases, restricting its ability to pass on the full input costs to consumers.
“We are contemplating another price increase during Q2, which should offset part of the commodity inflation,” Madan said.
However, this situation is expected to ease over the coming one or two quarters.
This will slowly recover the company’s margins, with profitability returning to normal levels by the fourth quarter if commodity prices soften and geopolitical pressures ease, Madan noted.
Greenfield manufacturing facility
Escorts Kubota’s ₹4,500 crore greenfield manufacturing facility in Uttar Pradesh is gathering pace, buoyed by rising demand, with groundbreaking expected to happen in August after taking possession of the land.
The phase-wise operationalised plant will have an annual capacity of 60,000 tractors in phase 1, expanded later to two lakh units in the coming phases. This will double the company’s overall capacity, Madan added.
This new facility will also incorporate a 15,000 annual capacity of construction equipment, along with a global spare parts centre.
“FY27’s major capex will be in two parts. The normal capex will be ₹350-400 crore, which is our ongoing capex. The second part will be on the greenfield project, for which we have earmarked about ₹500 crore this year. This is basically for land development,” he added.
New launches in pipeline
To address rising demand, the company is planning a slew of launches to strengthen its portfolio across all three tractor brands: Farmtrac, Powertrac and Kubota.
“We have got three brands, Farmtrac, Powertrac and Kubota. Within Q2 and Q3, most of the product launches will happen across all tractor brands. Our strategy is to fill the white spaces across brands and segments through new products,” Madan said.
Following the launch of the Promax and Shaurya series, the automotive player plans to launch new Kubota models this month. A few more upgrades are planned for its Farmtrac and Powertrac brands, scheduled across the second and third quarters.
Exports to stay flat
On the export side, the tractor major anticipates FY27 volumes to remain flat after a weak June quarter as demand for compact tractors below 40 horsepower slowed in overseas markets.
Currently, the international business contributes around 5 per cent of the company’s revenue, which it targets to increase to 15 per cent by FY31.
“The new products are currently under development and testing for the American market. Once the approvals are in place, exports to the US will begin from FY28, and we see America becoming our biggest market in terms of volumes beyond Europe,” Madan added.
The European market accounts for more than 60 per cent of Escorts Kubota exports, driven by Kubota’s distribution network.
Author: Prime Haryana
Information with Confirmation