VST Tillers Tractors Ltd. guided last quarter of tripling its annual revenue by fiscal ending March 2027. The company reported almost Rs 1,000 crore in revenue in the previous fiscal, and has targeted to triple this to Rs 3,000 crore in three years.
While volumes for its products have largely been flat due to industry-wide slowness, most farm equipment players are anticipating a stronger second half this financial year, led by volumes.
We look at the strategic initiatives that the company has mentioned that will lead to this ambitious but achievable target.
Steady Q2 Results Even As Sector Slows
VST Tillers saw its revenue grow 1.8% during the quarter ended Sept. 30, while margins stayed around 13%. Profit grew 22% the quarter under review.
Q2 FY25 Earnings Highlights (Consolidated, YoY)
Revenue up 1.8% at Rs 283 crore versus Rs 278 crore.
Ebitda down 12.4% at Rs 37.8 crore versus Rs 43.1 crore.
Margin at 13.3% versus 15.5%.
Net profit up 22.7% at Rs 44.8 crore versus Rs 36.5 crore.
The tractor and power tiller industry was in a slow lane with overall volumes across products up 6% in the second fiscal quarter. Power Tiller is the largest product segment for the company, and grew 5% in terms of sales.
Tripling Revenue By FY27
VST Tillers reported Rs 986 crore in revenue in the fiscal ended March 2024, and is looking to triple this within three years at Rs 3,000 crore in revenue. This will be led by the few key factors. The company primarily operates in small farm equipment machines is looking to enter new segments like the high-horsepower tractor space with Zetor. They are also looking to expand their export presence meaningfully and launching newer products in their existing small farm equipment machines space.
They expect to maintain margins around 13% range, which is close to the current margin profile. VST will be investing in newer technologies and R&D as well.
New Avenues With Zetor JV
VST Tillers and HTC Investments—the owner of Zetor brand, joined hands to form a joint venture namely VST Zetor Pvt. They have launched three tractors initially—VST Zetor 4211, VST Zetor 4511, and VST Zetor 5011 in the 40-50 hp range. This is a new segment for VST and will help diversify from current presence of small farm machinery like power tillers, weeders and reapers.
Speaking to NDTV Profit, Anthony Cherukara, chief executive officer of VST Tillers, said that the company currently have 56 dealers in North India and is increasing its presence. It expects to reach roughly 60 dealers by end of the current fiscal, and gradually increase the dealer network to 75-80.
The company is expecting to sell 1,000 units of the Zetor by March 2025.
Export Strategy: Entering US With New Models
The US and Europe are two big export markets for Indian farm equipment makers and VST Tillers is planning to capture them meaningfully. The company plans to introduce eight brand new models in the US.
VST Tiller's management highlighted they are building a brand new platform which will house these models. This will be in the compact tractor space, which is a very big opportunity outside India. New models in pipeline will be in the 30 hp space, with launches in 35 hp space to follow.
In Europe, the company is looking to consolidate its strategy through new launches in tractor space.
Small Farm Machines
VST Tillers has three products namely Power Tiller, Power Weeder and Reaper. Power Tiller is the biggest segment but is still very underpenetrated in the country. It only has a 5% penetration which expands the company’s growth outlook going forward. VST currently hold 70% market share in power tillers.
Power Weeder has seen rapid growth for the company. Despite being a late entrant in this space the company has been able to scale up quickly. This product is price sensitive, with a tag around Rs 60,000. VST is manufacturing this in India and selling new power weeder this month. Farmers who have less than 2 acres of land and cannot afford tractors are the target group for the segment, which has been largely unorganised so far.
Reaper is the smallest segment for the company and had sales of 589 units in this quarter.
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