VSTTILLERS - V.S.T.Tillers Tractors Ltd. Share Price

Management Outlook:
V.S.T. Tillers Tractors Limited expects strong growth in Q4 FY25, driven by pending orders and government schemes in states like Tamil Nadu, Karnataka, and Odisha. The company anticipates high single-digit growth in power tillers and 10-15% growth in tractors for FY25, with accelerated momentum in FY26 (25-30% growth). The Zetor tractor range is a key focus, targeting ~1,500 units in FY26 and expansion into higher HP segments. Exports to Europe and the U.S. are planned, but U.S. entry is delayed due to market unpredictability. New product launches (global platforms, in-house power weeders) and inorganic growth opportunities (INR 150"“200 crore range) are prioritized.

Major Points:

1. Financial Performance:

   • Q3 FY25 revenue grew 29% YoY; operational EBITDA surged 105% to Rs.19.55 crore.
   • PAT impacted by Rs.11.04 crore MTM loss (vs. Rs.15 crore gain in Q3 FY24).

2. Volume Growth:

   • Power tillers: 32% YoY growth in Q3; tractors: 43% growth in Q3 (2% YoY for 9M).
   • Power weeders: 69% growth in Q3; 5,000+ units sold in 9M (100% growth expected in FY25).

3. Strategic Initiatives:

   • Zetor Tractors: 100+ units sold in Q3; new launches (40"“50 HP) planned for FY26.
   • Retail Financing: Targeting 15"“20% penetration in FY26 via NBFC/bank tie-ups.
   • Exports: Cautious on U.S. due to tariffs; focus on Europe with new platforms.

4. Operational Highlights:

   • R&D and supply chain investments for future growth.
   • In-house power weeder production (higher ASP) to scale up in Q1 FY26.
   • Distribution business (Rs.100+ crore revenue) expanding in rural markets.

5. Challenges:

   • Subsidy dependency in key states (e.g., Tamil Nadu) affects cash flow timing.
   • Competitive pressure in tractors; regulatory risks in international markets.

6. Balance Sheet:

   • Strong liquidity (Rs.400+ crore cash) reserved for organic/inorganic growth.

Question 1: "Sir, the first question is just in terms of our volumes. So just wanted to understand how do we see the fourth quarter. If we looked at the volumes in the month of Jan, numbers were down both in tractors and tillers. Generally, fourth quarter is a strong quarter for us and combined with the fact that with a good monsoon, we were expecting growth to come in. If we look at industry data, tractors are back to growth, but we continue to decline in spite of new launches. So, if you could give some colour on this aspect, sir?"

Answer: Management expects strong Q4 volume growth in February and March due to pending government subsidy releases and order conversions. Higher single-digit growth is projected for tillers and 10-15% for tractors YoY.

Question 2: "Sir, we have launched the Zetor range. Could you give us some update how is the market acceptance? I know it's early days. If you could just run us through in terms of dealers, etcetera, how we are scaling up on that front?"

Answer: VST Zetor Tractors sold over 100 units last quarter, with new models planned for launch. FY26 target is 1,500 units. Dealerships and RTO registrations are progressing, focusing on gradual market penetration.

Question 3: "In terms of our base business, on the tractor side, could you talk about exports and the impact of tariffs do you potentially see, because we are looking at US in a big way?"

Answer: US market entry delayed due to regulatory unpredictability. Product development continues, but infrastructure investments are on hold. Europe launch prioritized first.

Question 4: "Could you tell us how much Zetor Tractors have you sold in the first 9 months and what is the guidance?"

Answer: Exact Zetor sales figures undisclosed for competitive reasons, but performance aligns with internal plans.

Question 5: "Could you elaborate on our right to win? Why customers are choosing our tractors over others in terms of the Zetor Tractor range?"

Answer: Zetor's differentiation lies in ruggedness, power, and durability, combined with premium features.

Question 6: "Do we include the Zetor numbers in our monthly updates that you give?"

Answer: Zetor volumes are included in cumulative tractor sales but not separately disclosed. Future standalone reporting is planned.

Question 7: "Employee expenses were up 24% in the quarter. Any particular reason?"

Answer: Increased R&D and supply chain hiring, along with ESOP grants, drove higher employee costs.

Question 8: "From a direct versus subsidy-led revenue mix, if you can share how much was in this quarter direct revenue?"

Answer: Subsidy dependency varies by state (e.g., higher in Tamil Nadu/Karnataka). Retail financing (8% of revenue) is expanding to reduce subsidy reliance.

Question 9: "What would lead to exponential retail finance growth from 8% to 15-20% next year?"

Answer: New NBFC/bank tie-ups for power tiller financing, pending approvals, aim to boost penetration.

Question 10: "How will in-house weeder manufacturing benefit P&L?"

Answer: Higher ASPs and margins from feature-rich weeders; ramp-up starts in Q1FY26.

Question 11: "Why haven't falling steel prices improved gross margins?"

Answer: Product mix shifts (new tractor launches) offset raw material benefits; normalization expected soon.

Question 12: "What inorganic opportunities are being explored?"

Answer: Targeting brand/network acquisitions abroad and agri-adjacent businesses in India. Ticket sizes up to INR450 crores.

Question 13: "FY26 growth guidance?"

Answer: 25-30% growth expected via new product launches, exports, and market expansion.

Question 14: "Equity investment strategy amid mark-to-market losses?"

Answer: Equity exposure (INR80-100 crores) will be minimized for reduced volatility. Focus remains on liquid funds and strategic investments.

Question 15: "Dealer additions and North India traction?"

Answer: Added 35 tiller and 26 tractor dealers in Q3. North India traction is promising, with 64+ dealers established for higher HP tractors.