Escorts Kubota plans to strengthen focus on non-tractor verticals, aiming to increase share to 25%

New Delhi: To solidify its position in the agri machinery business, Faridabad-based Escorts Kubota Limited (EKL) is looking to expand its non-tractor business, from the current 11% to 25%.

For the company, agri machinery business is the largest contributor to the overall sales mix with 70% share, followed by construction equipment at 19%. Railway equipment business holds the smallest share, contributing 11% to the group’s revenue. Within the agri machinery business, the tractor vertical currently accounts for about 89%, while the non-tractor constitutes 11%.

“By clearly distinguishing between our tractor and non-tractor businesses and making these independent business verticals, we intend to unlock the full potential of each business through focused strategies and efforts going forward. We anticipate the tractor and non-tractor verticals to be balanced in a ratio of 80:20 or potentially 75:25,” Bharat Madan, whole-time director and CFO, Escorts Kubota Limited, told ETAuto.

The company’s non-tractor business verticals consist of agri solutions, engines, service & spare parts, and global sourcing by Kubota Group.

The agri solutions business offers agri-mechanisation applications such as rotavators, harvesters, rice transplanters, bailers, Sprayers and more, all under the Farmpower and Kubota brands. The engine business specializes in high-performance diesel engines with power outputs ranging from 7.5 kVA to 58.5 kVA in Escorts engines. These engines are primarily supplied to genset OEMs, with third-party engines also being used when needed. Kubota engines are also supplied to construction machinery OEMs in the 10 KW to 55 KW power range.

Kubota Group is looking at India as a key sourcing base for goods & service to cater its global requirements. It will leverage EKL’s well established vendor base and frugal cost structure, along with a skilled workforce. Establishing a first part export warehouse, this year is a step towards achieving the larger objective. “In the next 5-6 years, we expect to grow significantly in this space,” Madan added.

Kubota, a leading Japanese tractor manufacturer, entered the Indian market in 2008, but its growth initially remained slow. In 2022, Kubota acquired Escorts, marking a significant milestone and leading to the rebranding of the company as Escorts Kubota. This acquisition provided Kubota with a crucial foothold in both the Indian and international markets, leveraging Escorts' strong presence and complementing Kubota's existing strengths.

Railways biz

In October, EKL said it has entered into a business transfer agreement with Sona BLW Precision Forgings Limited (Sona Comstar) to transfer the existing Railway Equipment Business Division (RED) as a going concern on a slump sale basis, for a cash consideration of INR 1,600 crore.

The expected date of completion of sale/ disposal is September 30, 2025, subject to completion of conditions as specified in the Business Transfer Agreement (BTA).

Following the divestment of the Railway Business, Agri Machinery Business is expected to account for about 80%-82% of EKL's revenue, while Construction Equipment Business will account for the remaining 18-20%.

Globally, Kubota does not have a core presence in the railway business.

Greenfield facility in Uttar Pradesh

Seeking an approval to acquire about 250- 300 acre land, Escorts Kubota has submitted an Investment Intent to the Government of Uttar Pradesh.

Once the land is allotted, production is expected to begin in phases, starting FY28. To meet the future growth requirement, the company will invest INR 4,500 crore for this and a part of the greenfield manufacturing facility is intended to set up additional tractor and engine manufacturing capacity.

Earlier, the company was planning to set up a new manufacturing plant in Rajasthan. However, the plan was soon withdrawn owing to a failure to meet all the key requirements for a large-scale project.

Currently, it has an existing capacity of 1.70 lakh units for tractors and engines.

Expand exports

The agri-equipment maker wants to establish India as its global production hub. The upcoming greenfield facility in UP will serve as its export hub for the world.

“Currently we are exporting from the existing facilities, but the export top line is only about 5% of the total turnover. In the next 3-4 years, we should be able to increase this share to 15%- 20%.”

The aim is to strategically localise the products which are currently being imported from Japan and Thailand. With Kubota's technical expertise, the firm is also developing certain products for the Southeast Asian markets, along with North and South America.