VST Tillers Q1FY18 Concall Summary

VST Tillers.png

Financial highlights

VST Tillers Q1FY18 Financial Performance.png
  • The revenue increases by 4.2% for the company and stood at Rs.186 Crores compared to Rs.178 Crores.
  • Revenue from operations in case of tillers and tractors is Rs.112 crores and Rs.73.89 crores respectively.
  • The overall industry growth in theQ1FY18 period was 8.6%, and VST growth was 17.6%.
  • The IndAS required the company to net off the selling expenses such as commission and discounts against the top line
  • The selling expenses and the top line also has come down by around Rs.5.8 Crores due to requirements of IndAS.
  • The investments are to be statedas fair value as per IndASrequirement. The impact which is around Rs.12.5 Crores in the first quarter of Q1FY18.
  • Prices are not settled in Tamil Nadu due to which the demand for horticulture segment was not capitalized and also delay in budget allocation in some of the states like Kerala.
  • Sales expenses and investment will continue to expand the channel network across the country and penetrate into markets where thecompanyhas not been present.
  • The revenue share from tractors increased to 40% from 35% of last year.
  • The company experienced a reduction of 1.8% in operating profit. The reason for decline in operating profit is due to product mix in tractors
  • The employee cost and the selling cost is a little higher in percentage terms, but the absolute number is within the budgeted amounts
  • The top line was not in line with the budget because of the market condition. Company expects EBITDA margins to improve Around 150 basis points.

Company overview

  • In recent years, thecompany increased its allocations to equity mutual funds, inter-corporate deposits and also in debentures of other group companies.
  • Most of the product development has happened in 2016-17, 2017-18 and partially in 2018-19.
  • Company spent Rs.26 Crores towards thepurchase of land and building. About Rs.14 Crores will be towards infrastructure.
  • Capex is Rs.130 Crores approximately for the year FY2018.The capex spending will become lesser in last two years
  • Capex towards assembly lines and equipment have been ordered for facility at malur and should be ready by Q4 of this year
  • The differenceof Rs.5 crores between company’s total revenue and combined revenue from tillers and tractors is due to the IGAAP.
  • Company is trying to get some new technology or tying-up with some international player to expand our product basket


  •  In Q1FY18 the company had a growth of around 16% for tractors while the overall industry growth in the compact segment was adverse 3%.
  • In less than 20 HP segment market share is around 30% while in 0- 30 HP, it is approximately 15%.
  • The 18.5 HP tractors, the four-wheel drive and two-wheel drive were sold more in Q1.
  • In case of tractors, it does not entirely depend on subsidy. This is the difference between tillers and tractors.
  • The company launched the Samraat tractors, which along with Viraat Plus is now under volume production. Both these models will help company gain market shate
  • Tractors segment will continue to do better than last year and the same trend will continue.
  • Expected sales in case of tractors are anywhere between 11,000 and 12,000 for year 2017-2018
  • The company moved to 21 to 30 HP segment with 27 HP tractors in FY18
  • Company’s Market share is 16.5% in less than 30 HP category, which was about 13% in FY17
  • The company sold more of 18 HP tractors where margins are lower than the other models.
  • Market share in less than 30 HP category of other key players- Escorts around 4%, Force Motors is 4%, Kubota is 5%, Mahindras is 51%,Sonalika is 9.7%, and TAFE is around 12.3%.
  • Higher sales promotion expense incurred for the launch of two new tractor models Viraat Plus and Samraat tractors.
  • Decrease in sales due to flood in Gujrat, but thecompanydoes not see any impact coming on the overall tractor sales during the year.


  •  Industry growth for tillers was negative 3% while VST degrew by 2%; however, its market share moved to 61% from last year share of 59%.
  • The decline in the industry was due to weak monsoon in Karnataka and delay in budget allocation in some of the states like Kerala due to which there was lower pull from the farmers
  • In case of tillers, there was degrowth in July compared to the same period last year.
  • Expected better Q2 for tillers because of heavy rains which will pull demand for tillers.
  • In case of tillers, there was a huge deficit of almost 2000 numbers and company is unlikely to make up the short falls
  • The company Expects to perform better than last year and sales to be around 27,000 or marginally more than that
  • Tiller includes the RTP, Tiller spares parts, Weeder and reaper
  • Revenue from RTP, weeders, spare parts and reapers are Rs.67 lakhs, 40 Lakhs, 10.57 crores and Rs.40 lakhs respectively. Tractor spare parts is 2.49 crores
  • Sale of tillers is highly dependent on subsidy and fluctuates with fluctuations in subsidy
  • In Q1FY18, tiller volumes sold compared to the budget was about 500 numbers less, and tractor volumes were 300 numbers less.
  • The keys states for tillers in general are Karnataka, Andhra Pradesh, Odisha, North East States, Assam, Gujarat and Maharashtra.
  • Sale in Q1FY18 was 943 in Karnataka, 103 in Tamil Nadu, 879 in Andhra Pradesh, 785 in Maharashtra,1012 in Gujarat, 116 in West Bengal, 1267 in Odisha, and then 1422 in Assam and North East.
  • Tillers will have a GST rate of 12% on the end product and input varies from 18-28%.
  • Increase in market share from 59% to 61% in case of tillers.
  • As far as the tractors are concerned in July, we saw a growth compared to last year.

 GST and subsidy

  • Price increases especially inthe basic raw material steel andcommodities like proprietary items - tires, batteries etc. These all have been subjected to steep price increases.
  • In Q1FY18 about 50% of the price increases have already been implemented, but no impact yet as thecompanywould be carrying the inventory of earlier last year buying prices.
  • Most of the price rate contracts have to be discussed with the government and government has to give the revised rate contract.
  • GST on Output is 12%, tractor is 12% and in case of inputs component it varies from 12%, 18 % to 28%.
  • Overall change due to GST will be around 7% as earlier tiller was subjected to VAT which was used to be about 6% to 7%.
  • Some of the state governments have accepted the prices, with other state governments discussions are in progress.