VST Tillers Q4FY17 Concall Summary

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 Financial highlights

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  • In Q4FY17, company registered 34% growth in volumes over the previous  year in the same quarter in the compact segment category. The compact tractor segment industry shrunk by 5%.
  • Registered volume growth of 26% over last year in the compact segment while the industry growth was 1%. Launch of 27 HP VIRAAT tractors helped the growth. The company sold 2200 numbers of VIRAAT models during the year
  • The revenue share from tractors increased to 41% from 34% last year. The tiller revenue share came down to 56% from 62%.
  • The revenue in Q4FY17 is Rs.198 Crores compared to Rs.177 Crores of the previous year, which enabled better absorption of fixed cost and expected to continue during the year.
  • The breakup of tractor and tiller sales by value for Q4FY17- Tillers were Rs.108 Crores and Tractors was Rs.75 Crore
  • The PBT for the company in 2016–2017 is 15% as against 17% last year.
  • PBT is around Rs.27.22 Crores in Q4FY17, which works out to 13.63% as against 17.08% in the same quarter last year.
  • PBT came down due to a planned increase in expenses in employee cost and sales promotion.The employee cost and sales expenses are well within the planned budget.
  • Realization for tillers and tractors in Q4FY17 are 1,32,398 per unit and 2,81,656 per unit respectively
  • The raw material cost from the base cost of 2016-2017, will go up by 2%-2.5% due to price increases in commodity

Market Share  

  • The market share in the compact segment grew from 13.2% to 16.5% 
  • Company market share In tillers increased to 58% from 56.7%. 


  • Tiller industry witnessed adverse growth of around 11% while VST suffered adverse growth of around 7% in the year 2016–2017.
  • The decline in volumes is attributed to drought Karnataka, Tamil Nadu and Kerala. Delay in launch of subsidy schemes in Andhra Pradesh, Odisha and Bihar, demonetization and political climate especially in Tamil Nadu.
  • The company expects a better year for tillers than 2016–2017 with the prediction of a normal monsoon and announcement of subsidy schemes in few important states like North East, Karnataka and Odisha.
  • New tiller launched 135 DI with additional features. Started selling the MTD brand power weeders in the country during the year 2016-17.
  • 90% of the tillersare sold on subsidy. The type of subsidyvaries from state to state. Full-Fledged DBT that has been introduced already in Tamil Nadu, Gujarat, Odisha.
  • By market research, average growth in case of tillers is expected to be 5%-6% and will reach to 4000 tillers per annum.
  • Total tiller volume is around 25,515 for the whole year and 7,700 for Q4FY17
  • The industry size for power tillers in 2016–2017 the was 43200 units and for FY2015–FY2016 was 48000 units. And this year it is expected to be around 50000.
  • Tillers are economically viable than tractors for farmers who have marginal shareholding, less than 2 hectares.
  • The overall industry for tillers will continue to grow at around 5% to 6% and is mainly driven by subsidy.


  • The overall tractor industry growth was around 16.8% during the year and company registered an increase of 26.3%. Target sales for tractors in FY2018 is around 11000 and 12000
  • Launched two new tractor models in the market namely the VST Shakti VIRAAT plus and the 17 HP single cylinder tractor VST Shakti SAMRAAT. These two models will help to grow the volumes in 2017–2018
  • The tractor industry saw a growth of 16.8%, in 2016-17 and only 16.8% major growth came from 41 to 50 HP segment while less than 30 HP segment growth was almost flat
  • With the launch of new model company could get into a new category 21 to 30 HP in which we were not present last year
  • Largest selling model for year FY2017 in case of tractors would be 18 HP model four-wheeler drive mainly in Gujarat, Maharashtra, Karnataka and Andhra Pradesh
  • In case of VIRAAT sales were about 2200 last year and VIRAAT PLUS is just launched this year and sales are expected to be more than 3500 during the year.
  • Company sold 9635 tractors and 25515 tillers in volumes for 2017-2018
  • In the 27 HP company category , the company sold 2200 and expected it to be somewhere around 3500 for FY2018
  • Crew trade target is of anywhere around 11000 to 12000 tractors and primarily coming from doubling of 27 HP tractor to somewhere approximately 4000
  • In FY16 and FY17 company have 22 and 18 HP tractor respectively, which is more than 70% of current volume mix. These two seyments have mostly been flattish but due to the launch of 17 HP tractor , the 20 HP segment also will grow

 Operational Updates

  • Employee cost and other expenses put together we will be in the range of about 19%.
  • In Q4FY17 some  price increases were given, but in Q1FY18 of this year,  the major impact is coming especially in case of tires, batteries and all the steel items, casting, forging, etc.
  • Realization went up from 1,29,000 per unit to 1,32,398 per unit.ion
  • Employee cost and sales & marketing expense are expected to be restricted to 16% due to anticipated growth through good monsoon and government schemes.
  • Non-current investments have gone up from Rs. 16 Crores to Rs. 57 Crores becauseof thechange in the accounting standard, which stays as company’s investment property.
  • Increased allocation towards sales promotion and marketing expenses and focus on creating more brand consciousness in the market
  • The Whitefield has a capacity of 50000 andcurrent production on an average is about 2500 tillers a monthinstalled capacity for tractors is 36,000 which is flexible. Currently company isbuilding about 10000 to 12000 tractors
  • EBITDA margins will improve this year due to good volume growth and same levels of expenses
  • Land at Whitefield, Bengaluru unit has been acquired by BMR Steel for the metro.The market rates compensation they have paid is shown as the capital gain which is a Rs 3.31 Crores exceptional item in the P&L

  Future plans and expectations

  •  Company plans  to bring more models in higher horsepower segment around FY2019
  • Operations in Malur are expected to get started sometime during next financial year and current facility we will continue
  • The company is doubling the 27 HP tractors. The company sold 2200 27 HP tractors  in 2016–2017 and is planning to sell more than 4000 tractors in this category
  • There are other products that the company intends to manufacture like reapers and other things, which are currently not in its portfolio
  • Sales will continue to be in the same quantum while the toplinegoes up and that can result in 1% savings from the employee cost, and another 2% the sales and marketing expenses and other overheads
  • Improvement in margin is expected to be around 200-300 basis point for overall company until the end of FY2018
  • The company will be having close to 450 dealers from the current level of around 250 dealers by 2021
  • The company will offset the increased cost through various measures like VAVE and some material cost savings. The net material cost increase may be about 1% with the internal efforts on VAVE and cost savings
  • The company entered into an agreement with MTD and gained exclusive rights to distribute and sell these power weeders in the country
  • The company will be marketing the 4.5 HP and 7 HP power weeders and will look to sell other products which are suitable for Indian market
  • Other expenditure and the staff cost is above 20% and the company expects as the topline goes up it will taper down to about
  • Growth in volumes for both tillers as well as tractors if rainfalls are normal in FY2018 and improvement in margins because of the operating leverage and not much increase in expenses.
  • Sales and marketing expenses will be around 8% of the total sales for FY2018
  • In terms ofrealizations, there could be some stress because of the commodity price increases and company is trying to negate it by material cost savings and working with the government

GST and DBT scheme

  •  Expected GST rate for tillers is 5% being an agricultural implement, for tractors it is 12% on the product and the input is 28% sale value is likely to be around neutral only, what input tax we pay and what output tax company pay, are neutral
  • Delay in subsidy by government impacted working capital of dealers and in turn over dues to the company.
  • States like Karnataka, Andhra, Odisha, Gujarat, NE and Maharashtra have announced, the planned allocation for subsidy to be around 52000.
  • The day government stops the subsidy, the company believes that in a couple of years the demand will go off.
  • Regarding sales, Tamil Nadu is still not very positive plus the political climate there but Karnataka can have good salesdepending upon monsoon in
  • The company is tying up with both banks and NFBCs also and have had good support from State Bank of India especially in Odisha
  • In the upcoming GST regime, everything company pay is going to be allowed as credit to it but being a farmer-oriented product the government may not allow to keep those benefi
  • The continue will continue to offer 1.5% of sales as an incentive for dealer’s associates because even in DBT the dealers may not pay within the credit period so it will encourage dealers to pay within seven days and it will helpthecompany in cash flow
  • The rate contracts are finalized in Karnataka, Odisha, in Gujarat and Maharashtrathere is no price increases. it is mainly Telangana, Andhra, these are the states where the rate contracts must be finalized
  • Expected government allocations to be around 50,000 and if that happens company’s market share is supposed to be close to 29000 to 30000

 Industry highlights and CAPEX

  • Internal accruals itself will suffice for the next three-four years of Rs.200 Crores of deployment on company’s internal Capex
  • The company plans to spend Rs.200 Crores additional investment in the next three to four year and have a five-year plan of over Rs.200 Croresn
  • Out of the Rs.128 Crore, Rs.38 Crores to Rs.40 Crores would be towards infrastructureand rest would be towards product development
  • Investment in infrastructure and machines is for the Mysuruplant and new plant in Malur
  • Increased need for power tillers because the labour is becoming scared, the labor costs are going up
  • Seasonality and the festival seasons create volatility in demand for both power tillers and tractors. June being the sowing season is expected to be a good month
  • Government is encouraging the industry and Increased allocation towards mechanization which can lead to pushing further growth of industry