VST Tillers Q4: Revenue Down 15% To ₹273 Cr | NDTV Profit
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00:00Welcome. This is NDTV Profit and Earnings Edge and we are taking stock of the quarter
00:10gone by for Asian Pains, which has come out with its numbers yesterday. Well, to take
00:15us through the quarter gone by and what we can expect going forward, we are in conversation
00:19with the MD and CEO of the company, Amit Singhal. Amit, good afternoon and thank you so much
00:24for joining in. My first question was to do with your volumes growth, which was in double
00:30digits and yet we had a subdued revenue growth number coming in. Can you talk to us about
00:37the factors that have actually led to the revenue number for the quarter gone by?
00:42So overall, as you rightly said, the volume growth has been pretty good in terms of the
00:47double digit, in terms of what we have been able to kind of get in. The value was under
00:51pressure because the price decreases in terms of what we had taken to the tune of almost
00:56about 3.7% and that is why we saw that possibly there was a little bit of a degrowth in terms
01:01of value, what we saw. We also saw a little bit of a mixed difference in terms of our
01:08product range, which kind of also depressed the value a little bit more to that extent.
01:12But having said that, what we definitely saw was that overall the urban and the rural demand
01:18was at par. Urban was a little bit higher as compared to rural, but the rural is starting
01:23to prop up to that extent, which is a positive sign in terms of what we saw in the environment.
01:28We also saw the institutional B2B segment kind of doing quite well overall to that extent
01:34in terms of both the spends on infrastructure, construction, builders and so on and so forth
01:39to that extent. And the third bright spot was the industrial sales where we saw the
01:44auto finishes sales as well as the productive paint sales kind of surging well for us to
01:50that extent to double digit numbers. So, overall, I think that has been the scenario overall a
01:56little bit kind of dip in March in terms of the institutional sales because of the lack
02:03of government spendings because of the election code kind of kicking into that extent. But
02:08otherwise, I think that demand has been a little bit moderate overall and these have
02:13been the bright spots in terms of kicking up the double digit volume growth which we have seen.
02:17Right. Amit, so I want to talk about demand and break that up into two areas. Of course,
02:22the first one is your institutional sales. The first quarter is also going to see elections
02:28naturally because the next two phases are still playing out at the moment and we won't have that
02:34much clarity when it comes to government spends. Moreover, when it comes to the real estate sector
02:41in general, residential or commercial for that matter, well, while there was a lot of construction
02:48activity which was happening in the past few quarters, the construction activity in the next
02:53few quarters is not expected to be as high. So, if you could first tell us just about the
02:59institutional sales on your outlook and what your expectation is, of course, notwithstanding the
03:04auto sector as well to a certain extent which contributes to your B2B sales.
03:08So, overall, our expectation is that the B2B segment should grow in terms of double digit
03:18value numbers is what we see and this is double digit value is what I am saying to that extent
03:22because today if you look at the components of the projects business, it comes in a large part
03:28comes from factories as well which is the spends with respect to maintenance and new factories
03:34which are kind of coming up to that extent. The second area is the area of government in
03:38the infrastructure which kind of comes in which possibly would be a little bit slower given the
03:44elections kicking in in this quarter one to that extent. The third area is the builder
03:49construction segment which is again according to us, I think the mid and the top segments are
03:56still kind of really doing well overall in terms of what we see around and the fourth area is the
04:02cooperative housing societies and so on and so forth in terms of their own maintenance and stuff
04:07like that which is also a fairly big segment overall to that extent and I think given these
04:13segments, CHS is also supposed to be great. So, overall, I would still be pegging the
04:19projects B2B business at a double digit value overall in terms of what we see. We have
04:24traditionally had very big growths in terms of even excess of 20% going ahead, a little bit
04:30slow down but I think this still should be in the double digit value growth.
04:34Right, Amit, I know that Asian paints is by far the leader in the paint segment
04:40but we have another player who is deploying a lot of funds and they're coming up with
04:46a substantial amount of investments in the area as well. Of course, it should be up and about over
04:50the course of the next few months and perhaps the next few quarters. I just want your overall take
04:56on competitive intensity, what you are anticipating over the course of the next 3
05:00to 6 to 9 months and whether or not there are some measures that you guys are taking or for now,
05:06you guys are not very unfazed about competition at the moment.
05:11So, as we look at it, I have always maintained that we have always had competition in this
05:16industry and given the fast pace, the growth and the kind of profitability we see, I think
05:22it's not surprising that we will see more and more competition kind of coming in this industry
05:26as we kind of go forward. Currently, as a leader, we have been always working in terms of increasing
05:32the per capita consumption of paint in the country since it is much lower as compared to any of the
05:39developed economies in terms of what we see outside and therefore, I think one of the big
05:44imperatives of Asian paints as a leader is that we are expanding the market in a very big way.
05:49We have just launched one new product called Neo Bharat, which is based on a new latex technology,
05:54which we have introduced, which is really going to the bottom of the pyramid, looking at the
05:58unorganized sector, looking at low-cost paints, which are kind of operating there and getting the
06:03unorganized customer into the organized market in a big way to that extent and therefore, it
06:08opens up another 5000 crore segment for us in a very big way. Similarly, we are looking at some
06:13other options like the French polish market, which is another big market in terms of looking at where
06:18there is unorganized players playing and we are kind of looking at converting that into a branded
06:24market to that extent and therefore, we feel that today as we kind of see this 80,000 crore market,
06:30we want to kind of really build it even more so that there is enough space for each and everyone
06:36who kind of comes in. I think today the way this industry has been growing, we are not really
06:42worried about new competition coming and what they are doing. What we were very clear is that
06:47as a brand, we are putting energies behind increasing the brand equity, increasing our
06:52advertising spends, looking at supply chain efficiencies, which are far more to that extent,
06:57looking at working around in terms of innovation in a very big way as we kind of go ahead. So,
07:03I think currently, I would say that we have seen competition earlier and we really welcome the new
07:09competition, which is coming in to that extent and we are not looking too worried about in terms of
07:13what's going to happen as far as competition is concerned. Right. Amit, let's move on and talk
07:18about margins then. Of course, your gross margins have seen an expansion because the concern to a
07:23certain extent was that crude was high in the quarter gone by and on that account, your crude
07:30derivatives would have some sort of impact. Is there a lag impact that we can expect in the
07:35upcoming few quarters? And the second question is that while your gross margins did expand,
07:42your overall EBITDA margins were slack at the moment. So, what was that on account of
07:47and what can we expect going forward on your overall operating margins front?
07:54So, two, three areas. One we see is that the crude has been a little bit up and down in a certain
07:59band because of all the geopolitical situation, which is going on to that extent. We are watching
08:04the situation pretty closely. But as I see it, the material inflation has not been very high
08:12in terms of what is there. In fact, it has been a little bit more flattish in terms of what we
08:16have seen. And therefore, I think in the immediate future of Q1, we don't see any price disruptions,
08:21which are going to happen in terms of either increases or decreases to that extent in terms of
08:26going forward to that extent. As I see it, overall, the gross margins have definitely
08:32gone up. And I think there also we have been maintaining a certain band in terms of the gross
08:36margins, which we will kind of operate at. The EBITDA margins, if you look at for Q4,
08:41definitely went down because of increases, which we took in certain areas, for example,
08:47the whole area of advertising and marketing. We have upped our expenses overall in terms of
08:52really upping the brand equity, taking new brand ambassadors, putting out a lot of below the line,
08:57above the line measures in terms of what we have done to that extent. And that is possibly
09:02eaten into some part of the margin. But more I think deficit has come in because of the value
09:07growth not coming in very, very strongly. As far as the year is concerned, we are still maintaining
09:13strongly a margin of 18 to 20% as far as PBTI is concerned. And we think that FY24,
09:21we have delivered almost about a 21.6% kind of a PBTI margin, which is much higher than the
09:28previous year, which is the financial year 2022-23 in terms of what we see. And going forward,
09:34I think we are confident that we should be able to maintain the overall margins
09:38above the guidance in terms of what we have been given.
09:41And under what circumstances can we expect perhaps some sort of pricing action over the next few
09:47quarters? I'm assuming that there won't be further cuts in pricing. Could there potentially be
09:54price hikes perhaps over the next few quarters? If that is the case,
09:58what are the factors that could lead to that? So currently, I think we are all aware of the
10:04geopolitical situation which is going on. So if crude, for example, literally kind of
10:10upsurges and there is a disruption in the crude price going up, it would kind of really affect
10:16all the derivatives which kind of come in along with crude, especially the monomers,
10:20which are kind of involved and the solvent-based prices to that extent.
10:24So I think in that case, if there is a surge which happens, we will try to adjust the pricing
10:30that something will have to get passed on to the market if it happens. But as I said,
10:34that Q1 is looking secure. We will have to look out for Q2 and Q3 in terms of what really happens
10:39if there is a disruption in terms of crude prices. And that is something which we are
10:44watching ahead with fingers crossed. Amit Singhal, thank you for joining us
10:47and taking us through how the quarter has gone by and what we can, in fact,
10:51expect from the upcoming financial year. You are watching NETV Profit.
11:02Good afternoon and welcome to Earnings Edge. You are at NETV Profit. We are tracking VSD
11:07tillers right now on the back of the quarter for performance. The company's revenues de-grew by 15%,
11:12while EBITDA and PAT were down roughly 26% and 3% respectively. We are now joined by Mr. Anthony
11:19Cherukara, the CEO of VSD Tillers. Good afternoon and welcome to NETV Profit, sir.
11:26Good afternoon and thank you for having me.
11:29So let me just start off with the quarter for numbers. Now, revenues de-grew roughly
11:34on the back of fall in the overall sales by roughly 10%. What do you attribute this fall to,
11:42sir? So H2 has been affected due to the poor monsoon,
11:48both the spatial and temporal distribution of monsoon. So this affected both our Q3 and Q4.
11:55However, if you look at the full year, the drop is just 3% in terms of revenue and we have been
12:01able to grow the operational EBITDA. And of course, we have done well on the profit after tax as well.
12:07Understood, sir. Now, Power Tillers is one of the key and the biggest segments for the company,
12:15which saw roughly a 5% fall in sales for the whole financial year of 2024.
12:20Now, I wanted to ask just a little bit of a larger question. Now, in this segment,
12:24how much is currently the organized market for the whole as a whole? And I also wanted to check
12:31that who do you kind of compete with in the listed space in this particular segment? And
12:37how, what do you see the outlook for this particular segment going into financial year 2025?
12:43Yeah, so let me start with the outlook first. There is tremendous potential in this segment.
12:49The fact that 80% of farmers fall in the small and marginal farmer segment creates this to be
12:56a very potential segment for us. And in Q4, we had a decline and Q3, Q4, of course, there was
13:03an effect of monsoon. Apart from that, in Q4 March, the model code of conduct came into being
13:10and that affected a couple of orders that were to come through. That did affect the small farm
13:17machine performance as we call it small farm machines, not power tiller. Because the range
13:23starts from about four to five horsepower and goes all the way up to 16 horsepower.
13:28In the listed space, there are a couple of players in this space in the power tiller segment.
13:35However, with 70% market share, VST Tillers Tractors is the largest
13:42in the industry and we expect this industry to grow in the future as well.
13:48And on the organized, how much of this market would currently be organized? Because we see
13:53that, you know, amongst the listed players, as you said, there are a couple of competitors,
13:57but how much of it would be organized and unorganized, sir?
14:01So up to eight horsepower, it is largely unorganized,
14:05but eight to 16 horsepower, it is an organized industry.
14:10Understood. Now, I want to talk a little bit about the tractor industry in general,
14:16which is roughly de-grown by 7% in the previous year.
14:20Roughly around 8.7 lakh units is what they sold. Now, that also is one of the key
14:25segments that the company operates in. How do you see the segment, like, you know,
14:31going into FY25? And for this financial year also, the segment was down roughly 22%
14:37versus 7% fall for the industry in general. Could you just guide us through what led to this fall?
14:43And how do you see in the next financial year moving into for tractor segment specifically?
14:50Yeah, our company operates only in the compact tractor segment, which is less than 30 horsepower,
14:55and specifically in the four-wheel tractor space. So if you look at this industry,
15:02which is dropped by 8 to 10%, if you see the north and central part of India,
15:07there was no drop. But the heavy drop has happened in the southwest and the eastern part
15:15of the country, where the drop has been almost 18%. And specifically, if you look at the compact
15:21tractor segment, the drop has been mainly in the state of Maharashtra and northern Karnataka,
15:27where the industry has dropped more than 30 to 40%. So considering that drop, which affected
15:34our tractor business and we could not grow in this year, but however, expecting that monsoon
15:40is going to be normal in the coming year, we expect to grow that business as well.
15:46And so I just want to take forward the point that you've been saying that Karnataka as well
15:50as Maharashtra has been affected. Now, we've seen similar commentary from the other players as well,
15:56who operate in the higher horsepower segment as well. Is there any key reason that you're seeing
16:01for this fall? Because this is industry wide. Yeah, like I said, in the higher horsepower
16:07segment, the northern markets, where VST Tillers Tractors Limited is not present,
16:13has remained flat, there was no drop. However, in Maharashtra and Karnataka,
16:18there has been a drop overall industry. And there is a larger drop in the compact tractor industry,
16:24which is a niche segment where the tractors are used specifically in sugarcane farming and
16:31grape vineyard farming. So there, there has been a larger drop.
16:36Understood, sir. And let me go across to the next segment, which is the power weeder segment,
16:40which showed a really good 35% growth in the whole financial year of 2024. I want to understand the
16:47competitive intensity in this as well. And how do you see this segment shaping up in the next fiscal?
16:55As I said, up to 8 horsepower, that is the classification of power weeder. And that is
17:00largely an unorganized segment. Most of the manufacturers or players in the market
17:08import these products and sell in India. We are the first ones to manufacture that in India.
17:14So it is completely make in India for us for the power weeder segment. We were only in the second
17:21year of our selling of power weeders in India. And we expect this segment to continuously grow.
17:29I would say that it would grow exponentially. And is there any kind of PLI benefit or any kind
17:36of subsidy that you get across your segments that you operate in currently? And if so...
17:44There is no production-linked incentive per se, but there is definitely subsidy,
17:49which is a direct benefit transfer, which the government offers to the farmers.
17:53And that is a state-dependent subsidy. So it will vary from state to state.
18:00Understood. And for the tractors, like you said, you currently operate in the compact
18:05tractor segment and you have been exporting roughly 1700 tractors as well in the previous
18:11financial year. I wanted to understand which geographies do you generally cater to?
18:16And how are you seeing the export market in general? We have seen some geopolitical issues as
18:22well, cropping up and affecting all automobile as well as tractor companies. So how are you seeing
18:30this market for export specifically? We have grown the export tractor business
18:36in a scenario where there is two wars going on, one in Ukraine and the other one in the Middle East.
18:42However, it affected our logistics, but we have been able to grow. Our exports are mainly to
18:48France, Germany, Belgium, Netherlands, Spain, Portugal, especially Western Europe. And this
18:56year we plan to enter the Nordic countries as well, so consolidate in Europe. And we have
19:01already announced our entry into US market as well. Got it, sir. And any other Indian OEM
19:11who competes with you in this space for exports of tractors currently?
19:15There are two to three major players who are already in Europe and I would say that
19:21Indian tractor manufacturers are doing well in Europe as well.
19:26And as you guided right now that you have formed a company in the US as well as you will be
19:33entering in that space. Now, the market is generally very competitive in general. Could
19:41you guide us through what has been the sense of deciding to enter into this particular geography?
19:47What is the competitive intensity for the products that you offer?
19:51And how do you see the market in general for the next fiscal?
19:55So our core strength has been in compact tractor segment, as I told you earlier.
20:01And interestingly, the US market has almost three times the industry size in the compact
20:06tractor segment, while the Indian segment is at about anywhere between 60,000 to 80,000 tractors
20:14for the four-wheel drive compact tractors. But in the US, the same industry is at about 300,000.
20:21And there is a positioning that the Indian manufacturers can achieve in this segment.
20:27That's the experience that we have had in Europe. And we believe that success that we have had in
20:32Europe can be replicated in the US market as well. This gives us the belief that we can enter the US
20:40market. Understood, sir. And my final question is your collaboration with Zetter, where you
20:47launched also the first one in the tractor segment. Now, this being a SEC company, how
20:54has this been received? Has the product already been launched? Because we saw that the filing,
20:59the company had said that at the end of 2023, the product was launched. How has this been received,
21:06if any, feedback that you've received? And do you see any further collaboration
21:11with this company as well as any other going forward as well?
21:16Yes, we have launched our first range of tractors in the higher horsepower segment,
21:21which VST Killer Tractors is entering through the joint venture with Zetter Tractors,
21:26Czech Republic. These tractors have been well received. In Q4 last year, we did seeding of
21:33these tractors in various markets and got tremendous feedback from the farmers. Now,
21:39on May 6th, we have launched these tractors across India and we are currently making these
21:44tractors available to dealerships across India. And so far, the performance and the feedback that
21:50we have received from the farmers have been excellent.
21:54Understood, sir. Thank you so much, sir, for joining us today here at NDTV Profit. We wish
21:59you the best for Zetter as well as your further launches. Look forward to talking to you post your
22:06Q1 or in case before that also for any other business update. But thank you so much, sir,
22:10for joining us today. Thank you. Thank you.
22:12So that's all the time we have today on this show. Stay tuned to NDTV Profit for more.