Escorts, a company that deals with Agriculture and construction equipment makers, is planning for a capital expenditure of ₹400 crores. According to the report, they want this to happen in this ongoing financial year.
Keeping urgency in mind, they are planning this.
According to the ET, the company is looking into all its three business verticals
⦁ Agri machinery
⦁ Construction equipment
⦁ Railways
Bharat Madan, Group chief financial officer himself, said this to Economic Times.
Why do Escorts take this decision?
This year, the farm sector is expected to have some favorable tailwinds and rain. So the Escorts hope the farmers buy more farm equipment or tractors.
In the months April-May, the tractor sales have increased. This rise in the sales of tractors is expected to continue this whole year. Irrespective of the rains and the low crop yield, farmers showing interest because of the commodity price.
There is an expected increase of 4-6% in 2023. In the year 2022, the Tractor industry dropped to 6.4%.
” In the tractor industry, recovery has set in and volume-wise the outlook is positive this fiscal, ” said Madan.
” Commodity/material prices too seem to have peaked in May. Though it will take 3-4 quarters to recover the increase in input costs due to the lag effect, ” he added.
Escorts is one of those companies entirely dependent on the sales of tractors. More than 3/4rth of its revenue.
Revenue on construction equipment sales
Escorts company expects the construction equipment sales to go high this financial year. Last year due to many external factors, construction equipment sales went down by 8%. But this year, the increase estimation is around 15-20% in the coming year.
” In railways too, there is a lot of pent-up demand. We are seeing good traction in tendering, with renewed government focus on the development of infrastructure, ” Madan said.
Escorts knew that construction equipment sales would go high in the second quarter of the year.
Conclusion
Escorts is in the process of collaborating with the Kubota company of Japan. In the next 5-6 months, the investment plan will be finalized.
Last year, Escorts had a decline of 12.4% in net profit.
EDITED BY – Sanjana Bhanot
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