VST Tillers and Tractors limited

Stock Opportunities Not-so-Hidden Gems
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Came across new CEO, very dynamic, ex Mahindra with lot of fire in the belly. New CFO an ex CIPLA guy with very strong pedigree and culturally very strong besides strong competencies and experience. Good governance with very strong management team at the top and with razor sharp focus on the execution. The team knows the market, has a good connect with farmers and strong brand recall. They are eyeing for 3000 cr topline by next 3 to 4 years, even if they end up achieving 70% of this, this will generate very strong cagr. Balance sheet is strong and clean with no debt and and strong cashflows (company is generating free cash flows). Dividend payout regular. Company has been growing all through internal accruals with no dilution and negligible debt over last decade. Product is strong and they are near market leader in the tiller segment. Recent push in the marketing, branding is also visible.

The stock shows multiple triggers.

Have invested in 2008 and stayed with it till 2010 and made good money. Exited because of other priorities.

Disclosure: Currently invested.

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Hi Friends

Sharing some notes we collated on VST Tillers.

  • #About

    • Company’s renowned VST SHAKTI range is India’s number 1 brand with 55% market share in the power tiller segment

  • #KeyPoints

    • New CEO Antony Cherukara hired in April 2019
    • Ambitious 2025 Target of 6x revenues in #AnnualReport2020 to 3000 crs
    • Investing in Zimeno - 2% stake - the company makes electric autonomous tractors
    • Shifting Bangalore Facility to Hosur. Land value could be around Rs 400 crs
    • Increasing International Market Foray
      • In the international market, we have forayed into Western Europe and Africa and going forward, plan to explore opportunities in Eastern Europe as well
    • New Alliances
      • Alliance with Pubert, , for the distribution of power weeders.
      • We have also signed a MoU with Zetor, Czech Republic to jointly develop higher horsepower tractors for the Indian and overseas market.
      • Technical partnership with Monarch Tractors. Monarch Tractor launched the world’s first fully electric, driver-optional, smart tractor on December 8th, 2020 in United states.
    • Restrictions on the imports of Chinese PT (~20-25% market share, currently)
    • The imminent launch of a ‘subsidy neutral’ PT.
    • Trailing Valuations at ~25 times

  • #AnnualReport2020 - https://www.bseindia.com/bseplus/AnnualReport/531266/65479531266.pdf

    • In FY 2019-20, we continued to consolidate our market position with a 46% and 10% share in the power tiller and compact tractors segments,

    • #Industry

      • Given that nearly 85% of the land holding is less than 10-hectare, demand for smaller horsepower tractors and power tillers is steadily increasing
      • India is also one of the largest tractor markets in the world, selling 600,000 to 700,000 tractors per annum, on an average. Tractorization has been happening at a faster pace than the overall mechanization process, which is evident through the increase in sales of tractors over the years. The country remains a highly lucrative tractor market as shortage of agricultural labour becomes profound and farmers continue to invest in innovative business models such as custom hiring solutions for tractors. Demand for tillers is placed next to that of tractors as they are predominantly used in small fields where usage of tractors is not viable. Power tillers have higher demand in low land flooded rice fields, and hilly terrains. Hence, the market for power tillers in India is mainly concentrated in the eastern and southern parts of the country owing to the small land holdings per farmer in these regions and high cultivation of rice crops.

    • #KeyIssues

      • For power tillers, farmers are dependent on government subsidy. Moreover, non-availability of retail finance may hamper the demand for power tillers. Significant percentage of total products i.e. power tillers and compact tractors of the Company are sold under the government’s subsidy scheme. In case of reduction in subsidy allocation might negatively impact the sales volume of the Company.
        Mitigation: The Company has joined hands with NBFCs and banks to ensure easy availability of credit to its customers. Further, it is also planning to diversify its products offering into various value added products which are not linked with government subsidy.

      • The tractor industry consists of many small and big players, thereby the company faces high competition in tractor industry. This may result in pressure on margin and profitability. The company faces stiff competition from both domestic as well as international players. This may result in stress on profit margin or loss of sales to peers.
        Mitigation: On the back of its rich experience, expertise and technical know-how, it has established a strong market position and brand loyalty for its products in domestic and
        international market. Further, its ability to offer unique, innovative and cutting-edge technology products gives it a competitive edge over its competitors.

Disclaimer

  1. We are not SEBI registered advisors
  2. The above note is not an investment advice but an educational post to discuss a business model
  3. Plz consult your financial advisor before taking any decision
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Hi,

Lovely thread with great insights on the company. I had few queries/ observations, would love to hear from others :

  1. M&M in their last quarter results weren’t so upbeat on new tractor sales for the next year. Wouldn’t that impact VST’s business as well - both tillers and small tractors? Given their compete with tractor manufacturers (both directly and indirectly for tillers)
  2. Company has set very ambitious growth targets but if we look at last 6-8 years, the sales haven’t gone anywhere. FY14 the revenues were Rs 615 crs with 83 Crs PAT. FY21 results would be ballpark in similar range. What will work for company this time around to achieve the projected growth?
  3. The other income (OI) seems to form a large component of PBT - FY20 is Rs 24 Cr of other Income on Rs 23 Cr PBT and FY19 is Rs 44 Cr of other Income on Rs 71 Cr PBT. Isn’t PAT then dependent materially on OI?
  4. With commodity price inflation already setting in, company will see rise in cost of inputs (esp steel and other metals). Shouldnt that dent the margins for the next year or two?
  5. The company has sizeable investments. Asper FY20 annual report Rs 156 Cr (35 Cr of equity investments and Rs 121 Cr of MFs and others). These are now valued at RS 250CR+. While this is positive but for the size of the company operations, the investment book seems very large. The income from the these investments then need to be adjusted from PAT to get a true picture of the profitability. And also the valuation by P/Ex needs to be adjusted.
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Vst tillers

Key highlights from Q4FY21 conference call

Farm sentiments have started to revive as pandemic resurgence is subsiding with VST seeing healthy demand for its product profile.

Key highlights from the call include:

(i) higher other expenses for the quarter include CSR spend of 3 crore, 2 crore as write off i.e. interest not received from dealer,

(ii) post VSS, employee costs will reduce by ~ 13 lakh/month,

(iii) VST will look at appropriate monetisation route for its land parcel in Bengaluru (~20 acres, classified for industrial purposes),

(iv) VST’s market share in power tiller segment was at ~53% as of FY21 end with total industry volumes pegged at ~53000 units,

(v) non-subsidy share of power tiller sales is currently at ~40-50% wherein farmers are purchasing power tiller at retail without waiting for subsidy release by the state governments (they do apply for subsidy),

(vi) VST has started supplying power tiller to two OEMs domestically and expects to contract manufacture ~3000 units in FY22E.

The same will be counted in volumes as part of monthly volume release but not in market share,

(vii) higher hp tractor sales in FY21 was at ~1000 units vs. ~260 units sold in FY20 with FY22E target at ~2000 units,

(viii) VST has cumulatively taken ~4-5% price hikes thus far in CY21, led by commodity costs inflation,

(ix) VST has added 155 dealers in the power tiller segment & 110 dealers in tractor segment in FY21,

(x) dealer inventory in power tiller segment was at ~40-45 days while the same in tractor segment was at ~30 days,

(xi) VST sold ~1800 power weeders in FY21 and expects to grow this business exponentially, going forward,

(xii) working capital gains in FY21 were led by supply constraints across the value chain,

(xiii) VST has guided for ~12-14% as EBITDA margins range, going forward,

(xiv) capex spend for FY22E is envisaged at ~| 60 crore, primarily meant for product development including the spend with Zeteor on new platforms

(xv) steel forms ~40-50% of its raw material basket costs,

(xvi) It remains committed to its | 3,000 sales target by 2025.

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Very positive outlook for FY22. 1000 cr Revenue for FY22 ( 763cr -FY21). Company expects 30% growth in tillers and 10-15 % in tractors.
Looks like Vision 2025 of 3000 cr Revenue(fingers crossed) no longer appears over ambitious to the market. A lot has happened at VST over the last 2-3 years to make all this possible They have increased distribution reach, Improved and expanded product portfolio,Focused on exports,Entered into JVs to fill gaps in portfolio and have gone from a promoter run firm to a professionally run firm. Good stock to play the Agri -theme and even after the recent run up valuations are still reasonable (Just my opinion. I could easily be wrong about the whole thing)

Disc: Invested

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Q1FY22 concall

3000cr revenue target for FY25. Targeting 10% from exports by FY25. 1000cr target in FY22 with 13% margins.

  • New launches

    • Higher torque 27 HP tractor did well in MH, gujarat.

    • Ramping up 17HP single cylinder tractor for Gujarat.

    • Seat fitted 16HP tillers getting tremendous response.

    • Tremendous response of 30 HP tractor is the most tech advanced tractor with features like fully syncro mesh gearbox, mid PTO (not available in any tractor), reverse PTO (first in segment)

  • Tillers 27000 FY21. Q1 did 6729, revenue up 30%. Targeting 30% vol growth in FY22, in line with Q1. Coverage/dealership growing.

    • B2B contract manufacturing for 2 OEMs did 500-600 in Q1. Guided for 3000 for FY22. One more possible OEM can get concluded

    • Historically faced issues on subsidy from govt. How will we grow much faster? We have 54% share in Q1 so we have to grow the industry. There is huge potential.

      • Trend has changed how subsidy is viewed. Subsidy is not a decision making factor. Farmer applies but is OK if he doesnt get the amount

      • New products- Launched 16HP tiller. Launching 9HP innovative product this year.

      • Increase active dealers from 200 last year to >450. Added 40-50 dealers in Q1. All India inventory has come down to just 2000, avg of 4-5

      • Not seeing need for subsidy neutral tillers

      • Operating at 97% capacity, working on increasing capacity

  • Tractors 8800 in FY21. Q1=2048, vs 1736. Revenue up 31%. Targeting 10-15% growth for full year.

    • 7th or 8th player in the tractor industry. Last year 90,000 units is compact tractor industry size. Launching newer products, increasing coverage

    • Entered higher HP segment which has a size of 800,000 units. Did 170 higher HP. Targeting 1000 for full year.

    • Exports- 450 in FY20 , 680 in FY21 and already did 264 in Q1. None of this is through Zetor, even though that alliance is helping us from references. Growth is from network expansion in Eastern EU and Africa. The growth will continue. Looking at 1000-1200 nos for FY22.

      • Africa is big opportunity for small and margin farmers. Power tillers. Getting considerable traction. West/South Africa- appointed 8-10 dealers. Will look at east now

      • Will explore higher HP play.

      • EU industry size is 30,000. Highly Competitive- All brands from across the world- Goldoni, Kubota, TYM Kobize, Sonalika, Escorts. We have been able to do good. We have 10% market share in France and one of the largest networks with 80 outlets with our distributor. Same work that we did in France- we are now doing in Germany, Belgium, Netherland, Portugal, Spain. Started getting into east EU- first dealers have come up in Croatia, Slovania. Appointed in Romania, Bulgaria

      • Our quality is no less than EU or Japanese tractor. The difference could be in technology or electronics that are not in our portfolio. The duty cycle in EU is very low. Indian farmer uses tractor for 600 hours per year. EU farmer uses 150 hours. They are looking at less complicated products in our segment. Higher HP segment could be different- higher electronics, sensors, brand play.

  • Parts business grew 44%. This will grow as our base grows. We want to build our distribution business. On an 800cr we did 80cr parts and lubricants. Probably there will be an upside to 15% as the base grows. This business has better margins.

  • Precision implements- Looking at niche tech, not just get into.

    • Rotavators- Started in Mysore. Talking couple of foreign players for tech collaboration in rotary application space

    • Sprayer segment is natural for us. We are leaders in the compact 4 wheel drive tractors (row crops/orchards) , where most of the spraying happens. We should be able to capture this segment. Talking to a Japanese and a European company. Looking for Technology such as electrostatic sprayers.

    • Power weeders- growth is good. Did 1700-1800 last year, expecting 5000+ in FY22. Travel for Pubert to India is not happening so collaboration to pick up.

  • Current Mix- 55% tillers, 40% tractors, 5% parts/oil. By 2025, mix will be equal.

  • Margin increase will be driven by vol growth rather than pricing. In scale up phase, opex and brand ad-spend goes up

  • Price hike in FY22- Price hike in June and August, in line with commodity inflation.

  • Whitefield 20 acre land- Currently Corporate office and warehouse, which was earlier at another rented place. Best time to monetize will be after 1-2 years

  • Other points

    • Write back 2.9cr in Q1- these are 3 year old provisions that are no longer required. This is more or less done so no further writebacks.

    • Wave 2 had an effect on rural in April and May. Consumption is back. The sowing is same as last year. Sentiment is positive

    • Risk to revenue target is COVID 3rd wave

    • RM situation- stabilized but unpredictable. Striving to improve margins over last year. Price hikes taken and Have done lot of efforts on increasing efficiency

    • ESOPS- Building management bandwidth for next level, seen in last 2 years. Nothing finalised as of now. Board to take decision

    • Looking at inorganic opportunity in farm-farmer rural market canvas.

    • Employee cost increased qoq. It has come down as % of revenue. One-time Leave encashment of VRS employees.

    • Capex plan 60cr in FY22

On charts, the stock has moved past 1960 odd levels that was acting as a resistance. Weekly chart below. Stock has run up hard on all time high volumes, which indicates that some funds may be interested

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Discl: Invested as techno funda bet at avg of Rs 2000.

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Yes, company seems to be doing all the right moves - new product development, geographical expansion, technology imports, plant automation, branding, etc. There are also external tailwinds - bountiful monsoons, improvement in farmer incomes, end of Chinese imports and so on. However, capital allocation stands out as a sore thumb. Lot of cash deployed in stocks, equity & balanced funds. Money also diverted to group companies. Responsible promoters don’t do this. Does the company plan to stop this any time in future? Could not find any such assurance in previous concalls.

(Disc: Tracking but no positions so far)

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All valid points :slightly_smiling_face: I first looked at vst tillers in mid 2019 and decided to wait n watch (I used to run a concentrated portfolio back then and one Can’t afford too many mistakes in a 10 stock portfolio). Capital allocation, industry headwinds, employee fraud, ceo resignation were among reasons that deterred me from investing back then. However as they say everything is good at a price.Vst may not get re- rated but earnings growth alone can make this a good bet and we have good reason to believe that is possible. The new ceo over the last 2 years has done a lot to inspire confidence and at this point one can only hope that the same continues. It’s just that I am not comfortable betting big on anything that’s linked to the agrarian economy Hence a 3% allocation here

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Sharing notes on a concall conducted by Dhanki Securities with VST management.

Transcript link: https://www.vsttractors.com/sites/default/files/2021-10/concall_transcript_6-Oct-2021_0.pdf

06 Oct 2021

  1. 3000cr by FY25
    1. Achieved 42% growth in FY21 which was their first milestone.
    2. Key strategies
      1. continue with our leadership in compact tractors
        1. 30% market share
          1. But 10% if taken segment as less than 30.
      2. Entering the remaining 800,000 tractor industry via higher horsepower
      3. precision implements business
        1. Started rotavator manufacturing from this facility, Scaling up sprayer segment, etc.
      4. Small farm mechanization business: getting into the power weeder, brush cutter, chainsaw, hedge trimmer, etc.
      5. Distribution business: getting into distribution of several related agri products which we will come out in the open few months from now.
        1. we don’t have any fixed cost addition that is there, what we would be doing is only utilizing this funnel to distribute more products.
      6. Futuristic technologies: invested into an electric tractor driver optional Tractor company in the USA, signed a master services agreement where they are developing the entire power train for those tractors in India and shipping it off to the U.S… And eventually they want to be ready for electric tractors in India as well.
    3. 3000cr target does not include inorganic growth. But they are looking for such opporunties.
  2. “Last year we have increased our tractor network by about 110 dealers, the power teller network also we have grown by about 155 dealers last year, this year we are continuing to grow that and we should be looking at about 500 to 600 tractor dealers by the end of this year and close to 700 to 800 power teller dealers by the end of this year. This I’m talking about two years back we had only about 200 dealers of tractors and about 150 to 180 dealers of power tiller.”
  3. Challenges management see:
    1. Network challenge
    2. Ensuring that there is a healthy transition to this massive scale.
      1. “That is why we are implementing theory of constraints based supply chain model wherein the inventory will be controlled and managed. It is not like kan-ban or just in time it is slightly different. The theory of constraint based model which is more suited to the pandemic kind of situation wherein we have a buffer stock, but at the same time the buffer is dynamically controlled through software systems.”
    3. leadership bandwidth that is required.
  4. Growth for Power Tiller:
    1. Already at 60% market share: they will have to grow the industry for the industry to grow and they are growing which means the industry is also growing
    2. Working on four A’s: awareness, availability, accessibility and affordability
    3. They expect 20-30% growth in power tiller.
  5. Kisan credit cards are helping in terms of down payment.
    1. Installed Paytm machines in most of the Power Tiller dealerships, enabling them to buy brush cutters, enabling them to buy things like power weeders by using their Kisan Credit Cards.
    2. The retail percentage on power tillers is also improving with various new banks like Jana Small Finance Bank have a tie up with them, Samunnati have a tie up with them.
  6. Q: Some of the largest farm equipment players in India, this implements business is only around 500 crores. Do we see an advantage for ourselves being more, like being in the power tiller space has been able to leverage?
    1. "Yes, so the impacts the largest player in the market also started to the implement business only, 2010, 2012 when I used to work there and created that business, and it has grown from there."
    2. “I am not saying that, we would be at that size faster than them, what I’m trying to say is it’s a very large opportunity, and what our focus is currently on building our business in two segments. One is the rotary tiller segment, and second is a sprayer segment. And these two segments, we expected to grow very fast. And the figure I said is by 2025 we want to be a business of at least 300 crore in these two segments.”
  7. Subsidy portion would be only about 20% of the sale.
    1. everybody is buying and then placing for subsidy
    2. What changed?
      1. Waiting for subsidy not helping as eventually they are not coming.
      2. DBT system: Farmer knows that, he doesn’t have to run around to collect it’s subsidy amount, it will get directly related to his account.
  8. Q: Strategy that you were looking to adopt in the higher HP above 30 horsepower segment?
    1. Not focusing on market share, rather want the benefit of capacity utilization.
    2. Two approaches: value for money tractors and VST Zetor, which is a premium range of tractors
      1. Attracting dealers by not be building any inventory and not creating the interest burden or working capital on the dealers.
  9. Exports:
    1. Distribution network in Europe.
      1. Last year spoke about getting into Eastern Europe and now they have got distributors in Romania, Bulgaria, Croatia, Serbia, and Slovenia.
      2. The second geography they are looking at for exports in Africa and in Africa.
        1. Have a network in West Africa and Southern Africa.
        2. And next year hope to do for Eastern Africa.
    2. Currently at 5-6% of international business revenue, aim is to get to 10% of that revenue, which we will hit by 2025.
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Announcement under Regulation 30 (LODR)-Press Release / Media Release:
VST Tillers Tractors Ltd, is ranked among the 25 most
Innovative Indian Companies of 2021 by the Confederation of Indian Industry (CII).

Bengaluru, 20 December 2021:
VST Tillers Tractors Ltd. (VST), one of India’s leading farm equipment manufacturer, is
ranked among the 25 most Innovative Indian Companies of 2021 by the Confederation
of Indian Industry (CII). Mr. Kris Gopalakrishnan, Past President, CII and Chairman,
CII Industrial Innovation Awards 2021 along with Dr. S Chandrasekhar, Secretary,
Department of Science and Technology, Government of India presented the award to VST
Tillers Tractors Limited.
The award evaluates innovation, processes, products, services, technologies, and
approaches which brought about quantifiable results. VST was felicitated with ‘CII
Industrial Innovation Awards 2021’ in a virtual award ceremony held during the 27th
edition of DST-CII Technology Summit 2021.
Receiving the award, Mr. Antony Cherukara, CEO, VST Tillers Tractors Ltd., said “We
are honoured to receive this recognition from CII for Excellence in Innovation and
delighted to be counted amongst the Top 25 Innovative companies in the country.
Innovation is a must for breakthrough results and our team at VST is dedicated to
bringing out more innovative products to the market. This award is a testimony to our
commitment to the farming community for offering high quality, innovative and
sustainable products.”
VST has showcased their newly launched state-of-the-art, VST MT 932 - 30 HP Tractor
and VST 165 DI (16 HP) Power Tiller for the awards.
VST MT 932 - 30 HP Tractor is the first multipurpose stylish compact tractor, infused with
advanced technology features like 9+3 synchromesh, Mid PTO, Reverse PTO, Shorter
Turning Radius, High-capacity Hydraulics, and operating comfort to increase
productivity in toughest farming conditions with lesser fuel consumption.
VST 165 DI (16 HP) Power Tiller comes with MDR (Maneuverability, Durability,
Reliability) technology, best in class power to weight ratio, unique adjustable seating
comfort for a long duration of work, wider rotary (750mm) for maximum coverage, and
reliable operation.

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Q3FY22 Concall notes

  1. Reduction in EBITDA is due to reduction in other income.

  2. Unit Sales:

    Units Power Tillers Tractors
    Q3FY22 7139 2043
    Q3FY21 6734 2433

  3. Overall market for Power Tillers looks good but tractor industry is affected in short term.

  4. Question by Analyst: “Mahindra announced CODE to replace power tilers”

    1. Answer: Currently it does not have any subsidiary. Plus it has limited application but as of now there is no big threat. Still power tiller demand is there.

  5. Rs.1 financing is similar to consumer goods financing

  6. Making payment at all dealership digital.

    1. Currently 85 and plans to 300-400 in next two months.
      1. Power tiler dealers: 554
      2. Tractors dealers: 325

  7. Commodity inflation continues to be issue but we are able to maintain it and that is why Operational EBITDA is not down.

    1. There will be price in Q4.

  8. Capacity for Higher HP tractor is set and getting good response and expecting 1000+ units this year.

  9. 3.5-4% of power tiler are being bought on Power Tilers.

    1. Target is to make it reach 10%

  10. There are new product launches coming up few months.

  11. For this financial year the company will achieve above 20% growth and positive to achieve the target.

  12. 140% growth in exports so far this year.

  13. Capex: Rs.45cr for this years

  14. “Tractor for hire” or “Subscription based model” are not that profit models as of now.

  15. No decision yet on the land parcel they have.

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This claim by M&M doesn’t make sense to me. CODE costs Rs.4 lacs while VST Power Tiller costs around Rs.1.6 - Rs.1.8 lacs. Code runs on petrol and VST Power Tiller runs on diesel. They don’t seem to be competing products. In many of the agri related websites, Code is being referred to as a tractor rather than a power tiller.

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Q4FY22 Concall Notes

  1. Segment wise:
    1. Power tillers 31776 (includes 288 exports) vs last year 27,318
      1. Q4 9282 vs last year 7474
        1. 134cr Q4. 458cr full year
      2. B2B 1800 tillers sold for full year.
      3. 55% market share (improved market share by 2% in the year)
        1. Industry size is 55,000 units.
    2. Tractors 7991 vs last year 8835
      1. Q4 1575 vs last year 1885
        1. Rs.62cr Q4. 294cr full year.
      2. 1400 exports tractors for FY22
    3. Parts business Q4 Rs.20cr and other business Rs.19cr.
      1. They want to take the Precision business to Rs.100cr
    4. Sold 200 power weeder
  2. Tractor volume have declined by 10% whereas industry has grown by 8%
    1. Lost market share in Gujarat & Maharashtra
  3. Price hike done in February (1.5%) now next will be in coming quarter (2-3%)
    1. Mainly tractor segment. Company cannot pass cost in power tiller segment.
  4. Capex of Rs.60cr for FY23 for new product development
  5. Inventory at 43 days receivable 29 days and sustainable.
  6. Dealer network
    1. Power dealer: Have 520 vs 150 (2 year back) adding 200 more FY23
    2. Tractor: 340 dealers peers are at 900-1000
  7. 40-45% CAGR needed for 3000cr target. currently around 25% CAGR

My thoughts: I am not finding comfort in the management commentary towards the 3000cr target. I get a feeling that every time they have some excuse for them not hitting the target.

Disclosure: Exited.

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yes, based on the Q4 Fy22 conf call, doesn’t look like 3000Cr by FY25 is doable. They might achieve it by FY27. However company seems to be establishing good dealer network, bringing multiple new products to market and spending more on R&D. Looks like 20% sales growth is doable for next many years.
If they maintain RoCE over 20%, this is still a good investment.

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Will this impact VST?

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From Nov 22 Transcript

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Monarch Tractors, the US-based company with which VST Tillers has a technical supplier partnership (& strategic investment), is set to commence commercial production this month. With the support from global majors CNH Industrial & Foxconn, if Monarch scales this up in a big way, a potentially promising opportunity for VST Tillers?

  • CNH Industrial, one of the largest manufacturers of tractors globally, has recently entered into a multi-year licensing agreement for electrification technology with Monarch Tractors. Monarch is leveraging CNH Industrial’s sector expertise in product, brand, distribution, and supply chain strength and has started generating revenue through this licensing agreement (even before manufacturing their first tractor).

  • Like VST Tillers, CNH also has a stake in Monarch Tractors. Further, CNH has shown clear intent to grow in India and are particularly looking at the product segments where VST has recently entered. Given the VST brand equity, distribution network and idle capacity, could it be an acquisition target for CNH Industrial?

  • Foxconn will contract manufacture electric tractors for Monarch. They’re looking at high volumes - tens of thousands of tractors.

  • President of Monarch Tractors, Mark Schwager, was the head of the Tesla Gigafactory.

  • Manufacturing talent on the shopfloor: “There are 600 spectacular manufacturing professionals all with the GM (General Motors) automotive background."

  • Last month, Monarch delivered its first tractor to Constellation Brands, a Fortune 500 company. This will be followed by shipment to other large MNCs.

  • In terms of pricing of Monarch Tractors, Founder Praveen Penmetsa says: “The new bill that has passed has support for electric farm equipment and our tractor qualifies. It’s going to make it very cost competitive, with the diesel tractors.” According to the company, Monarch Tractors have all the features of a regular tractor as well as being electric, driver optional, data driven. The shortage of farm labour in the US could benefit this company.

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