I have attended VST tillers and tarctors AGM on 11/08/2017 and brief notes of the same:( there may be few mistakes and misinterpretation from my side)
*FY17 sales were impacted due to drought in southern states and delay in implementation of DBT scheme and release of subsidiary amount by states like Orissa and AP. This year monsoon is good in most states except for karnataka/tamilnadu and few parts of AP.
Tractors : Will maintain growth of 15% for the year. Growth will be lead by new models launched in fy17 . Q1 fy18 sold 2555 tractors v/s 2158 in q1fy17. Margins are lower due to more no of 18 HP tractor sold in state of Gujarat where the price is very competitive and govt has not agreed to revise price from last few years. Overall no siginificant improvement in EBITA margins (it will be around 15-16%) are expected due to increased competitiveness of industry. The response to new virat model is good
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- Almost 25% of total tractor sale is done through govt subsidiary. Tractor sale through govt subsidiary is slightly different from tiller sales. Company will receive full money from farmer.
*Mahendra company “YUVA” brand tarctor in compact segment is doing well. It has impacted the market share of VST in compact segment. Trying to gain the market share by competitive pricing and better service.
- No new model/higher HP tractor launch this year. Expect to launch higher HP tractor in FY 19.With higher HP the margins also increases.
*Technology changes in tractors : No major changes like automation is visible in India. There is transition from sliding gear box to continuous mesh box in tractor which company is implementing already.
*Exports of tractors: tractors has to be EU homolgated. Certain models homolgation validity will expire by fy18. Applied for similar homolgation for remaining HP tarctors/models. This year VST will export around 500 tractors mostly to european union, rest to Srilanka and Nepal. Margins in this almost same as domestic sale.
Tillers: Growth will be flat or may slightly improve. Maximum sale happens through govt subsidiary. Very difficult to change the farmers mindset to buy tillers on own. Drought in southern states and delay in release of funds in Orissa/AP impacts tiller sales. Maintained significant market share of around 60%.
*Competitors include kirloskar/kubota /chinese players. kirloskar tillers are well accepted by farmers after certain modifiaction but its price is high compared to VST tillers. Chinese players will not give proper service after selling the products.New tiller launch by Honda seems to copy of Kubota.Impact of it on vst market share and farmers acceptance is yet be seen. VST have good relation with farmers and after sale service which is helping them to maintain market share.
DBT scheme: Most of the states have implemented DBT scheme .Bihar, karnataka(they follow different model) and few eastern states have not implemented. Response of farmers to DBT is satisfactory. Company has arranged retail financing for farmers. Banks and NBFC are ready to lend money to farmers for DBT scheme.
*Reducing the dependence of southern states /Gujarth/Maharastra by entering to other states. Have presence in all the states now. Presently have around 200 tractors channel partners and 230 for tiller(not sure about no). Continuing with discount for dealers even after DBT implementation to encourage for early cash deposit by dealer. Currently giving additional discount of 4.5k to dealer in karnataka on selling tiller( I could not get more clarity about this. Concall may provide more detail).
Power weeder : last year sold about 300, expect to sell 500 this year.
Custom hiring centre in karnataka : have around 79 centres to which company has sold around 150 tractors and 300 tillers in 2016-17. Other states also have chc but vst does not have business with them due to different model.
New palnt at MALUR : new plant work in progress. It will be used for new products and tillers production. Over next 2 to 3 yrs whitefield factory tiller production will be shifted in phased manner. Installing new technology machines at Malur which increase cost efficiency. Need just 60% of present manpower to run the new plant.
*Around 200 cr will be spent on new product developement/machines and palnt. New product developement typically takes about 2 to 3 years. Upgradation of existing products are done in house. New products development is outsourced.
*Trade receivable increased due to govt subsidiary scheme for tiller sales .Most of it is secured and will be received from govt. Raw material cost is increasing, discussing with various state govt for price revision. Many states have already agreed.
*GST: resulted in price increase to end customer of about 2k for tiller and 5k tractor. No impact on company margins.
*Added additional sales force/marketing persons(around 70 in no).This year may not see such increase.
*Govt has acquired 3,300 sq feet of land of company at Whitefield factory for metro project at cost of Rs 10,000/ sq.feet(just to get sense of land value at whitefield).
disclosure:recently brought shares for tracking purpose.