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Ladies and gentlemen, good day, and welcome to the V.S.T. Tillers Tractors Limited 4Q FY '22 Post-Results Conference Call, hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Annamalai Jayaraj from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Thank you, Anita. Welcome to V.S.T. Tillers Tractors Limited 4Q FY '22 post-results conference call. From V.S.T. Tillers Tractors and its management, we have with us today Mr. V.T. Ravindra, Managing Director; Mr. Antony Cherukara, Chief Executive Officer; and Mr. Pankaj Khemka, Chief Financial Officer.
I'll now hand over the call to the management for the opening remarks to be followed by question-and-answer session. Over to you, sir.
Yes. Thank you. Good evening, everyone, and we're very happy to share with all of you the results for the last financial year FY '22 and the quarter 4 results. I will start with the financial figures for the year. For the FY '22, the revenue has been INR 853.86 crores, which is a growth of 11.73% over the previous year. The overall EBITDA is at INR 158.27 crores, which is 17.82% compared to 17.01% previous year, which is a growth of 14.82% over the previous year.
So operational EBITDA is at INR 124.18 crores, which is 14.54% compared to previous year's 12.01%, which is a growth of 35.33%. PBT is at INR 132.18 crores. This is a growth of 10.87%. And PAT is at INR 99.31 crores, which is a growth of 9.41% over the previous year. These are the annual financial numbers. I'll go to the quarterly Q4 FY '22 numbers. The revenue was INR 218.36 crores, which is a 12.13% increase over the previous year.
Overall, EBITDA is INR 36.58 crores, which is a 65.67% increase over the previous year. Operational EBITDA is at INR 30.15 crores which is 285.07% over previous year. PBT at INR 29.16 crores, which is 66.62% over the previous year. And PAT at INR 22.10 crore, which is 70.91% over the previous year.
Now coming to the numbers of products. We have done 31,776 tillers, of which 31,480 is domestic and about 288 is export. This is compared to previous year 27,318. And in tractors, we have done 7,991 tractors against the previous year of 8,835.
The quarterly numbers on power tiller, in Q4, we have done 9,282 power tillers against previous year 7,474. And tractors, we have done 1,575 against previous year of 1,885. So these are the brief numbers of the quarter as well as the year in terms of revenue as well as the volume.
I would like to open now for questions.
[Operator Instructions] The first question is from the line of Mukesh Saraf from Spark Capital.
My first question is on the tractor volumes. So you've seen the tractor volumes for this year decline about 10%. And if I look at the industry volumes, at least in the less than 30 HP, industry volumes have actually grown about 8%. So just want to understand, number one, I mean what is the reason why we are losing some market share there? And secondly, what's our plan with respect to some of these new launches? And how are we going to kind of get back some of this market share?
Yes. So the market share primarily loss has been in Gujarat and Maharashtra. And this is where the 4-wheel drive compact tractors go. So if you look at less than 30 HP, there are 2 segments. One is the utility tractor segment and the other one is a 4-wheel-drive combat tractor. So the growth has happened only in the utility tractor segment. And in the 4-wheel drive tractor segment, there hasn't been much growth.
However, we are taking steps in terms of launching more products in this segment. Last year, we took initial steps. During the second half of last year, we launched the 30 HP. Now our combat tractors, we would be following that with more launches with the same platform this year. We would also be launching a new platform of a series called EGT, which is an ergonomically much advanced tractor that will be launched in this year. So we have multiple product launches planned in this segment with which we hope to gain back the marketplace.
So sir, these launches will they be now prior to this key season that we're going to see in the next 3, 4 months? Or this is going to be slightly later?
Yes. These launches will happen in the next 4 to 6 months.
Okay, 4 to 6 months. So after the June, July season, basically?
Yes. When we market in Maharashtra, which is mainly for the grape crop, during the June, July season, at that point, we should be able to hit the market.
Okay. Okay. Okay. Understood. And second question is on pricing. So I think last quarter, you had mentioned that in fourth quarter, we will take some price hikes on both the tillers and tractor segments. Could you give some sense on how much price hikes you have taken in this fourth quarter, sir?
Yes. We have taken a price rise in quarter 4 in February. So now the other companies, as you already know, have gone in for a price rise in April. So we should be looking at further price rise in this quarter as well because the commodity prices have gone up further.
So what would be the quantum of the hike rate for tillers and tractors, if you can?
Yes, the February price rise is in the tune of about 1.5%. And in -- going forward, we are looking at about 2% to 3% price rise.
This will be for both the segments, sir, tractors and tillers?
Mainly in tractor segment. Power tiller space, we have very little room for further price rise.
Okay. Okay. Okay. So there, as raw material costs go up, we are not able to still pass through the pricing there?
We will have to manage our bottom line through better cost efficiencies and the other cost management measures that we are working on which yielded as results last year also, as you can see from...
Right, right. Understood. Understood. Just lastly, could you give us the number of tillers within the total number that you mentioned, how many were the B2B tillers that we have sold within these, sir?
B2B is about 1,800.
For the year as a whole?
For the year as a whole, yes.
The next question is from the line of Harsh.
Can you hear me?
Yes, yes.
So my question was on the margin side. So we've seen a little bit of a gross pressure on the gross margin. So would you let us know what kind of a cost impact did we have in this quarter? And what kind of a cost impact are we expecting going ahead?
Yes. So right now, there is unprecedented inflation. So which we should be able to look at a price rise of 2% to 3%, as I just said. So that is for now. And volatility continues. So to predict what will happen in the future is difficult. So we will be looking at it on a quarter-to-quarter basis.
Okay. Okay. Got it, sir. And any CapEx -- what kind of CapEx are we looking at for this year, sir?
We're still looking at the CapEx of about INR 60 crores.
INR 60 crores in FY '23?
FY '23, yes.
And this will be towards new capacity or the maintenance CapEx? Or this is including maintenance CapEx?
Mostly new products development.
The next question is from the line of Devanshu Sampat from Yes Securities.
A few questions. So can you please let me know what is the increase for the noncurrent investments from INR 77 crores to INR 106 crores?
What is the nature of investments you're asking?
No, no. I mean, yes, while there are roughly INR 30 crore increase in noncurrent investments in this year.
Did you understand the question? I didn't...
The noncurrent investment, sir.
Noncurrent investment. Basically into equity and equity-linked mutual fund steel.
Okay. So what is the investment in the U.S. company currently, total?
That is about INR 23 crores in total.
INR 23 crores so far. Okay. Sir, I'm just coming on the -- if you can comment on the working capital, right? I mean last year, you mentioned that we have been taking conscious efforts to do so. And this year, there seems to be a lot of work done on the debtor side as well. So can you explain a bit of what is -- what has happened and whether this number is something that's sustainable?
Yes. Of course. See, as you -- I have shared with you earlier, we have been working on POC-based supply chain methodology. So that is yielding as results where we have been able to manage inventory very well. So inventory, as you know, is at about 43 days. And the receivables also has considerably come down. The receivables is just about 29 days. And all this has been systematically done, process-driven, very clear methodologies are in place. So hence, I think, it is very much sustainable.
Sir, you think the tightening of these receivable days can possibly have an impact on volumes as well since we're being a bit more stricter than what we were?
We are working -- as I repeated before, we are working on a pull-based system. So the focus is on retail. The focus is on billing based on consumption. We are not building any extra inventory into the channel. The focus is on ensuring dealer profitability through higher rotations for the dealers. We believe it is a key differentiator for us going forward.
Got it. Got it. So coming to your export volumes, can you tell me what the number was for FY '22?
FY '22 power tiller exports was about 288 and tractor export is about 1,400.
1,400. Okay. And FY '23 is a year when your export business is supposed to grow considerably because of one of the tie-ups. So would you say that your statement is -- that statement is still correct? Or are there any delays in the plan? And if so, if you can provide some guidance in terms of the numbers.
No, the tie-up with Zetor is not only for exports. So there is no delay in that product in that. The international business growth plan is continuing, as I have said before.
So what is your internal forecast for export volumes this year, if you can give some guidance?
I don't have a guidance number on that because, as you know, things are very volatile today. But definitely, you can expect growth this year as well.
Okay. Okay. And just last question for now. So sir, we are generating about INR 100 crores of free cash flow per year, right? And in our cash and cash investments is about INR 300 crores, INR 350 crores odd. So cash is definitely piling up, and it's roughly forming about 40% of the balance sheet now. And I'm not including the noncurrent investments over here also.
So -- and plus, we also -- there will be a land sale discussion that is happening. So there will be some windfall chunk that will come in as well. So can you elaborate a bit on what is your -- the capital allocation policy now. And the promoters also did add some -- did add to the holding a little bit in December last year. So clearly, there is some sort of value that the promoters are seeing. So are we considering a buyback? Or is that a part of the plan?
We are looking at new opportunities for growth. Currently, there is no plan for any buybacks. But definitely, we are looking at faster growth and hence, new opportunities. Like I've said before, we are looking at inorganic as well as organic growth opportunities, where the capital will be utilized.
[Operator Instructions] The next question is from the line of Kaushal Shah from Dhanki Securities.
Sir, you shared the volume numbers for fourth quarter, if you can share the revenue breakup also between tillers, tractors and the other segments?
Yes, just give me a second for the revenue figures. For the tiller segment, the revenue for Q4 is INR 134 crores. And for the tractors, it is about INR 62 crores.
And there would be parts or the other segments?
Yes. The parts business is about INR 20 crores. And the other businesses, all put together, is about INR 19 crores.
Right. Sir, you shared the B2B volumes earlier and it was 1,800 numbers. At least in the past, there was this possibility that this particular segment can grow because it was servicing dealers who were earlier selling Chinese-make tillers. So any particular reason why this particular segment has not picked up and numbers continue to be very modest?
Yes, that depends on certification. So whatever we supply will have to be recertified by government agencies for the other brands to sell. So last year, a lot of time was spent on certification. So we expect that business to grow.
Right. And sir, how many such dealers are we servicing now? I think it was 2...
We are really -- 2 OEMs that we are servicing now.
Okay. And so directionally, sir, can this number grow? Because I mean, at 1,800 numbers, it is quite a modest number just now. So maybe in the current year, can we look at a really stronger growth in this number or that is unlikely?
Very high level of OEMs are in there because people who are traders typically importing 2 containers, 3 containers. They are not working on a structural business. So that I don't think will come back to us. However, these 2 OEMs plus a couple of other OEMs we are in talks with. Will the number be very high? I don't think so, but it should be in the tune of about 3,000 to 4,000 number.
Right. And sir, some thoughts on the implements business. We have been doing power weeders. We have been doing rotavators, brush cutters also. So maybe some thoughts on where do you see that particular segment in the current year and maybe for the next, let's say, 2 years?
Yes. So last year was the first year when we started this business. I'm very happy to say that power weeders, we have registered good growth, and we have done over 2,000 power weeders. The brush cutters, also we have done good volume. We expect that to grow. We would like to see exponential growth in that, and we are taking actions to grow that exponential.
[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor & Company.
Sir, I missed the earlier commentary. So sorry for repetition. Sir, if you could give us some more color on the how the business environment is shaping up for both the power tillers as well as the tractor segment. If I am -- correct me there, sir, we were expecting that the tractor segment will be outperforming going forward from the first quarter, depending as per our -- as far as the understanding from the OEMs. So if you could give us some more color. And what are the current challenges the company and the industry is facing? And how are we going to deal with it?
So the challenges in both the segments are very different. The small farm mechanization space continues to grow. The industry continues to grow in that segment upwards of 20%, 25% CAGR. We also expect to grow the same rate or slightly better. That is what we are aiming at. What we are doing for that is trying to increase our coverage, increase the range of products. We have about 520 dealers now, come about 150 dealers 2 years back. We expect another 200 dealers to be added this year. So that should get us the growth with increased coverage and more number of products in that segment.
Coming to the tractor segment, as I've said, we are at about 340-odd dealers currently. Most of the OEMs are at about 900 or 1,000 plus dealerships. So we have a long way to go in terms of increasing coverage in the market. Second is there are mix segments that we operate in, which is the combat tractor 4-wheel drive segment, where we will try and strengthen our position this year with launch of multiple new products.
Second major aspect is we don't build volumes by talking at the dealerships. We are working on a pull-based system. So if you see our retail market share has gone up, while the wholesale figures does not reflect what the industry would generally do when the price increase happen, that is stocking of inventory, which we wouldn't do because we are focused on pull-based system. We believe that should yield us good results because we -- the focus is on the dealer profitability. So that is where we are. So slightly different approaches in both these segments. And I hope I've have answered your query.
But, sir, for the outlook for the sector, what is the feedback from the ground? And we have -- we are already 2 months into this new financial year. So if you could give...
We expect both the industries to grow. Both the industries, both the power tiller and the tractor industry to grow. However, it will depend on the monsoon, prediction due. Improved exports are giving better income to the farmers, especially in the wheat growing states. So I think all of this will over well. But in the wheat growing state, our presence is much lower. So how much of that will turn to business for us, I mean, is comparatively lower compared to companies which are having a very strong presence in North India. So however, overall, if you ask me, the industry is looking at positive growth. However, there is a disclaimer that doesn't....
Right, sir. Sir, we did make some investment in the equipment. I think that at Mysore, correct me there also. So what is the contribution from the unit currently? And what are we -- I think some new products were being developed there. So what is the feedback from that segment? And how is it going to contribute in the current year?
Yes. So in Mysore, we had done some investment for Precision Components as well as our prevision implement for it. So last year, we have started the manufacturing of implement. We are yet to really scale up in that segment, which we intend to do this year.
What have been the contribution, sir, last year from this segment?
It is very small. It is not very significant.
Okay. And for the current year, are we like looking to scale it up to some reasonable levels or still in the pilot phase?
Yes, we should get into the double-digit level in terms of revenues. And that is what we are looking at.
Double digit mean INR 10 crores?
Slightly better than that. I don't want to give any guidance because...
No, I just wanted to understand the base, sir, from -- we are starting from...
We're starting from 0. So I think whatever number we do in the double-digit should be pretty good. But the aim -- this business is being built for the long term. So I believe that in the short term, you won't find any big impact on the top line. But however, as the industry grows, farm [ maganization] grows in India, which has got huge potential in India, we will be one of the most significant players there.
Okay. Sir, in your INR 3,000 crores top line roadmap for 5 years, what have you factored in from this unit, from the Mysore unit?
We want to get the implement business up to at least INR 100 crores.
Annual turnover of INR 100 crores. And the margins are definitely significantly in the higher double digits from this segment?
Yes.
Right. Sir, a volume number, sir, if you could share in the press release part, I think that would be very helpful. Earlier also, we have requested that your press release to be slightly elaborative so that the quarterly volume numbers in a cumulative way and also a competitive number year-wise. And when we are coming up with annual results, the annual volume numbers would have been very helpful, sir, in the press release.
Yes, I know. But media guys tell us a different story. They want more focus on the financials. They say stick to one, either the financials or the numbers.
You can add both...
We'll see how best we can manage both.
Okay, sir. And sir, so one more -- to one more point. Sir, if we take this quarter numbers comparison with March last year, sir, the other income was slightly higher, much slightly higher. It was INR 14 crores. And this quarter, it's INR 6.5 crores. So what has resulted in the lower other income for this quarter?
Last year, the other income was around INR 11 crores to INR 12crores. This then the -- basically the write-off -- right back where I was level -- this time, right back around INR 3 crores or INR 5 crores. I think that is from the major head under which the difference has come.
Right, right. And sir, for this year, you have mentioned INR 60 crores, the CapEx. That is all into the operational CapEx funding when there's no capacity enhancement due to that.
No capacity enhancement. Very little on some power weeder segment and all that, but mostly into product development.
The next question is from the line of Shashank Kanodia from ICICI Securities.
I just wanted to understand what will be the total industry volumes in the case of power tillers and our market share for effect '22?
Power tiller industry, I don't have the exact figure, but we have a 55% market share. Our volume is 31,776. If you don't mind, you could just calculate that. 55% is our market share. So we will improve market share by 2% this year.
Okay. So domestic will be 30,000 units, right? Because 1,800 is a contract manufacturing part?
Yes, right.
So that means the industry size is again 55,000 kind of a unit market, right?
Yes, around 55,000, yes.
Yes. So sir, the initial understanding was that 50%, 55% market is controlled by [indiscernible]. Rest 25% by TEMCO. So the rest 25% is importing is nature. So that should have come back to us, right? So something like 10,000 units of incremental volumes in terms of contract manufacturing and import substitution was supposed to come back to us.
I agree. See, the industry has slightly grown last year. But that entire 10,000 does not come back. Like I told the previous gentleman. Any product that is introduced in the market has to go through certification process. Even if BSE is supplying it, it has to go through the certification process. So for both the OEMs, many number of months were spent on certification last year.
So this -- in fact, this will be the first full year they will get to operate. So we expect the volumes to grow, but not to the same 10,000 level. Because I said that 10,000 had a large segment of unorganized players who would be importing 2, 3 containers. So that businessmen won't come back to this business.
Right. So there is significant [ modification ] right? Or people have smartly made a way out in importing power tillers in India?
No, there is no import happening. There is no import happening of power tillers into India because they won't be able to clear customs if they do that. So that is still not happening. But a large amount of power weeders are being imported. Power weeders are, again, some smaller sales of power tillers, anything below 9 HP is called a power weeder. So that's a large amount of import is happening.
So you mean to say that power weeders have kind of cannibalized some portion of power tiller market?
Not really because both are very different segments. And power weeders are very much smaller compared to power tillers. So these segments are very different. As you can see, even after the import thing, the industry has grown slightly, and we expect this year the growth to get stronger.
Okay. And secondly, sir, for the tractor division, you have been guiding industrial volumes. So are we happy with the performance for the last fiscal? So do you feel that we have grown ahead of the industry?
We are working on a particular strategy that I very -- I said that is focused on pull-based system on retail. So if you look at the retail market share, we have done well. But if you look at the wholesale market share, which is increasing channel inventory, we have not followed the industry in terms of building that inventory. We believe the key differentiation is going to be profitability of dealers in the market. So we are sticking to that principle, and you will see growth happening.
If you ask me, are you happy with the growth? Definitely not. I'm not happy with any growth that is happening, but then we need to grow faster. So you will see that growth happening. But we will stick to that strategy. You may not see the same moment -- same -- if wholesale billing happens in industry, we, V.S.T. follow the same trend? It may not happen because we will follow the retail and consumption-based model.
Okay. And sir, lastly, if you can share the absolute rupees crore number for power tiller and tractor sales for the full fiscal year.
Yes. Just give me a second. I just have said that before. Yes, the power tiller business is about INR 133.87 crores for quarter.
For the full year, sir. We have it for the quarter, for the full year?
Yes. Full year is INR 458.7 crores for power tiller. And tractor is INR 294.23 crores.
Okay. And sir, what kind of growth position should we work for next fiscal, in FY '23?
This year, I'm not giving any guidance simply because the situation is very volatile.
Okay. But we feel that we can achieve a target of INR 2,000 crores of sales for 2025, which we...
The growth journey continues. All the plans are in place to move towards that objective because the key objective for V.S.T. Tillers Tractors Limited was to move out of stagnancy. I think in the last 3 years, what we have achieved is move out of stagnancy and going to the growth momentum. And so I think that will continue.
The growth journey continues. All the plans are in place to move towards that objective because the key objective for V.S.T. Tillers Tractors Limited was to move out of stagnancy. I think in the last 3 years, what we have achieved is move out of stagnancy and going to the growth momentum. And so I think that will continue.
Now because of the volatility of the situation, commodity, supply disruption. And still, we are yet to see the monsoon completely playing out. So we don't know for sure what to expect. However, our plans are in place to chase down that vision. And like I said, the primary purpose of getting into growth momentum has been achieved, and you will see growth happening in V.S.T. Tillers.
The next question is from the line of Sunny Agrawal from SBI Securities.
Sir, just continuing on the last question. So for a target of INR 2,000 crores by 2025. What will drive this number? So if you can just throw some more light on this.
Like I have shared with you before, we have done multiple projects for that. Some of those projects are going live this year. One is the V.S.T. and Zetor joint venture, which will go live this year. Multiple products are being launched. We are working globally to expand our presence both in Europe, Africa and this year into Latin America. So this should give us growth.
We are working on a range of products, both in the small farm mechanization space and also the tractor space, both in the combat tractor, competing with all the international players that is present in India.
Also, we are launching these new products internationally, so that should give us growth. Second big thing is the higher HP segment, which -- in this, we will be making a larger presence this year with the launch of V.S.T. Zetor products. So all these put together, we are on a growth path. We have started working on multiple verticals, which I have shared with you before, one of them being the implements vertical, which I said is insignificant today.
But we believe in the long term, it will grow, and it will be significant numbers. We are looking at working with technology partners to launch new products. We have invested into the electric growth story. So all these put together should be -- we intend to get to the milestone that we have created for 2025. We will also be looking at inorganic growth for them.
Okay. Okay. Sir, on electric side, so I mean, how fast you feel that electric or maybe electric tractor or electric implements or I mean electric units will get penetrated in the agriculture sector? So if you can throw some light on that also.
Yes, it will take some time. It will not be before 2027, 2028 before significant volumes in thousands will start happening in India, especially in the combat tractor space. I think we will be ready by then, more than ready by then, for the entry into electric tractors space.
The next question is from the line of Noel Vaz from Asian Markets Securities.
I just wanted to get some clarity on the certification process that you described. Could you exactly tell me what is deposited? And how long does the process normally take?
The depreciation of power tillers is done in South India called Institute for SRFMTTI, which is the Southern Region Farm Machinery and Tractor Testing Institute. So typically, it takes anywhere between 3 to 6 months to get a complete test report from this institution. And in the case of tractors, it happens in [indiscernible], that takes anywhere between 8 months to 16 months.
I see. What exactly is -- I mean what is the criteria on the -- which the certification has done I just want to...
There is a whole list of test procedures. We have to meet the norm for the engine. We have to meet the norm for transmission, sound level, braking efficiency, reliability. So there is a whole host of testing standards that will be tested. There will be lab tests and also field tests. So it's a very elaborate procedure.
The next question is from the line of Rahul Jain from Credence Wealth.
Sir, with regards to the higher HP tractor segment, so what kind of numbers we have ended this year with? And how do we look at the numbers going ahead? And you also mentioned about Zetor coming this year. So that is expected in somewhere around quarter 2 or quarter 3 of this year?
Yes, quarter 3 of this year. This last financial year, the growth has remained flat. This year is where we are looking at new product launches. So we have done about 900 numbers last year, which is almost similar to the previous year. However, with the growth of dealerships happening in the northern market, we didn't want to grow much in the last year in the northern market because the products weren't ready.
So UP, MP, Rajasthan and all the other markets, which are mainly higher [ throughput ] markets, we will be growing the dealership network rapidly this year. And with that, we will be launching the product from V.S.T. Zetor stable by Q3.
So our of the dealer network, which we have taken up to almost 500 plus, typically, there will be some dealers who -- or what will be the number of dealers in this northern market, the incrementalization which has been...
500 is what we've called for power tiller segment. The tractor is at about 340. In the northern market, it will be 40 to 50 dealers only at the moment.
And next 12 months, what kind of addition do we foresee?
We are looking at adding at least 100 dealers in the north.
Okay. And typically, sir, how has been the response till now with this 40, 50 dealers with regards to our product acceptance and with regards to the marketplace and the competitiveness over there, with regards to the kind of dealership margins we are offering to the dealers? How has been the initial response?
Yes, it has been reasonably good, I would say, because almost all the dealers have been with us almost 1, 1.5 years now, and they are waiting for new products from us. We are also looking at the V.S.T. Zetor products to come in and help the growth of these dealers.
Is there some ballpark number? Like generally --- typically, a similar dealer will give you x amount of tractor sales in the Europe. Do you work with that?
See, we work on the ROE of dealers, and we don't have a particular number to give you right away.
I'm asking so because I think within that INR 1,000 crores top line expected for tractors out of the INR 3,000 crores, we had spoken earlier that a good chunk of about INR 500 crores, INR 600 crores can be done from higher HP tractors, which is why I was trying to go into more details in regards to this segment.
Their tractor business will be around close to INR 1,000 crores. This is what I have shared with you. I have not looked at a segmental revenue, at least I have not shared those numbers. We are looking at tractors to be around INR 1,000 crores.
Okay. And just to get a sense, sir, in some of the calls recently, not the tractor segment, but other segments which are catering to the rural India or agri-dependent products kind of they have. The commentary coming from some of this company has been that rural seems to be picking up because of increase in MSP prices and better crop.
So I do understand rainfall is still nowhere, it's a difficult call to take. But do you -- compared to last year, do we see some better activity on the ground in terms of rural optics, the rural India?
I definitely feel that this year looks positive at the moment. See, but there are multiple factors, especially on the commodity front. If the prices keep rising the way it is priced and if we have to pass on the consumers, I think it will have a detrimental effect on the demand.
The next question is from the line of Niteen Dharmawat from Aurum Capital.
I hope I'm audible.
Yes, you're audible.
I wanted to know about this real estate parcel. Last year, you mentioned in our con call that beyond 1 or 2 years, you will consider it. So what is the status now? Are we considering anything on that?
Yes, you're right, we will definitely consider it. I think as any progress is made on that, we will definitely let you know. Right now, there is no -- nothing to share on that front.
The next question is from the line of [ Sushital ] from [ Samat Investments ].
I had 2 questions. The first one is, sir, how has the experience with segments in the sector in the last 1 year, what were your key learnings? And like how do we see it going forward? And also, when you say to the dealers with regards to total tractors or trillers, would these all dealers be selling same segments products as well?
Yes. So we have dealers separately for a small farm mechanization segment, and we have dealers separately for the tractor segment. So that is an action that we took 2.5, 3 years back that we will have separate dealers. So for the tractor, we have around 340 dealers now. And for the small farm mechanization, we have about 520 dealers now, which is continuing to expand. So this next 2 to 3 years, the dealership network will continue to expand. We will have about 800 to 900 tractor dealers, and we would like to have about 1,000 dealers for the small farm mechanization segment. So it will continue to expand.
And how has your experience being in the last 1 year, sir? Like what are the things, your key learnings would be? How would you say you would change your strategy in the next 2 years?
Yes. If you look at the last 1 year, see, if you look at FY '20, we grew at about 40% plus. Last year, our revenue growth has been 12%. So we are at about 25%, 26% CAGR. We need to get to about 40%, 45% CAGR to be closer to the INR 3,000 crores plus in inorganic, which will help us to get to that INR 3,000 crores.
So the key focus of the company today is to how to accelerate faster in terms of execution, how to accelerate faster in terms of revenue growth. The key verticals have all been set up. Now the key is execution, and the entire focus of the company is on faster execution.
And sir, can you throw any light on the trillers industry? Like we're seeing the new products being launched, like CODE by Swaraj. So can you see -- can you let us know what's happening on the ground? And does company have any plan to launch any product to take on the such specific products?
I don't have any comments on the competition product, but I can tell you we have studied this closely. We have to be innovative. Last year, we were the most -- among the most innovative companies in India, CIA awarded us. In fact, we had the 9th position among the innovative companies. So definitely, V.S.T. will continue to innovate. We will provide solutions to small and marginal farmers. Definitely, this is one area you will find a lot of innovation coming from our end in the next 2 to 3 years.
The next question is from the Shashank Kanodia from ICICI Securities.
In one of the previous interaction, you used to mention that nowadays farmers are not waiting for subsidiaries for purchase. So what will be the proportion of sales coming from retail...
Power tiller, yes, you're right, they don't wait for subsidy to be announced. But it is not as if they don't want subsides. Every single customer applies for subsidy. But since it is direct benefit transfer, they don't wait for the subsidy to be announced anymore. They go ahead when the need is there. And then they apply for them. Many of them get it, many of them don't get it.
Right. So sir, what proportion of that is actually -- so what I'm trying to drive is easing proportion, which is not subsidiary for us in the power tiller segment.
The subsidy dependency of this business is, I think, something behind us, except for some tribal subsidies, which come in Northeast, where the subsidy is as high as 90%. But I think the quantum is going down. So the industry cannot depend on that -- those subsidies anymore.
Okay. Sir, secondly, I just wanted to get a sense for this import issue. The total tiller volumes domestic have remained more or less constant, right? The 53,000, 55,000 odd level. And we have also maintained some kind of the same leadership in terms of 50% to 55% in our market share. So have...
In fact, the power tiller industry has gone down. Now it is back up at 55%. Now I think in the next 5 years, we will find growth happening. We are expecting by around 2030, that is around 7 to 8 years, we should be able to get to about 100,000 power tiller industry. While I say that, then there is another segment that is growing exponentially at the rate of 25%, 30%, which is the power weeder industry which is less than 9 HP, 9 HP below, which is 8 horsepower, 6 horsepower, 5 horsepower. There, the growth is at about 25% to 30% CAGR. So that is growing exponentially.
So fundamentally, the small farm mechanization as a whole is growing exponentially.
So sir, something like 10,000 units of import is restricted. So the industry volume should have gone down and market share improved drastically right? You mentioned that this is not the case.
Sir, see market share, I'm not calculating based on what I'm supplying to OEMs. I'm looking at the brand market share, which is 55%. If I add the OEM sale and look at manufacturing market share, our share will be closer to 57%, 58%.
But sir, we are supposed to go in excess of 60% to 70% kind of a thing, right? Because again, there were some limitations with TEMCO going big onto this segment, so...
We were at 60%, 65% market share until about February -- I mean, sorry, yes, until February, March, there has been some excess billing by competitors. So that is something which we are not very sure about.
Sir, we have this pretty optimistic, right? So we are basically tracking is TEMCO.
There is TEMCO, there is [ Kamoa ], there is [ Grease ], there is [indiscernible], there is -- there are [indiscernible], there are at least 7 or 8 organized players.
Mostly these are who largely were importing and selling, right? So we were supposed to do contact manufacturing...
[indiscernible] is manufacturing. [ Grease ] is also invested into manufacturing.
Okay. Okay. And were they importing in the initiatives and then go from manufacturing because of the import restriction?
[indiscernible] has always been -- my understanding is [indiscernible] has always been manufacturing. [ Grease ], I think they were importing something. I'm not too sure about it.
Okay. So what kind of contract manufacturing volumes we are supposed to receive? Any ballpark guidance from your...
It is around roughly -- let's say, around 3,000 number.
The next question is from the line of Yogansh Jeswani from Mittal Analytics.
Just 1 question on the dealer network for tractors and tillers, what were these numbers a couple of years like, if you could share?
Tillers, number of dealers were about 150, 175. And tractors were around 120, 130. I'm talking about numbers a couple of years back.
But this would be FY '18, '19 number or even before that?
It will be, I think, FY '19 figures, FY '19, FY '20 figures, yes.
Okay. And sir, so the plan that we have to increase tractor years from 340 to 800, and similarly for tillers. So what is the time line that you are keeping in mind for the execution of it?
By FY '25, we want to do that.
Okay. And sir, in terms of the OEM contracts that you are looking and discussing, is there any new orders or anything in pipeline that you would mention? And sorry if this was in your opening commentary.
No, we don't have any new orders in pipeline. This is a continuous supply agreement with this OEM. So those agreements are continuing.
Okay. And do we have any further potential from the domestic market where we see somebody who is importing this now still looking for manufacturing? Or there is no potential opportunity?
We are looking at a couple of players, but nothing is concluded yet.
Next question is from the line of Devanshu Sampat from Yes Securities.
Just 2 more questions. So any update on the power weeder tie-up with Zetor and discussion going forward?
Yes, that tie-up continues. Unfortunately, the physical travel is yet to happen. So there is no other news to share on that front.
So the weeder that we are selling right now, that is -- are we basically just trading in them?
Right now, we are trading in them, but we intend to get into manufacturing this year.
Okay. Okay. Can you give a sense on what the volumes were?
Last year, we have done 2,100 weeders. This year, we should be able to double it.
Okay. Okay. And can you talk a bit about the agri pumps that we've launched, just to the tie-up, what are the plans or just in terms of market size opportunities and maybe if the working capital scenario is different from this year, if you can just touch up a bit on this?
Yes. So this is the distribution vertical that we have launched. So the idea is to distribute and build a funnel into rural India. We already have a retailer network of about 1,500 to 2,000 retailers. We want to build on it. The immediate target is to build about 5,000 retailer network in the next 2 years. And start with electric pumps, we will be looking at other opportunities as well in terms of rural distribution.
Okay. Okay. So we've done this through a tie-up with someone right now? Or what is the...
We have -- we are not manufacturing. We have tie-ups with manufacturers.
Okay. Okay. And so what kind of numbers are we talking about so we can look at some -- at least internally what are the numbers?
No, it is not -- like I said, right now, the vertical is being set up. The launch has happened only in 2 states, which is UP and Bihar. And we want to focus on that. There is a particular reason why we want to get there because in the north, the V.S.T. brand is not significantly present. We want to penetrate in the households with the V.S.T. brand name. So we are focused on that front. And the focus is on digital distribution. From day 1, the distribution is managed completely digitally. The last-mile person also using the mobile network to manage the sales. So that has been the focus, and that focus continues. I mean, as it grows, I will keep reporting on that.
And if you're talking about brand building and everything, so are we looking at any big spends over here or maybe getting an embassador or something...
Spending, we have started spending on advertising and brand promotion. Last year, we significantly broad change in the approach towards advertising and spend. The brand has been -- the new look of the brand, probably you're aware. We have brought the new look of the brand, the advertising in TV commercial started last year. We will be building further on it, and we will be spending more money digitally in terms of advertising and sales.
The next question is from the line of Mr. Saket Kapoor from Kapoor & Company [Operator Instructions]
Only 1 question. For the raw material mix, if you could explain what are the key components of it. And any forward booking or forward contracts we undertake at the time of receiving orders? But how does it secure our raw materials? Or is it...
We have some agreements with steel mills. That is 1 thing. But the last 1.5 or 2 years, the contracts have not really played out because the volatility has been very high. The key areas has been passing metal forging and then, of course, proprietary items. So the volatility has been pretty high. If you see from Q4 of last year to this year, casting recast itself has increased by about 14%. [indiscernible] you see is at about 20%. Heat metal is at about 12%. Forgings are as highest 42%.
And if you look at other metals, aluminum, 58%; copper, 21%. So the volatility has been very high and it will be moving on a month-on-month basis. So wherever we have seen that tie-ups -- in steel mills level, tie-ups are there. Even in those cases, we have sales difficulty because the material was not available. So it's a very volatile situation to be...
And out of this revenue mix for the total year, how much has been from the spares business we have done for this year?
Spares business, I had said earlier, the revenue is -- just give me a second, yes, INR 92 crores for the year.
And what kind of income growth are we expecting going forward, depending upon the base? Now the base has increased.
We have grown last year also at about 12% to 13%. So we will continue with that growth in that segment on parts and oil alone.
And therefore, this first month numbers for the tractor and the tiller, the tractor numbers were muted. What factors did this paid out for the April '22 tractor numbers lower than April '21?
Like I said, in the domestic market, we follow a pull-based system on consumption-based billing. So we don't push inventory to the dealers based on price increases or any other methodology. We are focused on profitability of the dealer because one of the gentlemen asked me how are we ensuring profitability. What we see in the tractor industry is most of the dealers lose money on inventory carrying cost, which we are not incurring for our dealers.
That is one of the reasons why most of the dealers are with us even in the northern market, where we have appointed them 1 year, 1.5 years back. So we will continue to focus on the dealer profitability, and we believe that in the long run, that will be the differentiating factor.
Ladies and gentlemen, as this was the last question for today, I would now like to hand the conference over to Mr. -- over to the management for closing comments.
Yes. Thank you very much for -- from all of us at V.S.T. for your participation. We look forward to this quarter as well and this financial year. Thank you for being with us. Thank you.
On behalf of Batlivala & Karani Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.