“I have seen Escorts in its worst situation when it had a large debt and a negative EBITDA. So, any new investments that we do must have a right basis. We diligently ask tough questions before putting money in any part of the business because we know what it is like to not have any cash,” said Nanda. Escorts stock has rallied 50 per cent in last one year to Rs 900, giving the firm a market cap of Rs 110 billion.
Three consecutive years of strong tractor demand, backed by a normal monsoon, has helped the performance as the company gets almost 80 per cent of the revenue from tractors. The rest comes from construction equipment business and railway orders. But, with an about eleven per cent market share, Escorts is today the fourth largest player in the domestic tractor market, after M&M, TAFE and Sonalika.
Sonalika is at 11.9 per cent and Escorts is confident of gaining market share. “We have seen market share growth in last few quarters. We are very bullish. The balance sheet is clean and we are a debt free company today. We are gunning for a 15 per cent market share by 2022. There is always a scope to do more in cost reduction. We will make investments to grow profitably, focus on growing in markets we had ignored earlier,” said Nanda.
On Tuesday, the Faridabad-headquartered company announced a joint venture with Japan’s Tadano Group to manufacture cranes of higher capacity. The company is investing about Rs 3.5 billion between FY18 and FY19 to expand tractor production capacity by fifty per cent to 150,000 units. The expanded capacity will come on stream in early 2020. It is currently operating at over 90 per cent capacity.