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Edited Transcript of ESCORTS.NSE earnings conference call or presentation 4-Nov-19 11:30am GMT

Q2 2020 Escorts Ltd Earnings Call

Nov 9, 2019 (Thomson StreetEvents) -- Edited Transcript of Escorts Ltd earnings conference call or presentation Monday, November 4, 2019 at 11:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Ajay Mandahr

Escorts Limited - CEO of Escorts Construction Equipment

* Bharat Madan

Escorts Limited - Group CFO & Corporate Head

* Dipankar Ghosh

Escorts Limited - CEO of Railway Equipment Division

* Shenu Agarwal

Escorts Limited - CEO of Escorts Agri Machinery

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Conference Call Participants

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* Amit Goela

Rare Enterprises - Partner

* Bharat Gianani

Sharekhan Limited, Research Division - Analyst

* Dhaval Shah;Girik Capital;Analyst

* Hitesh Goel

Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst

* Jinesh K. Gandhi

Motilal Oswal Securities Limited, Research Division - SVP of Equity Research

* Mayur Milak

IndiaNivesh Securities Limited, Research Division - Senior Research Analyst

* Mitul Shah

Reliance Securities Limited, Research Division - VP of Research

* Pravin Yeolekar

CIMB Research - Analyst

* Priya Ranjan

Antique Stockbroking Ltd., Research Division - Research Analyst

* Raghunandhan N. L.

Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst

* Riken Gopani

Infina Finance Private Limited - VP

* Sabyasachi Mukerji;Centrum Portfolio Managers;Analyst

* Saksham Kaushal;PhillipCapital India Private Limited;Analyst

* Sameer Deshpande

Fair Deal Investments Limited - Owner

* Srinivas Seshadri;Mirabilis Investment;Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Escorts Limited Q2 FY '20 Earnings Conference Call, hosted by PhillipCapital India Private Limited. (Operator Instructions) I now hand the conference over to Mr. Saksham Kaushal, from PhillipCapital India Private Limited.

Thank you. And over to you, sir.

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Saksham Kaushal;PhillipCapital India Private Limited;Analyst, [2]

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Thanks, Neerav. Good evening, all. And on behalf of PhillipCapital, I welcome you all for Escorts Limited Q2 FY '20 Earnings Conference Call. I also take this opportunity to welcome the management team from Escorts. Today, we have with us Mr. Shailendra Agarwal, Executive Director; Mr. Bharat Madan, Group Chief Financial Officer and Corporate Head; Mr. Shenu Agarwal, CEO Agri Machinery; Mr. Ajay Mandahr, CEO, Construction Equipment; Mr. Dipankar Ghosh, CEO, Railway Equipment Division; and the Investor Relation team.

We would start the call with a brief opening remarks from the management followed by Q&A. Before we start, I would like to add that some of the statements in today's discussion will be forward-looking in nature. Over to you, sir. Mr. Madan, sir over to you.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [3]

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Thank you all for joining us on the earning call for second quarter ended 30th September 2019. A snapshot of company's standalone quarterly performance is as follows: turnover at INR 1,323.9 crores against INR 1,398.4 crores last year, is down by 5.3%. This is primarily due to drop in tractor and construction equipment volumes.

Tractor volumes went down by 6.1% to 19,750 tractors as against 21,039 tractors last year.

Construction volume went down by 29% to 945 machines as against 1,331 machines last year.

EBITDA at INR 126.7 crores against INR 157.5 crores last year, is down by 19.5%. EBITDA margin now stands at 9.6% against 11.3% last year, impacted by product mix, lower operating leverage and higher manpower costs.

Finance cost is down by INR 2 crores to INR 3.9 crores as compared to quarter ended June '19. The total debt outstanding as of September '19 is INR 79 crores, down from INR 277 crores in March '19. Net debt however continues to remain negative at INR 391 crores. There is an exceptional item of approximately INR 9.2 crores on account of an old product liability claim in U.S.A. market that we settled during the quarter.

PBT stands at INR 108.7 crores as against INR 154.4 crores last year same quarter. The company's standalone PAT now stands at INR 104.6 crores versus INR 102.7 crores last year due to company opting for lower tax rates from this financial year, that resulted in tax rate gain of the first quarter and restatement of deferred tax liabilities at revised rate amounting to INR 23 crores approximately incurring in this quarter. As a result, PAT margin now stands at 7.9% versus 7.3% last year. EPS stands at INR 8.75 as against INR 8.6 last year same quarter.

Now moving onto segmental business performance. On Agri machine business, domestic tractor industry volumes went down by 10% to 1.68 lakhs tractors as compared to 1.85 lakhs tractors in previous fiscal same quarter. Our domestic volume went down by 8.6% at [18,789] tractors as against [20,553] tractors in previous fiscal same quarter.

Industry in our strong markets in North and Central India de-grew by 1.8%, whereas industry de-grew by 18.2% in the burgeoning markets of Southern and Western India.

Our domestic market share stands at 11.2% for the quarter ended September 2019, marginally up over previous fiscal same quarter.

Our exports have done well, which grew by 97.7% from 486 to 961 tractors, basically [only] got a very strong response to (inaudible) around the world.

On channel front, we have added net 45 new dealers in India during the quarter, taking total number of dealers to 950 plus. Going forward, we'll continue to expand our dealer network in both strong and the burgeoning markets. The current channel inventory at the end of October 2019 stands at comfortable level of less than 4 weeks.

This quarter, on account of lower sales and production volume and unfavorable product mix, EBIT margin now stands at 10.3%. Industry in second half is likely to fare better than first half due to festival season and plentiful rains in most parts of the country, leading to improved farm sentiment of the ground, but lower quantum of construction activity and low subsidy allocation by Central and State Governments continue to affect the industry.

Coming to the Construction Equipment business, our served industry, backhoe loaders, pick and carry cranes and compactors de-grew by 30.1% in Q2 FY '20. Our total volume including manufactured and traded posted in the quarter ended September 2019 correspondingly was down by 29% to 945 units as against 1,331 units in previous fiscal same quarter, leading to marginal improvement in market share.

Despite volume drop, EBIT margin improved due to reduced commodity prices, better product mix and price increases to 2.7% for the quarter ended September 2019 as against 0.7% in previous fiscal same quarter.

Construction Equipment industry continues to see some slowdown on account of financing issues. And delayed payment for ongoing infra projects. However, in the mid- to long-term, we expect that our served construction equipment industry will grow in high single digit.

Coming to the Railway Division, revenues at INR 126.7 crores, went up by 19.6% as against to INR 105.9 crores in previous fiscal same quarter. During the quarter, we have executed 42% of the total orders coming from new product category, which are more import content and lower margin as compared to the previous fiscal, when it was only 30%. EBIT margin for the segment now stands at 19.1%. Order book for this division as of September '19 stood at around INR 500 crores, that will get executed in next 12 to 15 months. For FY '20, we expect the Railway Equipment segment to grow by 15% to 20%, and margins for the segment are likely to be maintained.

Now I request the moderator to open the floor for Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Raghunandhan from Emkay Global.

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [2]

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Sir, my first question was, how is the performance for tractor industry in the festive season? Which regions, states have supported performance? Do you see the recovery sustainable? And what is your outlook for FY '20, '21?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [3]

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So there's a question from Raghu from Emkay Global, on the festive season, how it has gone and which regions have done well, and what is the market outlook for next year, '20, '21?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [4]

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Yes, Raghu, sorry for this disruption. But festive season, we saw some good signs of recovery in the last months, starting with Navratra in September. And April-August industry, as you know, was moving at about 15% down. And September-October industry has still de-grown, but has de-grown only to the extent of minus 5%, right? So there is a significant recovery from minus 15% to minus 5% compared April-August to last 2 months, September-October. And as we continued into the season, actually things got better. So we had some good signs in Navratra and then as we approached Dhanteras and Diwali, I think the momentum was -- made it better. Now this momentum we think is going to continue because you know we had a delayed sowing this year, which resulted in delayed harvest, so the [natural] cycle is also delayed all over India. And therefore, November at least until the next 2 to 3 weeks we'll see a good momentum on the [region's side.]

In terms of regions, North India -- I mean, there were some specific regions which did better than others. But I think except 1 or 2 states in the country, every part of the country saw [good cycle.] So I think it is slightly inclined more towards North and Central and Maharashtra. I am talking about the recovery, but I think in future, South should also see some good recovery because of the rainfall, kind of rainfall we have received.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [5]

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Raghu, hope your question is answered?

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [6]

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Yes, just 1 clarification. For the festive season, festive this year versus first last year, was it a positive growth or a marginal decline?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [7]

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Yes. So that is remain to be seen because the September, October, November, because Dhanteras and Diwali was in November last year, and therefore we have to complete this November to see how did the overall season fare. But my expectation is that we will still see a strong recovery, although the numbers will be -- overall numbers would be smaller than last year's (inaudible).

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [8]

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And the outlook, sir, for Q3 for FY '20 '21?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [9]

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It's a little bit too early to comment on it. But I think, let us go through November. But I'm definitely sure that what we have seen in April-August, this was minus 15% down. I think the entire year would be much better than that, maybe negative single digit.

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Operator [10]

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(Operator Instructions) Next question is from the line of Hitesh Goel from Kotak Securities.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [11]

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Sir, basically, I just wanted to get a sense on the outlook for third quarter and fourth quarter, specifically. You are saying that it will be still a decline on second half because if I see the base is quite low. So can you just attribute the reasons why there should be decline, because rabi crop should be very good, right? I mean just wanted to get a sense on just November to March kind of outlook?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [12]

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Hitesh, I think, the response what Shenu gave was not that the H2 is going to be low. He said the overall, for the full year, the de-growth is likely to be down to single digit, which is about 5% level compared to the first half, where the de-growth is 10% plus. So actually H2 will be better than H1. But it will probably still be -- even if it's at [a stretch] flat, still it will lead to 5% de-growth on a full year basis.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [13]

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Okay. And sir, last year, you had said that subsidy sales were only in single digits as for the industry per se. So -- and so why has that been an important factor this year for tractor demand to come down? I can understand the first half was weak because of delayed monsoon. But in second half, is NBFCs also a big factor, that NBFCs are not aggressively taking calls on the tractor side, and maybe a few customers at the margin and getting rejected, which is also a factor? If NBFC situation improves, you could see much better growth. Can you just tell us something about that? On NBFC funding side, what is happening?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [14]

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Yes, see funding side, we had a little bit of a situation with NBFCs. I don't think it's not directly related to tractor industry performance as far as their portfolios are concerned. But I think it was more of an overall scare that the NBFC [indiscernible]. But thankfully starting this season, there was a real recovery from the NBFC side also, so they went very aggressively to push the market. So at least in the season, we did not see any problems as far as our [funding] was concerned.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [15]

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Okay. And just my last question. If you see a strong rabi crop basically, which is likely, and government has increased MSP also, then what would be your outlook for FY '21? At least first half should be a decent growth because you've seen a very bad base in the first half, would that be a fair assumption to make for FY '21?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [16]

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Yes, see right now we are considering 2 scenarios. In both the scenarios, we are seeing that the (inaudible) is far, far better than what we have seen in the last 8, 9 months. Now the point we are considering is whether the momentum will really increase from March or whether it will take up to May or June, right? So that is still a kind of question that we need to answer. But definitely, next year would be far better than what we have seen in last few months.

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Operator [17]

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Your next question is from the line of Riken Gopani from Infina Finance.

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Riken Gopani, Infina Finance Private Limited - VP [18]

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Sir, I first wanted to just understand that in your market share performance, I particularly noticed that in markets like UP, there has been some market share corrections that have happened. If you could elaborate any specific trends there? And anything that you would like to attribute that to?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [19]

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Yes, see, as we have been talking about our focus, our focus has largely been in our opportunity markets for last 1 year or so. And we have -- in the last 2 or 3 years, we have put in significant initiatives in these markets. So if you look at our market share, we have clearly grown in opportunity and [indiscernible] markets, which is the eastern [block] and western block and also in some states of the [federal block.] So that is the focus area. In the [strong] market, right now, we are trying to maintain our market share, which is already at about 14% to 15% range. And in the opportunity markets, where we are between, say, 3% to 8% range, that is where we are hoping for most of the growth.

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Riken Gopani, Infina Finance Private Limited - VP [20]

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Okay, understood. Okay. And then secondly on the...

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Operator [21]

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Sorry to cut you off Riken, can you speak a bit louder?

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Riken Gopani, Infina Finance Private Limited - VP [22]

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Sure. Is it better?

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Operator [23]

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Yes.

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Riken Gopani, Infina Finance Private Limited - VP [24]

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Also, if you could highlight what is the sort of growth that you're looking at in the exports volume for next year? With the Kubota relationship now entering second year, how do you think things should pan out?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [25]

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For next year?

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Riken Gopani, Infina Finance Private Limited - VP [26]

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And a related thing, if you could update on how the JV with Kubota is panning out? Or if you can share any update on that effect?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [27]

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Yes. So on the exports front, I think this year, a tremendous year for us in exports in terms of growth from the previous year levels. So I think the growth should be in the range of 35% to 40%, something like that. And we are -- I mean, even so far in H1, we had that kind of growth already experienced. So this year would be a good year for exports, and of course, we want to build on that going into future. Because you know that by [indiscernible] in the ranking, we are still one of the bottom players as far as the exports out of India is concerned, right? But we have been talking about a lot of investments we have made in -- on products for exports for Europe and other markets, and therefore, those investments, I think, will bring some results next year also. Now as we have not completed our budgeting process, but please do consider significant growth next year also in exports volume.

As far as Kubota J4 is concerned, the status is pretty much same as last year because it has kind of gestation period. So we are in the -- indiscernible building the factory right now. And I think things are going more or less on schedule. And we will have -- the target was to start production around mid of next year -- mid of next calendar year. So that should happen on schedule.

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Riken Gopani, Infina Finance Private Limited - VP [28]

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Understood, understood. And lastly, in terms of the pricing environment if you could highlight, is it -- would you characterize that being steady in the tractor market or any specific discounting trends that are existent?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [29]

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No, there were some players who indulged in some [one-off] discounting in quarter 1. But after that, we are back to kind of a steady state, right? So right now, I don't think there is any push -- extra push on pricing that is being made by any one of the players. We are going towards like kind of a deflationary environment, but the prices are quite stable.

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Operator [30]

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(Operator Instructions) Next question is from the line of Jinesh Gandhi from Motilal Oswal.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [31]

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My question pertains first on tractors. In this quarter, we have seen almost 3% Q-o-Q [drop] in tractor realization. So is that just a reflection of mix or there is anything more to that?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [32]

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Bharat?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [33]

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You are saying quarter-on-quarter?

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [34]

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Quarter-on-quarter, yes, vis-à-vis first quarter.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [35]

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Yes, so essentially, basically, it's on account of mix, so there's no major change. And there's -- another reason is [indiscernible] this time there's a slight drop in the non-tractor sale actually, so I think which was 10% to 11% range in the last quarter has come down to about 9% in this quarter. So that also has a [play] because you are looking at a consolidated picture of both tractor and non-tractor revenue in that number. So otherwise, on per realization basis on tractor per se, there's no major change. But on non-tractor sale, definitely, there is some decline, which is reflected here in the realization.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [36]

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Okay, okay. Understood. Secondly, the rail PBIT decline is again reflection of this higher import content in the new orders or a gain in -- anything beyond that?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [37]

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In Railway?

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [38]

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Right.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [39]

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Yes, in Railway, it's essentially like you said, this time the mix of new product is almost 42% in the overall orders, which have been executed compared to 30%, which was last year. So that new order book is growing, though in terms of absolute number, obviously we are doing much higher revenue now. But yes, in terms of margin, it's slightly lower compared to the normal conventional product which we had. So that, again, is a temporary impact, I think, which will be there for about a year or so. But after that, we expect we should be able to improve on the margin. But even on a full year basis, we are likely to sustain the margin at the last year level.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [40]

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Okay. And what would be contribution of this new products in 1Q FY '20?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [41]

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In FY '20?

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [42]

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Right.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [43]

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Yes, in overall, in terms of revenue contribution, there will be almost 40% to 45% range.

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Jinesh K. Gandhi, Motilal Oswal Securities Limited, Research Division - SVP of Equity Research [44]

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Sorry, my question was for 1Q FY '20, what was contribution, first quarter?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [45]

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First quarter was 34%.

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Operator [46]

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Next question is from the line of Mitul Shah from Reliance Securities Limited.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [47]

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Sir, my first question is on the product mix in the tractor segment, which impacted our ASP as well as the profitability to some extent. So can you give exact detail in terms of Powertrac versus Farmtrac ratio? And whether this similar product mix continued in the month of October, and what would be the situation going forward?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [48]

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See, between Powertrac and Farmtrac, if you look at this quarter, it's almost 41% sales coming from Farmtrac and 59% coming from Powertrac. And really, if you compare it with the last year same quarter, it's about 38% for Farmtrac and 62% for Powertrac. Though in October, the share of Farmtrac has slightly moved up, so the mix is slightly better in October compared to what we have seen in the last 6 months.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [49]

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On full year basis, FY '19, if you can give a similar number for Powertrac, Farmtrac?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [50]

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Roughly 40-60 ratio on a full year basis.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [51]

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So going forward, this would not change much?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [52]

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Not much change.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [53]

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So second question, sir, you highlighted that whether recovery would happen from March or it maybe from the June, July. So in both the cases, there is then possibility that next year number would grow from the FY '20 level. So in this situation, in past, we have observed that cyclical downturn last for 2 years at least, there's a decline for 2 years, then it starts growing. But in this situation, then it will remain negative only for 1 year during down cycle. So do you expect recovery much ahead of the normal cyclical downturn this time because of various economic factors or including monsoon you highlighted?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [54]

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Yes, Mitul. See, actually, the slowdown started from last year only, like November, maybe October, November onwards. And then some of the competitors also reported that last year Dhanteras, Diwali was not as per the expectation, right? So actually, on ground, the slowdown was there since October onwards last year. So if the recovery or the growth starts happening from let us say June, then [firstly,] it will be about 18 months of slowdown. The second thing is, like you said, right, that the monsoons have really helped this [far out] because right now the water reservoir levels has raised, most of the parts of the country has received excess rainfall. And I have been personally, like, traveling a lot because of the season. And I have personally talked to customers and the sentiment is really, really good. And they are really expecting bumper crop and they are very positive about the future, at least next 2 years or so.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [55]

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So positive monsoon of this year would have a positive impact for next 1, 1.5 year kind of situation, right?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [56]

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I think at least 3 crop cycles.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [57]

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Last question on the Construction Equipment side. Our breakeven point is down significantly and right now it's reported positive EBIT. So what would be the new breakeven according to this new structure of the cost as well as ASP and product mix?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [58]

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So this year, we [indiscernible] served around about -- served around 280 to 300 machines a month, average.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [59]

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Sir, what is your view on this in terms of next 2, 3 years point of view on the volume as well as on the margin side? Once the industry -- right now, it is declining, once it start recovering, what would be your margin target for that?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [60]

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So like we've said, our long-term margin target on this has been high single digits. So we've been targeting to reach a level of 8% to 9% margin on this. So this year, right now, we are at less than 3%. And we expect [probably] on a full year basis will be somewhere around 4% sort of margin. But yes, the idea is to target 8% to 9% sort of margin in the next 2 to 3 years' time frame.

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Mitul Shah, Reliance Securities Limited, Research Division - VP of Research [61]

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So you see Q3, Q4 margins much better?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [62]

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That's the normal trend. I think if you look at the last 2 years also, normally second half is better for the Construction Equipment industry. But obviously this time it -- a lot depends on how the financing issues really pans out and how the NBFC respond to the situation. That's been one of the bit of a challenge right now for the Construction Equipment industry. And second also in terms of the funds which are stuck with the government for various infra projects. If the money gets released, then we'll see probably good revival. So demand is there in the market, but the issue is the liquidity really.

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Operator [63]

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(Operator Instructions) Next question is from the line of Pravin Yeolekar from CGS-CIMB.

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Pravin Yeolekar, CIMB Research - Analyst [64]

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Sir, my question was on Construction Equipment segment. We have seen significant improvement in realization sequentially in the Construction Equipment for the last 2 to 3 quarters. So I just want to understand what's the current product mix? And is it sustainable, this realization?

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [65]

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This is Ajay with you. It is a combination of the realization, which is coming out of the product mix, the cost initiatives that we have taken in-house. And we feel that going forward, probably the product mix will become even better in terms of realization per product. So as Bharat has said, this coming 2 quarters, it should be an improvement definitely and we are all working towards bringing down our costs, breakeven point to come down, and that will be the trend that will follow for some of that [indiscernible]

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Pravin Yeolekar, CIMB Research - Analyst [66]

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Sir, follow-up. Sir, what's the current product mix in terms of cranes, backhoe loaders and [indiscernible]

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [67]

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70% is cranes more or less, and then you have the backhoes and compactors going in tandem. So 74% to be precise on the crane side. And out of that, 50%, 51% is of high-value products, high-end cranes.

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Pravin Yeolekar, CIMB Research - Analyst [68]

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And sir, on this Doosan Infracore partnership, so how is it going and what's the current contribution in terms of volume mix from the Doosan?

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [69]

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So it's basically a niche product for us. It's a high-value product, which we're competing on the top of the market in terms of price. And there is element of foreign exchange as well that plays a role in the game that we play, because most of the manufacturing has been always localized by the competition in India. So we have our niche play and that too in the mining sector. So with all of the monsoons that we had, heavy on Rajasthan side, (inaudible). But now we are seeing that uptrend coming in, so we should be able to sell -- a good value there.

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Pravin Yeolekar, CIMB Research - Analyst [70]

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Could this indicate this volume mix in terms of percentage, current?

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [71]

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[In the ex] quarter?

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Pravin Yeolekar, CIMB Research - Analyst [72]

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Yes.

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [73]

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In terms of -- [this all] as a percentage of (inaudible) you're talking about?

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Pravin Yeolekar, CIMB Research - Analyst [74]

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In the volume or percentage of revenue.

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [75]

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5% to 6% in revenue.

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Pravin Yeolekar, CIMB Research - Analyst [76]

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Sorry?

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [77]

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5% to 6% in revenue.

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Operator [78]

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(Operator Instructions) The next question is from the line of Amit Goela from Rare Enterprises.

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Amit Goela, Rare Enterprises - Partner [79]

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I've just one question. Could you throw some light on the inventory situation now? Like we've always been hearing that the inventory situation is quite difficult. So could you throw some light on that? And we saw that you've generated a fair amount of cash. Could you throw some color on that also?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [80]

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Yes. Amitji, I'll respond on the inventory and have Bharat respond on cash. The October [past has been --] was really a very, very good month. Because we got a -- we had all-time high monthly record on both our deliveries and [releases.] And with that momentum that we could generate, our inventory is actually at a very, very optimum level right now, both the company inventory of finished goods and also the dealer shops. Actually, I think in terms of dealer shops as (inaudible) we expect in the industry right now in terms of number of days (inaudible), which means that we did [vehicle stocks] a little bit in September because of the festive season that we have wholly corrected it now in October. So on the inventory, we are fine. And October definitely was a record month for us within the entire history of the company.

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Amit Goela, Rare Enterprises - Partner [81]

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Okay, that's great. That's very encouraging, Shenu. And what about the cash situation now? It must be reasonably liquid now, no?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [82]

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Yes. So I think if you look at the cash flow also, I think, this time, the cash from operation has been almost INR 300 crores positive this time compared to the negative situation last year. So last year, we were building up inventory, expecting a very good season going forward too. So this time, obviously, a lot of correction has happened. So in the first 6 months, the production compared to last year is down by almost 24%, even though the sale has been down only about 10%, but there's a sharp cut which has been taken in the production side to cut down on the inventory levels. So that's what is reflected in the margin too, which has actually got impacted in the first 6 months. But in terms of cash flow, I think situation is pretty good as of now.

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Amit Goela, Rare Enterprises - Partner [83]

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So Bharat, you're expecting some recovery in margins in the second half?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [84]

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Yes. So we expect some margin recovery to happen now going forward on the inventory units. Actually by the end of October, we are sitting at only less than 2 weeks of inventory within the company and less than 4 weeks of inventory within channel. So overall, [indiscernible] inventory is pretty good. So going forward, if the market really recovers or even if it's a flat market, we expect, I think, the overall margin improvement will happen in the next 6 months, into second half basically.

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Operator [85]

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Next question is from the line of Mayur Milak from IndiaNivesh.

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Mayur Milak, IndiaNivesh Securities Limited, Research Division - Senior Research Analyst [86]

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Yes. Just trying to understand the operating efficiencies. So we've seen Y-o-Y volumes were down 6%, but we've seen the operational efficiency get hit by more than 200 bps. So despite your gross margin improving significantly, we could not really see that benefit coming into the EBITDA margins. Some light on that?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [87]

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Yes. So like I said, when the sale is (inaudible) a decline, which is only 6%, the production decline has a steep, which is 19% this quarter. So that obviously led to the inventory correction, which is, I think, reflected in the cash position also, because the overall operating cash has actually improved significantly. So we did correct inventory in this particular quarter also. It's a 19% reduction. So over and above the 6% sale decline, which happened, so effectively, we did 13% more production decline to really contain the inventory levels at a reasonable position. So which is what has impacted roughly 2% margin on account of the production cut, which got undertaken this quarter. So which is why we are saying going forward, we expect the recovery in margin to happen in second half.

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Mayur Milak, IndiaNivesh Securities Limited, Research Division - Senior Research Analyst [88]

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So this should ideally mean that the benefit of lower raw material will continue along with operating efficiencies coming back?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [89]

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That's right.

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Mayur Milak, IndiaNivesh Securities Limited, Research Division - Senior Research Analyst [90]

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Okay. And secondly, just wanted to know how is the trend in the horsepower? So are we selling more of the 40-plus HP as the trend was in the past? Or you've gone back to doing the 30, 40 HP more because of focus more on the agri side?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [91]

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So I think like we mentioned, I think within the [big sales] are slightly negative if you compare really with last year. So last year, less-than-40 HP sales was roughly 51%, and more-than-40 HP was 49%. though the [indiscernible] trend got slightly adverse this year, with less-than-40 HP has gone up to 55%, and more-than-40 HP has gone down to 45%. The 4% adverse change has happened in the mix indiscernible . And obviously, the major change has happened in the less-than-30 HP segment, where the margins are low. So that's another factor which impacted the margin, even though we did a lot of cost initiative to make up that shortfall in the mix. But still, that is one factor, which has been impacted compared to last year.

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Mayur Milak, IndiaNivesh Securities Limited, Research Division - Senior Research Analyst [92]

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So would this also be because the construction activity has been low. So ideally just want to believe that -- assuming that people will pick up higher HP for multi-purpose use, including construction, so could that also be a reason why we've seen sales of the 50-plus HP not really picking up in the recent past?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [93]

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Yes. Please, Shenu, continue.

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [94]

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No, I think the fact that construction activity was very slow in the first half, but it did not really impact the way the HP segments move, because 31 HP to 40 HP was same in terms of industry weightage, and also 41 HP to 50 HP was same. Right? So that -- although that is a fair assumption to make that construction would have impacted this, but it hasn't. I think in our case, lower-than-40 HP sales is kind of by design, because we did launch some new models in this category, especially the Compact Series, which is actually doing quite well. And our market share is 21 HP to 30 HP has more than doubled in H1 compared to previous year H1. So we were absent in this market and we were leaving a large chunk of the market in hands of the competition. And that's why we (inaudible) tractor which has been received very, very well. Now of course, margins are lower in this new range, but we are working towards it to raise the margins as we go.

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Operator [95]

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Next question is from the line of Dhaval Shah from Girik Capital.

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Dhaval Shah;Girik Capital;Analyst, [96]

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Just one question from my side. What would be subsidy-driven sales at the industry level for the first half? Sir, last year, there was some 70,000 to 90,000 tractors were sold on the subsidy, yes.

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [97]

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Yes. The first half was a little subdued. I don't have the exact numbers first half versus previous year's first half right now. But I know, it has been quite subdued so far. And the main reason was mainly, like, elections because of which a lot of funds was [freezed] out for some time separately. But second half, we are seeing some momentum or expecting some momentum from markets like Assam, Telangana and a couple of other markets like even Maharashtra and Gujarat. So I think probably we will be maybe (inaudible) overall in subsidy sales at an industry level. But it's [indiscernible] in H2.

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Dhaval Shah;Girik Capital;Analyst, [98]

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Okay. I suppose subsidy has started in Gujarat from July onwards. So are you seeing some sales number impact on that on our volumes?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [99]

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Sorry, can you repeat the question?

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Dhaval Shah;Girik Capital;Analyst, [100]

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In Gujarat, the subsidy was supposed to start from July onwards. I think that's what we discussed in one of the 2 previous calls. So has the subsidy started? Are you seeing any volume impact?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [101]

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Yes, subsidy has now started in Gujarat on the scheduled date of July 1. So yes -- I mean -- so Gujarat will see (inaudible) because of that. But [as I said,] Gujarat (inaudible) on subsidy. And every year, pretty much it starts around June or July.

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Operator [102]

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Next question is from the line of Srinivas Seshadri from Mirabilis Investment.

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Srinivas Seshadri;Mirabilis Investment;Analyst, [103]

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Sir, I have one question regarding this emission norms change from the next year, I think about a year away from now. So broadly, if you can make me understand, basically what will change in terms of the engine part? And secondly, your own preparedness in terms of the -- coming out with a product well in time? And also, what kind of economics it would mean for the buyer and whether it can result in a meaningful pre-buy for the tractor industry per se?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [104]

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Yes. First of all, let me clarify that the new emission norms which are going to be applicable from 1st of October next year. This is the current schedule date. This affects only tractors above 50 horsepower, which is right now only about 7% of the total market. It may not have a hugely significant impact on the overall industry, because the volumes affected will be only 7% to 8%. Secondly, of course, there will be some change in the [factories] as the cost of the tractor or (inaudible) will increase in the range of (inaudible) INR 1 lakh or upwards on the base price of -- current base price of INR 6.5 lakhs to INR 7 lakhs. So there would be about, let's say, 15% kind of impact on the price of the tractor. So there will be some change of [indiscernible] above 50 horsepower. So some customers (inaudible) who buy lower-than-50 horsepower tractor. indiscernible there will be no indiscernible . Or they may even go up and buy 60-, 65-horsepower tractors (inaudible) to justify that additional cost with the extra power that they will receive. So in terms of our readiness, I think we are completely ready, although the market will take time to adopt to this new technology. The automotive industry is getting familiar with it, as they are already through these kind of norms and these kinds of new engines, which (inaudible), right? So generally, customers at least who own automobiles, they are familiar with it, right? So it won't be, I think, much of a challenge. But definitely, there would be some change in the market dynamics (inaudible).

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Srinivas Seshadri;Mirabilis Investment;Analyst, [105]

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Okay. And sir, for the below 50 HP, is there any time line around this change in the emission norms, sir?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [106]

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There is no scheduled date yet. It is still under discussion with the government.

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Srinivas Seshadri;Mirabilis Investment;Analyst, [107]

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Okay, okay. Got it. Sir, just one question on the Railway segment. You mentioned that you have a higher share of credit because of the [indiscernible] demand to the new [tech] products. So is there any plan to localize that? And what kind of time frame are you looking at to again bring it down (inaudible)?

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Dipankar Ghosh, Escorts Limited - CEO of Railway Equipment Division [108]

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Yes, this is Dipankar. Yes, we have a very targeted localization plan for all the import content what we have. But as you (inaudible) in this government safety business, where you have a lot of field validation trials and all this stuff before you can actually do a localization, so we have already localized some of the products. They are, as we speak, are going out for field validation trials. So that's why we are saying it will take a year or so to do the localization. Because in railways, there are 2 parts of the localization. One is the physical localization of the product, and the second part is the trials and testing in the field. So that helps us to be [competent.] That's why we are talking about a year's time frame from now.

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Operator [109]

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Next question is from the line of [Naveen Kumar] Investments.

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Unidentified Analyst, [110]

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Sir, we have purchased (inaudible) from long time. Sir, we hold -- we want to hold (inaudible) and Coffee Day. Will we buy Infosys (inaudible).

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [111]

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Sorry, we can't get your question. So what is the question for Escorts' management?

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Unidentified Analyst, [112]

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Sir, we are holding Coffee Day. What about Coffee Day, we exit or hold?

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Unidentified Company Representative, [113]

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I think it's a wrong question you asked to us. So maybe you need to -- I believe you're on the wrong call.

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Unidentified Analyst, [114]

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(foreign language).

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Unidentified Company Representative, [115]

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(inaudible)

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Operator [116]

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The next question is from the line of Hitesh Goel from Kotak Securities Limited.

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Hitesh Goel, Kotak Securities (Institutional Equities) - Associate Director & Automobile Analyst [117]

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Sorry, sir, I just missed that point of: one, gross margin expansion on Q-on-Q basis? So how much of the commodity cost benefit has come through on a Q-o-Q basis? And how much is more likely to come through, because steel prices have come off quite a bit.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [118]

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Hitesh, I think the major benefit for the steel prices is actually is on the Construction Equipment segment. We were seeing some positive moments. So almost 1% improvement has actually happened because of the commodity prices over last year. Though on the tractor side per se, the benefit has not been much, because we don't really buy much of steel there. So it's more like costing (inaudible), which we really are bought, where the impact has not been much. And also the rubber side, we're seeing some price escalation happening. So while there is some impact has been there favorable in the last 2 quarters on the material cost side, so where we're seeing about 0.3%, 0.4% sort of benefit coming in on the commodity prices side. And going forward, we expect the same will get sustained. So we don't expect anything significant to change really in the third quarter on the commodity front.

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Operator [119]

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Next question is from the line of Bharat Gianani from Sharekhan.

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Bharat Gianani, Sharekhan Limited, Research Division - Analyst [120]

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Sir, I heard your comment on the previous question that for FY '21, you are expecting tractor industry to grow. So is -- heard it correctly? And what could be the reasons for the same, if you can highlight?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [121]

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Yes. So (inaudible) right now. As I said, (inaudible) right now. The monsoons have been better -- much better than expectation [indiscernible]. And based on what we are seeing at (inaudible), we will -- we think that this momentum will continue to increase. I think on the financing side also, there are no major threats right now, and we have actually seen some improvement in the last 2, 3 months. If you look at the industry [financing] also -- April-August, minus 15% to September-October minus 5% is a very positive sign. So we do think because of these reasons and some others, we will see some growth in tractor industry next year. It's hard to quantify it right now. I think we should wait another 60 or 90 days to put a number on it.

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Bharat Gianani, Sharekhan Limited, Research Division - Analyst [122]

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Okay, okay. So it's fair to assume that it will be single to mid-single-digit kind of a growth, if at all? I mean if it will be November or sort that sentiments continue to sustain?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [123]

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Maybe on the next call, I can confirm that.

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Operator [124]

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Your next question is from the line of Raghunandhan from Emkay Global.

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [125]

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What would be the breakup of CapEx across segments? In terms of the segmental effect changes, Railway's capital employed seemed to have grown faster than other segments?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [126]

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For Railway, there are 2 unique reasons. I think other than CapEx, there's not been much still on railway side. I think one of the issue in Railway is because from this year, all the tendering process, the government has shifted from -- earlier they used to accept the bank guarantees as earnest money, and now they have shifted it to cash basis. So that has led to some accumulation on the tender money [really with] the railways, so which clearly will take some time to before it really comes through the cycle. So we have about INR 25 crores, INR 30 crores, which is now stuck in the earnest money deposits [indiscernible] in the [first 6 months.] The second issue which railway had was on the GST accumulation. If you remember, in the railway parts, the output is taxed at 5%. -- it used to be taxed 5% and your input costs were much, much higher. And there was no provision of any refund against those input taxes. But recently, the government has shifted the tax rate from the railway products also from 5% to 12% based on the (inaudible) from the industry lobby. And now going forward, we expect that the accumulation will not be there. But whatever has happened in the last 2, 2.5 years, which is roughly INR 25-odd crores, so that will be get utilized over next 12 to 18 months. So hopefully, going forward, we'll have a better capital employed in the Railway business coming down compared to what we have seen in the last maybe 6 to 9 months.

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [127]

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Sir, another question on the debtor days, and that's roughly about 50 days. How do you target reduction ahead?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [128]

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So obviously, like you said, September, since we are looking at the big retail season, which happened in October, so there was a buildup of inventory, which happened, which has led to some increase in the receivables. So October situation is [just pretty good actually.] So we had a record cash inflows in October month. So this is one of the highest retail, which happened on the tractor side too. So obviously, the debtor days actually, would really move to third -- to the end of December period, we'll have a much better visibility and the days would have actually come down to normal levels, which used to be about 35 to 40 days range.

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Raghunandhan N. L., Emkay Global Financial Services Ltd., Research Division - Senior Research Analyst [129]

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And for the tax rate, given the deferred tax benefit, full year tax rate should be around 23%, 24%. Would that be a fair assumption or much lower?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [130]

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Effective tax now, because earlier, our ETR was about 32% plus, which will be now down to 25% plus, which is there. And obviously, there's a onetime benefit from the deferred tax liabilities, which is about INR 14 crores we've already taken in this quarter. So yes, on a full year basis, I think it will be somewhere close to 23%, 24% this year. But going forward, it will get stable at 25% plus.

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Operator [131]

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(Operator Instructions) Next question is from the line of Sabyasachi Mukerji from Centrum Portfolio Managers.

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Sabyasachi Mukerji;Centrum Portfolio Managers;Analyst, [132]

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A couple of questions. First of all, can you help me understand the retail sales during quarter 2 and as well as the festive season during October?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [133]

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Yes. So actually given retail sales -- we had a record in October, and even September-October combined, it was much better. And yes -- so -- I mean, retail scenario is actually better than (inaudible). I think we don't share retail numbers. Therefore, I'll restrict the comment to this right now. [indiscernible]

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Sabyasachi Mukerji;Centrum Portfolio Managers;Analyst, [134]

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If you can specify the quantum of Y-o-Y growth, festive-to-festive?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [135]

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Yes, I think the festive season last year extended till November. So it will be wrong to compare (inaudible) still in the middle of that season. So we can't really give the number because the November is still running. So for the first 2 months, definitely, we have seen growth in the retail. But obviously, since November this time is not a festive month, so it'll be wrong to give comparison based on just 2 months' performance. So we'll rather wait for November to be over and then look at [the festive season,] September to November, which will be a real indicator. So as of now, I think it'll be more misleading if people tell you about a growth pattern, but they are [in growth] across the industry, but that's because of preponement of the festive season to October. So let's wait for another month, and then for the combined 3 months, we can definitely share the number, how the retail is looking like.

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Sabyasachi Mukerji;Centrum Portfolio Managers;Analyst, [136]

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Okay, okay. And secondly, on the subsidy status, last time when I spoke at the Q1 call, you said there were large subsidies in (inaudible), in Assam and probably something is expected in Telangana as well. How does that come up or should we expect something in Q3?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [137]

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Yes. So both Assam and Telangana are expected to start in Q3. Telangana, in fact, has already started moving a little bit in the last couple of weeks. And Assam also, we should have a final decision around end of this month. So I hope the [right part from] December or January onwards.

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Sabyasachi Mukerji;Centrum Portfolio Managers;Analyst, [138]

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And anything on Maharashtra?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [139]

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Maharashtra, the subsidy is ongoing. There is no big -- new scheme yet. There are some discussions underway within the government, but nothing specific yet.

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Operator [140]

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(Operator Instructions) The next question is from the line of Priya Ranjan from Antique Stock Broking.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [141]

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One is on the -- what will be the share of non-tractor revenue in the overall tractor, I mean, segment? [indiscernible] moving, and because for the last 2, 3 years -- last 2, 3 quarters, I mean, when the entire downturn has happened?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [142]

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See this quarter, the non-tractor revenue is about 9%, and it was about 10.7%, 10.9% in the last year and the previous quarter. So historically, it has been in the range of 8% to 9%, but we have been trying to focus on this particular segment to improve going forward. So -- but this quarter, obviously, there's been some impact on the demand side. But we think in the full year basis, it will get made up and will be back to 10% to 11% sort of revenue in this full year.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [143]

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So entire farm, I mean, distress or whatever you want to call it, or entire tractor industry trend for last 1 year, how do you see -- I mean, this revenue was also -- this equipment business has also suffered significantly in terms of downturn?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [144]

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Yes. If the agriculture activity gets affected, then definitely, your other revenues, spare part implement also gets affected. So that's obviously -- there's a direct correlation there -- over there.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [145]

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But I mean, the tractor is still significantly penetrated compared to the other farm equipment implement, et cetera. So there, you have more of a penetration gain as well. So ideally, this should not have too much of an impact, because you might be getting some share as well?

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [146]

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Yes. So that's what I'm saying, in the long term, definitely we expect this segment will continue to grow, which is also our explanation if you look at [2020] document. So it talks about the growth coming in from the non-tractor segment, which includes your engines, implements and spare parts. So that is a long-term trend. But in the short term, on quarter-to-quarter basis, if we really try to compare, and 1% or 2% movement here and there can happen.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [147]

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Okay. And in terms of the Construction Equipment business, if I look at -- I mean this year -- this quarter or first half, the crane business has been significantly -- so if the backhoe loader, which is more of a road construction and other parts, so that business starts picking up, then how do you see the margin panning out? Because that is one segment where the problem is in terms of profitability?

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [148]

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Yes. This is Ajay with you. Our focus for this year is to have -- we are focusing on EBITDA margins, value-adding [margin] products. We are not chasing the market share per se, if you ask me. So that will be the objective as we go along for this year and the next year.

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Priya Ranjan, Antique Stockbroking Ltd., Research Division - Research Analyst [149]

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Okay. So we are kind of avoiding market share in the backhoe loader? Or we want to just keep (inaudible) -- in some contract where we can make money, is it what we want to go...

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Ajay Mandahr, Escorts Limited - CEO of Escorts Construction Equipment [150]

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On the niche market side, where you have the aggregate handling or mining applications. So that segment is a segment, which we will [-- that kind of] remuneration. So on that segment, we'll focus. And the retail segment, the competition is very stiff and discounting happens. There we would tend to pick and choose.

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Operator [151]

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The next question is from the line of Sameer Deshpande from Fair Deal Investments.

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Sameer Deshpande, Fair Deal Investments Limited - Owner [152]

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It is nice to see recovery in the volumes in the last 2 months. And despite the very high base, which we had, we have been growing by at least 2%, 3% over that. And now after getting this festive season sales, et cetera, do we expect to have some modest growth in the second half in the tractor volumes over last year?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [153]

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Yes. Sir, we have yet to see. But definitely, we have -- we are sure about one thing that September-March [period] it will perform much better than April-August.

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Sameer Deshpande, Fair Deal Investments Limited - Owner [154]

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So you mentioned that at the end of the year, it is likely that the volumes should [drop back] 4% to 5% compared to the last year. So if you...

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [155]

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[indiscernible] On a full year basis, we are expecting a single-digit negative growth.

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Sameer Deshpande, Fair Deal Investments Limited - Owner [156]

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Single digit?

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [157]

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Negative growth for the full year. Because (inaudible) already is minus 15%. So even I think the [indiscernible] September last year, and we still think there would be some negative growth [for that side.]

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Sameer Deshpande, Fair Deal Investments Limited - Owner [158]

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[4%.] So from that, if you derive the half 2 volumes, the last year volumes were some 51,000-odd. So it seems that you will be in a position to hold on to those levels.

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Shenu Agarwal, Escorts Limited - CEO of Escorts Agri Machinery [159]

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Let's see. We really also hope to do our best and definitely better than the industry.

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Operator [160]

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As there are no further questions, I will now hand the conference over to Mr. Bharat Madan for closing comments.

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Bharat Madan, Escorts Limited - Group CFO & Corporate Head [161]

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Thank you, ladies and gentlemen, for being present on this call. For any feedback inquiry, feel free to write into us at investorrelation@escorts.co.in. We'll meet again in next quarter. Thank you very much, and good evening.

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Operator [162]

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On behalf of PhillipCapital India Private Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.