Farm equipment and engineering major Escorts Ltd is planning to increase its overall tractor production capacity to 1.8 lakh units annually to meet the current robust demand for which it will be investing Rs 100 crore in the remaining part of the fiscal, according to a senior company official. The company, which currently has an annual capacity of 1.2 lakh units, expects the overall tractor industry to grow in low double digits this fiscal as against the low single-digit projected earlier.
“We are already growing above pre-COVID-19 levels…Both at capacity utilization and sales we are above pre-COVID-19 levels…Our stated capacity is around 10,000 tractors per month but we are going beyond the capacity and are trying to stretch as much as we can because the demand is so strong that we are unable to make it,” Escorts Group CFO Bharat Madan told.
He said the company will try to build up capacity once the current festive and sowing season is over in expectation of another round of strong demand coming in the January-March period.
“In the next two months, we will try to build up inventory both at the company level and at the channel level. We expect January to March to be very strong months .. we are expecting a very good harvest this time and it could lead to very good demand going forward,” Madan added.
When asked how the company is planning to meet the demand, he said Escorts has already started enhancing production capacity both at the company level as well as at the supply chain level.
“In six to nine months we will do that. It will be Rs 100-odd crore which we will be investing further to enhance our capacity both at the company level as well as the supply chain level. The commitment will definitely happen this year only but the cash flow may spill over to the next fiscal in 60:40 ratio,” he said.
The company is looking to take its internal capacity to 1.5 lakh tractor per annum while pushing those of its vendors to the level of 1.7-1.8 lakh units annually.
Madan further said the company expects 30,000 units capacity to come in from its joint venture with Japan’s Kubota next fiscal thereby taking the total available units to around 1.8 lakh annually.
Commenting on the current market condition, he said, “There will be sustainable demand. This year the industry will grow. Earlier we were expecting low single-digit growth but in the first six months of the year the industry has grown 12 per cent and it looks like that the momentum will continue in the balance six months of the year. So there will be low double-digit growth.”