A REPORT

ON
COMPANY ANALYSIS
OF

DONE BY:
HARSHA VARDHAN
20FMUCHH010985
A report submitted in partial fulfillment of the
requirements of the BBA Program of IBS
Hyderabad.
 EXECUTIVE SUMMARY

Escorts Kubota Limited manufactures and sells agri machinery, construction equipment, and
railway equipment in India and internationally. The company offers agricultural tractors
under the Farmtrac, Powertrac, Steeltrac, and Digitrac brands; crop solutions; engines; spare
parts; lubricants; and sprayers, harvesters, implements, planters, and gensets. It also provides
construction, earth moving and material handling equipment, round and flat tubes, heating
elements, double acting hydraulic shock absorbers for railways coaches, center buffer
couplers, automobile shock absorbers, telescopic front fork and Mcpherson struts, brake
blocks, internal combustion engines, and friction and rubber products. In addition, the
company offers metal bonded and other products. Further, the company trades in oils and
lubricants, implements, trailers, tractors, compressor accessories and spares, construction
equipment, and earth moving and material handling equipment. The company was formerly
known as Escorts Limited and changed its name to Escorts Kubota Limited in June 2022.
Escorts Kubota Limited was incorporated in 1944 and is based in Faridabad, India.

The Indian tractor market has been facing headwinds in recent periods. Financial insecurities
of farmers created by the Covid-19 pandemic, steep rise in input costs, and inconsistent
monsoon are some of the major concerns. However, technological advancements in Agri
machinery, government initiatives to develop rural infrastructure, easy low-interest loans for
farmers, subsidies/tax concessions on Agri equipment are the drivers for the tractor industry.
ESCORTS KUBOTA LTD.

INTRODUCTION:
Escorts Kubota Limited was incorporated in the year October 17th 1944 as Escorts
Agents Ltd in Lahore. The company has diversified business in three different
segments viz. Agri Machinery Material Handling & Construction Equipment and
Railway Equipment. In the year 1951 Escorts established India's first private
Institute of Farm Mechanisation at Delhi and in the year 1953 Escorts (Agents) Ltd
and Escorts (Agriculture and Machines) Ltd merged to form Escorts Agents Pvt.
Ltd. The company was converted into a public limited company in December 1959
and subsequently the name was changed to Escorts Ltd in January 1960.
In 2019 the Company introduced India's first autonomous tractor concept. It
collaborated with Kubota to develop value-oriented tractors that cater to farming
requirements in India and overseas markets. It tied up with seven technology
leaders like Microsoft Reliance JioTrimble Samvardhana Motherson Group
WABCO Bosch and AVL. A joint venture was formed with JV Tadano to produce
specialized cranes that address high capacity use cases
During FY 2022 Escorts Limited & Kubota Corporation reinforce their long-
standing partnership. Kubota increased its stake in Escorts Limited with this
Kubota Corporation became a joint promoter along with existing promoter of
Escorts. It launched 7 new products under EAM 6 new products under ECE and 3
new products launched under RED.

Key Personnel:

Mr. Nikhil Nanda - Chairman and the Managing Director

Ms. Nitasha Nanda -Whole-time Director
Mr. Harish N Salve - Independent Director
Mr. Seiji Fukuoka -Deputy Managing Director
Mr. Manish Sharma - Independent Director
Mr. Yasukazu Kamada - Independent Director
BUSINESS MODEL:

Escorts Limited, one of India’s leading engineering companies, is a partner of choice for
farming and construction equipment in the country. For seven decades, Escorts has helped
accelerate India’s socio-economic growth through its presence across high-growth sectors of
agri-machinery, construction and material handling equipment and railway equipment.
Powered by an in-house research and development centre and collaborations with global
technology leaders, Escorts is committed to contributing towards India’s growth story and
bringing in quality change in the lives of people.
The Escorts Kubota announced its medium-term business plan with three objectives. The first
was that it would become the number one global tractor manufacturer in terms of volumes,
followed by strategies to expand its revenue. Thirdly, it would improve profitability and
promote farm mechanisation globally.
To achieve these objectives, Escorts Kubota said it will establish a research and development
centre to design new platforms for innovative machinery of up to 120 horsepower. It added
that leveraging its frugal manufacturing capability and Kubota's global quality system will
create competitive products at aggressive prices, enabling its Japanese ally to compete against
brands exported from India and Korea. The company plans to make India a global
manufacturing hub of tractors and farm equipment with these initiatives. It also aims to grow
its volumes and market share in the US, Europe, Latin America and Africa.
Highlighting that Escorts Kubota is one of the cheapest multinational company (MNC) stocks
available in the Indian equity markets, Sanjiv Bhasin, director of IIFL Securities, is extremely
bullish on the stock. He expects it to go up to Rs 3,000 during the year.Earlier this month,
Escorts Kubota reported a 7 per cent rise in tractor sales at 6,111 units for August 2022. The
company sold 5,693 tractors in the year-ago same period. Domestic tractor sales stood at
5,308 units against 4,920 units in August last year, up 8 per cent, the company said in a
regulatory filing. Exports increased 4 per cent to 803 units from 773 tractors sold in August
last year.Escorts Kubota's net profit in the last fiscal came in at Rs 765 crore, down 12 per
cent from Rs 874.06 crore in March 2021. Its net profit in March 2020 came in at Rs 484
crore at the end of the financial year 2019-20.
They strive to build organizational capabilities by structuring a solid foundation of technical
know-how. So that everyone in the organization is aware of their responsibilities and
accomplishes these to their best potentials.As an imperative norm, they follow world-class
practices to deliver world-class performance. They embrace TPM as the manufacturing
language, business language and organizational language. Their three-step approach to
transformation is to - follow best practices, develop our own excellence model, and be a
benchmark for others. This includes developing and sustaining systems for “zero accidents,
zero defects and zero failures” in the entire lifecycle of the production system.
PRODUCT PORTFOLIO:
The company is engaged in the manufacturing of Agri Machinery, Construction Equipment
and Railway Equipment.
Products Line: FarmTrac, PowerTrac, Spares and Lubes, Engines, Crop Solutions, Material
Handling Equipment, Road Construction Equipment, Earthmoving
Equipment, Brake Systems, Couplers, Suspension Systems, Friction &
Rubber Products
Key Focus Areas: Global Reach, Manufacturing, Agri Machinery and EV Market

MANAGEMENT PROFILE:

Name Designation

Ajay Mandahr Chief Executive Officer

Amit Singhal Group Chief Human Resources Officer

Bharat Madan Group Chief Financial Officer

Dai Watanabe Non Executive Director

Hardeep Singh Director

Harish N Salve Independent Director

Kenichiro Toyofuku Independent Director

Manish Sharma Independent Director

Nikhil Nanda Chairman & Managing Director

Nitasha Nanda Whole Time Director

Ravindra Chandra Bhargava Independent Director

Reema Rameshchandra Nanavati Independent Director

Satyendra Chauhan Co. Secretary & Compl. Officer

Seiji Fukuoka Whole Time Director

Shailendra Agrawal Executive Director

Shenu Agarwal President

Shiro Watanabe Non Executive Director

Sunil Kant Munjal Independent Director

Sutanu Behuria Independent Director

Tanya Dubash Independent Director

Vimal Bhandari Independent Director

Yasukazu Kamada Non Executive Director

Yuji Tomiyama Non Executive Director

REVENUE ANALYSIS:

Annual Revenue rose 3.93% in the last year. Its sector's average revenue growth for the last
fiscal year was 18.28%.
Quarterly Revenue rose 12.96% YoY. Its sector's average revenue growth YoY for the
quarter was 28.84%.

COST STRUCTURE ANALYSIS:

These are the financial information of ESCORTS KUBOTA LTD. for the financial year
ending 31st March 2022 :-
1. Revenue / turnover of ESCORTS KUBOTA INDIA PRIVATE LIMITED is INR 100
cr - 500 cr
2. Net worth of the company has decreased by -11.39 %
3. EBITDA of the company has decreased by -254.07 %
4. Total assets of the company has increased by 45.38 %
5. Liabilities of the company has increased by 519.56 %
The company has reduced its equity share capital by cancelling and extinguishing
1,22,57,688 shares each held by Escorts Benefit and Welfare Trust (EBWT) pursuant to a
scheme approved by the NCLT. Further, the Co has filed for a 2nd capital reduction of
remaining 2,14,42,343 Equity Shares held by the EBWT.

Annual Net Profit fell 15.49% in the last year. Its sector's average net profit growth for the
last fiscal year was 106.57%.
Quarterly Net profit fell 42.93% YoY. Its sector's average net profit growth YoY for the
quarter was 133.78%.
Depreciation increased by 7%.
Other Income increased by almost 37%.
Price to Earning Ratio is 41.92, lower than its sector PE ratio of 46.53.
The company has delivered a poor Sales Growth of 11.8% over past five years.
Expenses are also increased by 10%.
Operating Profit plunged by almost 9%.

PROFITABILITY ANALYSIS:
Profitability indicates the percentage of return in business. A high return on investment
shows the company is having a higher rate of return of profit as a percentage of capital
employed.

Profitability Ratios

Return on Equity (ROE): The ROE for the company declined from 17.33 to
9.69 during FY 22. ROE for the last financial year was less than 10%,
indicating an inefficient use of shareholder's capital to generate profit. The ROE
measures the ability of a firm to generate profits from its shareholder’s capital
in the capital.
Return on Capital Employed (ROCE): The ROCE for the company decreased
from 26% to 15% during the last financial year. The ROCE measures the ability
of a firm to generate profits from its total capital employed in the company.
Return on Assets (ROA): The ROA for the company improved from 8% to
11% during FY22. The ROA measures how efficiently the company uses its
assets to generate earnings.
LIQUIDITY RATIO:

Escorts Kubota’s Current Ratio for the last FY was 5.08.

Escorts Kubota’s Quick Ratio improved from 2.37 to 4.48 during last FY.
Escorts Kubota’s Inventory Turnover Ratio increased to 6.08 during FY’22.
Escorts Kubota’s Dividend Payout Ratio (NP) increased hugely from 2.80% to 9.63% in the
last financial year.
Escorts Kubota’s Dividend Payout Ratio (CP) stood at 8.23%.
Escorts Kubota’s Earnings Retention Ratio fell from 97.20% to 90.37%.
Escorts Kubota’s Cash Earnings Retention Ratio also decreased from 97.53% to 91.77%
during last fiscal year.
Escorts Kubota Net Working Capital was stood at 953.96 Crore in the last FY.
Company is virtually Debt free.
Escorts Kubota Ltd Cash Conversion Cycle Calculation
The Cash Conversion Cycle (CCC) is a metric that shows the amount of time it takes a
company to convert its investments in inventory to cash. The conversion cycle formula
measures the amount of time, in days, it takes for a company to turn its resource inputs into
cash.
The CCC is one of the several measures of management effectiveness.
The company has an efficient Cash Conversion Cycle of -1.89 days.

Working Capital Analysis

Escorts Kubota's ROCE has reduced by 43% over the last five years, while the business
employed 347% more capital. Escorts Kubota raised some capital prior to their latest results
being released, so that could partly explain the increase in capital employed. It's unlikely that
all of the funds raised have been put to work yet, so as a consequence Escorts Kubota might
not have received a full period of earnings contribution from it.
Escorts Kubota has decreased its current liabilities to 15% of total assets. That could partly
explain why the ROCE has dropped. Effectively this means their suppliers or short-term
creditors are funding less of the business, which reduces some elements of risk. This reduces
the business' efficiency at generating ROCE since it is now funding more of the operations
with its own money.

Net Working Capital

 Profit Growth

SOLVENCY ANALYSIS:
If the debt is decreasing over some time, it is a good sign and vice versa. Companies that
have a debt-equity ratio greater than 0.5 should be avoided. Hopefully, for almost last two
financial years their Debt Equity remains below 0.5.

A high-interest coverage ratio means a high capacity to bear the interest of the debt with
profit. To ensure the safety of the investment, one should never invest in companies that have
an investment coverage ratio of less than 2.5. In this parameter, Escorts Kubota has a very
strong foothold because as we can see from the above data that from FY16 its ICR was
always above the minimum.

CAPEX ANALYSIS:
Escorts Kubota’s Return on Assets decreased from 12.13% to 8.16% in the last financial
year.
Company’s Assets Turnover Ratio fell from 1.11% and stood up at 0.86% in the previous
fiscal year.
Escorts Ltd has lined up a capex of up to Rs 400 crore for the ongoing fiscal for new product
introduction and creation of production capacity for the same

The company, which has started exporting electric tractors to markets like the US and
Europe, expects it to contribute up to 15 per cent of its overall overseas shipments in the next
five to six years.
Apart from creating the capacity line for the new products, the capex will also cover vendor
capacity expansion, which the company is doing with its suppliers, where their capacity for
the existing component is restricted.

Overall, the company currently has an annual production capacity of up to 1.7 lakh units at a
group level and that is enough to take care of for the next two to three years.
The company is looking to outsource to a third party supplier for the batteries in India.
Stating that once the localisation happens it will bring down costs and give the company the
ability to launch in the domestic market
COMPETITIVE ADVANTAGE:

Escorts Kubota has many competitors in India and also over the globe. The topmost
companies in their segment are:-
(1) HMT
(2) VST Tillers
(3) Mahindra & Mahindra
(4) John Deere

SWOT Analysis

Strength:
(1) Company with No Debt
(2) Book Value per share Improving for last 2 years
(3) Company with Zero Promoter Pledge
 (4) FII / FPI or Institutions increasing their shareholding

Weakness:
(1) Negative Breakdown First Support (LTP < S1)
(2) Decline in Net Profit with falling Profit Margin (QoQ)
(3) Decline in Quarterly Net Profit with falling Profit Margin (YoY)
(4) Declining profits every quarter for the past 3 quarters
(5) Major fall in TTM Net Profit

Opportunities:
(1) Brokers upgraded recommendation or target price in the past three months
(2) High Momentum Scores (Technical Scores greater than 50)
(3) Stocks near 52 Week High with Significant Volumes
(4) 8.4% returns for Nifty 500 over 0.3 years
(5) 319.5% returns for Nifty 500 over 5.1 years

Threats:
(1) Stocks affected by weak monsoons

STAKEHOLDERS ANALYSIS:

Engagement of stakeholders is essential to the company's goals and initiatives. Materialism is

the primary means of achieving and pursuing this aspect, despite the organization's efforts to
be the most admired and socially responsible. They must be aware of the matters that concern
each of their stakeholders and convey to them the company's difficulties, initiatives, and
advancements.
Engaging key stakeholders is important to Mahindra Sanyo and helps drive its sustainability
vision. For their materiality analysis, they involved various internal and external stakeholders
including employees, investors, customers, suppliers, strategic partners, community,
government, financial institutions, and NGOs. From partnering with peers and industry
associations to public forums and meaningful dialogues with the community in which the
company operates, they engage with each of their stakeholder groups based on their relevance
to the business, stakeholder involvement, and interest in the company's issues and
expectations. cooperation.
BEST PRACTICES:

Community Health- Escorts engages with reputed hospitals and medical organisations to
increase health awareness and provide free primary healthcare services

Women Empowerment- Escorts addresses women’s empowerment issues through

multifarious community outreach initiatives, including the wives and daughters of employees.

Social Welfare / Eco-Responsiveness- Escorts is committed to national progress, upkeep of

the eco-sphere, reflected in the several social and environmental initiatives around its
manufacturing units.

Employee Engagement- Escorts is a fellow voyager of its people, evident through various
engagement programs, that reach out to employees’ families to establish a personal connect
with them.

National/International Contingencies- Escorts is a regular contributor to national and

international funds targeted at providing relief from natural disasters and contingencies.