Don't expect drastic changes, continuity my mantra: Escorts chairman

Three consecutive years of strong tractor demand, backed by a normal monsoon, has helped the company's performance

There is a saying that you make some of your worst mistakes in the best of your times, says Nikhil Nanda the chairman and managing director of Escorts. Nanda, who was the managing director until recently, also took over the position of company’s chairman after the demise of his father Rajan Nanda early this month. Nanda said he is not looking to make any ‘drastic’ changes in the business and will work to take it forward in a profitable manner.   

“A lot of people expect that a new CMD will come and the group will undergo a change. In today’s context, consistency, focus and persistence are more important than wanting to make a change for the sake of it. Continuity is going to be my mantra and there will be no dramatic changes,” Nanda told Business Standard.

The Escorts management, under the leadership of Rajan Nanda, had initiated a turnaround journey a decade ago, and FY18 was kind of a culmination of the exercise that aimed at cost reduction, a leaner workforce and of wiping away the debt. The company reported a record revenue of Rs 50 billion last year and earned an all-time high profit of Rs 3.44 billion. It now sits on a cash reserve of Rs 7 billion and is expected to make a record profit in FY19 as well.

“I have seen Escorts in its worst situation when it had a large debt and a negative EBITDA. So, any new investments that we do must have a right basis. We diligently ask tough questions before putting money in any part of the business because we know what it is like to not have any cash,” said Nanda. Escorts stock has rallied 50 per cent in last one year to Rs 900, giving the firm a market cap of Rs 110 billion.

Three consecutive years of strong tractor demand, backed by a normal monsoon, has helped the performance as the company gets almost 80 per cent of the revenue from tractors. The rest comes from construction equipment business and railway orders. But, with an about eleven per cent market share, Escorts is today the fourth largest player in the domestic tractor market, after M&M, TAFE and Sonalika.

Sonalika is at 11.9 per cent and Escorts is confident of gaining market share. “We have seen market share growth in last few quarters. We are very bullish. The balance sheet is clean and we are a debt free company today. We are gunning for a 15 per cent market share by 2022. There is always a scope to do more in cost reduction. We will make investments to grow profitably, focus on growing in markets we had ignored earlier,” said Nanda.

On Tuesday, the Faridabad-headquartered company announced a joint venture with Japan’s Tadano Group to manufacture cranes of higher capacity. The company is investing about Rs 3.5 billion between FY18 and FY19 to expand tractor production capacity by fifty per cent to 150,000 units. The expanded capacity will come on stream in early 2020. It is currently operating at over 90 per cent capacity.