Escorts Kubota Limited: Q2 FY26 Sees Strong Tractor Growth Amidst CE Headwinds

Escorts Kubota Limited has reported a robust performance for the second quarter of fiscal year 2026, primarily driven by its Agri Machinery Products segment. The company's standalone operating revenue from continuing operations saw a significant jump of 22.6% year-on-year, reaching INR 2,777.4 crores. This growth translated into an impressive 56.0% year-on-year increase in EBITDA, which stood at INR 363.2 crores, pushing the EBITDA margin up by 280 basis points to 13.1%. The normalized Profit After Tax (PAT) also reflected this strong operational efficiency, growing by 51.7% year-on-year to INR 321.2 crores.

The tractor business emerged as a key growth driver, with total tractor volumes increasing by 30.3% year-on-year. Domestic tractor volumes grew by 30.5%, while export volumes saw a substantial 26.2% increase. This strong performance allowed Escorts Kubota to gain 20 basis points in overall tractor market share. The Agri Machinery Products segment's revenue grew by 29.1% to INR 2,432.9 crores, with its EBIT margin expanding by 368 basis points to 12.8%. This margin expansion was supported by easing material costs, better operating leverage, and effective cost control measures. The company also noted a positive shift in customer preference towards higher horsepower tractors, influenced by GST reforms that make these models more affordable.

In contrast, the Construction Equipment (CE) business faced a challenging quarter. Served industry volume declined by approximately 4% year-on-year, and Escorts Kubota's CE volumes were down by 17.8% to 1,146 machines. This downturn was attributed to an extended monsoon season and slower mobilization of infrastructure projects. The segment's EBIT margin significantly contracted to 3.8% from 9.3% in the corresponding quarter last year, primarily due to lower production volumes and inventory adjustments made in the previous year for emission norm transitions. However, there was a bright spot within the CE segment: mini excavators continued to gain traction, with the company increasing its market share by 151 basis points to 18.5%.

Looking ahead, management expressed optimism for the tractor industry, projecting a low double-digit growth rate for the full fiscal year, supported by healthy water levels, robust crop yields, and improved terms of trade. For the CE business, a recovery is anticipated in the latter half of Q3 and Q4, with margins expected to return to high single-digit levels. The company is also making strategic investments, including a greenfield project to expand manufacturing capacity for both tractors and construction equipment. This project, expected to be ready by the end of next year (FY27), will primarily focus on boosting exports, particularly to the U.S. market, starting from FY28-29.

Escorts Kubota is also focusing on localization efforts for its Kubota branded products, aiming to improve margins by reducing reliance on imported components like engines. The captive finance company, launched last year, is gradually expanding its operations and is expected to achieve profitability in the next two fiscal years. The agri solutions business, including harvesters and sprayers, is seeing strong demand, and the company is actively working on localizing high-value items in this segment. These strategic initiatives underscore Escorts Kubota's commitment to sustained growth, operational excellence, and market leadership, positioning it well for future opportunities despite current sectoral headwinds.