EKL construction growth offsets agri-machinery margin decline

Escorts Kubota Limited reported diverging segment results in the quarter ended September 2026. EKL’s construction-equipment revenue rose 58.6% to Rs 536.2 crore as volume increased 53.9%, while agri-machinery EBIT margin fell to 7.8% from 12.8%, affected by commodity-cost inflation and product mix.

How did EKL’s construction-equipment business perform?

EKL’s construction-equipment business recorded higher volume, revenue and margin in the quarter ended September 2026. Sales volume reached 1,764 units, up 53.9% from 1,146 units in the corresponding quarter and up 31.3% from 1,344 units in the sequential quarter. This compared with a 0.4% year-on-year increase in EKL’s tractor volume.

Construction-equipment revenue rose 58.6% to Rs 536.2 crore from Rs 338.1 crore in the corresponding quarter. Revenue also increased 27.8% from Rs 419.6 crore in the sequential quarter, while unit sales rose 618 units year on year. The business therefore delivered a faster rate of growth than the larger agri-machinery segment, whose revenue increased 10.6% year on year.

Construction-equipment EBIT, or earnings before interest and tax, margin was 7.9%, compared with 3.8% in the corresponding quarter and 5.4% sequentially. EKL attributed the 411-basis-point year-on-year increase and 250-basis-point sequential increase mainly to operating leverage. A basis point is one-hundredth of a percentage point.

For the half year ended September 2026, construction-equipment volume rose 41.2% to 3,108 units from 2,201 units in the corresponding period last year. Segment revenue increased 49.4% to Rs 955.8 crore from Rs 639.6 crore, while EBIT margin rose 206 basis points to 6.8% from 4.7%.

Why did EKL’s agri-machinery margin decline?

EKL’s agri-machinery margin declined because commodity-cost inflation and product mix adversely affected the September 2026 quarter. EBIT margin was 7.8%, down 500 basis points from 12.8% in the corresponding quarter and down 300 basis points from 10.8% in the sequential quarter. The margin fell despite higher revenue than a year earlier.

Tractor volume was 34,017 units, up 0.4% from 33,877 units in the corresponding quarter but down 7.7% from 36,862 units sequentially. The year-on-year increase was 140 units, in contrast to the 618-unit increase in construction-equipment sales over the same comparison.

Agri-machinery revenue rose 10.6% to Rs 2,690.1 crore from Rs 2,432.9 crore in the corresponding quarter. However, revenue was 2.8% lower than Rs 2,766.5 crore in the sequential quarter, alongside the decline in EBIT margin to 7.8% from 10.8%.

For the half year ended September 2026, tractor volume increased 10.0% to 70,879 units from 64,458 units in the corresponding period last year. Agri-machinery revenue rose 18.3% to Rs 5,456.5 crore from Rs 4,614.3 crore, but EBIT margin declined to 9.3% from 12.7%.

How did the segment trends affect EKL’s quarterly earnings?

EKL’s September-quarter revenue rose, while profit measures declined from both comparison periods. Standalone revenue was Rs 3,231.4 crore, up 16.3% from Rs 2,777.4 crore in the corresponding quarter and up 1.7% from Rs 3,178.9 crore sequentially. Construction equipment added Rs 198.1 crore of year-on-year segment revenue growth, while agri-machinery added Rs 257.2 crore.

Standalone EBIDTA, or earnings before interest, depreciation, tax and amortisation, was Rs 292.4 crore, compared with Rs 363.2 crore in the corresponding quarter and Rs 355.4 crore sequentially. Profit before tax was Rs 344.0 crore, versus Rs 431.1 crore and Rs 493.8 crore, respectively, as agri-machinery margin fell to 7.8%.

Standalone profit after tax was Rs 255.0 crore in the September 2026 quarter, compared with Rs 321.2 crore in the corresponding quarter and Rs 387.3 crore in the sequential quarter. Earnings per share were Rs 23.18, down from Rs 29.19 a year earlier and Rs 35.20 sequentially. The figures show that construction-equipment expansion did not offset the decline in overall quarterly profitability.

On a consolidated basis, continuing-operations revenue rose 16.2% to Rs 3,243.4 crore from Rs 2,791.6 crore in the corresponding quarter and increased 1.1% from Rs 3,207.6 crore sequentially. Consolidated profit after tax from continuing operations was Rs 250.2 crore, compared with Rs 318.1 crore a year earlier and Rs 385.9 crore in the sequential quarter.

What does EKL management expect for margins?

EKL management expects margins to improve gradually from the fourth quarter of fiscal year 2027, assuming a stable commodity environment from that quarter. Management said margins should return closer to normal levels in fiscal year 2028 after the September-quarter effect of commodity costs and product mix.

Management also said EKL is focusing on operational efficiencies and cost-optimisation initiatives across the business. Its product pipeline and innovation roadmap were cited as support for long-term growth ambitions, following a quarter when construction equipment generated Rs 536.2 crore of revenue at a 7.9% EBIT margin and agri-machinery generated Rs 2,690.1 crore at a 7.8% margin.

Conclusion

EKL’s September 2026 results showed construction equipment as the faster-growing segment, with volume up 53.9%, revenue up 58.6% and EBIT margin at 7.9%. Agri-machinery remained the larger segment by revenue at Rs 2,690.1 crore, but tractor volume was nearly flat year on year and its EBIT margin fell 500 basis points to 7.8%.

The next disclosed marker is management’s expectation that margins will improve gradually from the fourth quarter of fiscal year 2027, contingent on a stable commodity environment. EKL’s stated aim is for margins to return closer to normal levels in fiscal year 2028, supported by operational-efficiency and cost-optimisation initiatives.