In an interview with CNBC-TV18, Antony Cherukara, CEO of VST Tillers Tractors, stated that the company is aiming for over 20% revenue growth in fiscal year 2025 (FY25), building on the ₹500 crore revenue recorded during the first half of the year (April-September).
International markets, particularly Europe and the US, are pivotal to the company’s growth strategy. While exports contributed 12-13% of revenue last year, Cherukara expects this to increase to 25% within three years. He also anticipates that profit margins will remain in the 11-13% range for the current financial year (FY25).
Discussing future strategies, VST is exploring opportunities for inorganic growth and geographical expansion, though no specific deals have been finalised. The company also owns 25 acres of valuable land in Bangalore, which it may monetise to fund growth initiatives if required.
Below is the verbatim transcript of the interview.
Q: For the month of November, the volume numbers are looking pretty good. Tractors on a lower base, have popped up and even the overall numbers are up between 6% and 7%. So that’s good news. For the year give us a guidance on the three segments that you operate on – tillers, tractors as well as weeders – what kind of growth are you looking at in comparison to the last fiscal?
Cherukara: Second half of the year is good for agriculture. The rains have been good and so we expect the demand to grow in second half compared to the previous year.
On our power tiller business, we are looking at about 10 to 15% growth. We are looking at tractors to grow between 15% and 20%. For the power weeder business, we are kind of doubling the business. So it is accelerating.
While all the three segments grow, we are also looking at the international market, specifically at Europe. We have some new product launches that we have done. Despite the war and the logistics cost going up, we expect at least a 10% growth in the international market as well.
Q: First half of the year, revenues are at around ₹500 crores. What are you targeting for the entire year because you still have that aspirational target of ₹2,000 crores for FY26, that’s still on the cards?
Cherukara: That is definitely on the cards. I’m looking at 20% plus kind of growth for this financial year. And I think the way things are panning out in H2, I think it is very much doable and the visibility for the next year is still maintained at ₹2,000 crores.
About the US market, we have announced the launch and we have registered the companies and we would be launching the products in the US market in Q4 of next year.
Q: And how much is the potential revenue that you see from exports as a proportion of your overall sales in the next two to three years, Europe and US?
Cherukara: International business as a whole was about 3% three years back. Last year we clocked about 12%-13%. In the next three years, we expect the overall international business to be at about 25% of our revenue.
Q: For this fiscal you’re looking at a 20% growth, in comparison to last year, that is revenue growth?
Cherukara: Yes.
Q: You did around 13% margin as of the last quarter, but it’s been steadily improving, which is great. Do you get back to the high teens? Is that possible? And also if you could give us a sense about receivables from governments that’s coming in, right? There is no problem on receivables as of now?
Cherukara: There is no problem on receivables at this point. In quarter two we saw a slight increase in receivables which was all pending payments, that is coming through in Q3. So no issues on the receivables front.
Coming to the margins, we had given a guidance of about 11%-13% and we continue to stick to that. This is considering the large revenue expenditure we are doing in terms of entering new markets, both in India, which is the northern markets with the higher horsepower tractors and the US market with compact tractors and electric machines.
Q: On the higher tractors, you had a target of 1,000 units this year itself, that’s the Zetor JV that we’re talking about. How much have you done so far and what’s the target here?
Cherukara: We don’t want to give out the numbers, but I can tell you that we will be very close or we would be hitting the target this year.
Q: The market cap has moved up and the stock has done quite well of late. But it seems the street is ascribing a good amount of value to that land that you have, the 25 acres. What’s the decision? The last time around, you told me we will be taking a decision on that soon. What’s the decision?
Cherukara: What I told you is at the appropriate time we will take a decision – that is when we need the money for further growth. Right now we have not taken a decision on that as yet but we are looking at inorganic opportunities and as it arises and when the need of money is required, we will be doing that.
Q: What is the rough value for this 25 acres if you have to put a number to it?
Cherukara: I don’t have a market value but all of us know that real estate prices are increasing in cities like Bangalore. So it augurs well for the company.
Q: Typically, one acre. How much does it cost? Let’s keep it simple. I’m not asking about your land in particular, but in Bangalore, give us a rough range.
Cherukara: I am not an expert on that.
Q: But you will have a better idea because you are closer to Bangalore. So you give us a broad range at least.
Cherukara: I have no idea because I don’t want to be terribly wrong with whatever I say.
Q: You said that you are looking at inorganic plans as well. You gave us a mild hint here. What is it that is on your mind?
Cherukara: We are looking at growing geographically as well as in terms of products. So we are evaluating couple of opportunities, but it’s too early to announce anything. So once things are more concrete, we will be announcing it.
Q: So that ₹2,000 crores of revenue target for the next year includes some part of inorganic growth, right?
Cherukara: No, we have not taken that into account as yet that. Eventually, we have to chase down the ₹3,000 crore vision as well. That will definitely play a role in that.
