Escorts Kubota Ltd Management Discussions

Economic Review

In 2024, the global economy grew by 3.2%, a sign of strength despite facing challenges such as elevated interest rates and ongoing geopolitical uncertainties. While this marked an improvement from recent years, it remained below the historical average of 3.7% observed between 2000 and 2019. The tempered growth was influenced by a combination of structural and cyclical headwinds, including tighter monetary policies in major economies, persistent geopolitical instability, and specific constraints in sectors that hindered activity across both advanced and emerging markets.

Economic activity took divergent paths across the globe. Advanced economies faced challenges, including sluggish manufacturing output, dampened consumer confidence, and ongoing inflationary pressures. Soaring energy prices disrupted global trade, and the delayed impact of earlier interest rate hikes further reduced demand, limiting growth. Emerging markets and developing economies, on the other hand, confronted a unique set of challenges. These included reduced external demand and capital outflows sparked by rising interest rates in developed nations, as well as uncertainties around local policies. Geopolitical tensions and trade disruptions hit export-dependent countries the hardest. Still, some economies showed significant resilience,

On the inflation front, global headline inflation moderated to 4.2% in 2024, down from 5.7% in the previous year. This easing was supported by stabilising energy prices and the gradual alleviation of supply chain constraints.

supported by strong domestic consumption and targeted policy measures, helping to cushion the impact of these headwinds. On the inflation front, global headline inflation moderated to 4.2% in 2024, down from 5.7% in the previous year. This easing was supported by stabilising energy prices and the gradual alleviation of supply chain constraints. Central banks remained cautious in their approach, aiming to strike a delicate balance between fostering economic recovery and maintaining stable inflation expectations. Looking to the future, global inflation is projected to decline further to 3.5% by 2026, contingent on the containment of geopolitical risks and supply disruptions.

The global trade landscape in 2024 was marked by fragility, with protectionism rising, geopolitical tensions escalating, and trade alliances shifting. The US-China trade tensions, along with tariffs and export restrictions, caused disruptions to supply chains. The growing trend of near shoring and friend-shoring also introduced new layers of complexity. Geopolitical unrest, including the war in Ukraine, added to the sense of economic instability and market volatility. Oil prices were expected to drop by 2.6% in 2025, due to softer demand from China and increased supply from non-OPEC+ countries, although geopolitical factors could change this trend. Commodity-exporting nations faced heightened challenges, as new trade patterns and ongoing supply chain disruptions affected their economic stability. Financial markets in 2024 displayed a blend of outcomes. While equity markets in advanced economies saw a rise, emerging markets struggled with volatility as capital flowed out and the US dollar strengthened. Inflationary pressures and expectations around interest rates remained prominent concerns. Prolonged tightening of policies posed risks to both growth and investment. However, countries with strong, forward-thinking policies and solid global partnerships were better equipped to face the uncertainties and maintain economic progress.

The global economy in 2024 stood strong in the face of adversity, guided by adaptive trade practices and a more stable inflation climate. Though financial markets and geopolitical instability presented hurdles, targeted policy measures and diverse economic strategies helped mitigate the impact. This year highlighted the importance of staying flexible, making sound policy choices, and working together globally to sustain growth in a complex world.

Indias economic performance in FY 2024-25 has been solid, with an estimated GDP growth rate of 6.5%, maintaining its place as the fastest-growing major economy. The economy is benefiting from a combination of strong infrastructure spending by the government, a rebound in rural demand spurred by a successful Kharif crop, and the continued growth of the services sector, particularly in finance and real estate. The Reserve Bank of Indias accommodative stance, including a rate cut, has provided a much-needed boost to investment and consumption. Furthermore, improved manufacturing performance and steady urban consumption have kept the economic momentum strong. Despite the ongoing risks posed by global trade uncertainties, Indias strong domestic foundations, supportive policies, and a thriving private sector are expected to keep growth on track.

In FY 2024-25, the agricultural sector growth rate is estimated at 3.8%, recovering from a period of underperformance. The favourable monsoon season have resulted in a bountiful Kharif crop, which has significantly boosted rural incomes and spurred increased demand. Alongside this, strategic government initiatives focused on strengthening agricultural infrastructure and providing support to farmers have created a solid foundation for sustainable growth in the sector.

In FY 2024-25, the industrial sector is estimated to grow by 6.2%, driven by a boom in construction and key utilities like electricity, gas, and water supply. Manufacturing has also held its ground, with higher production levels in major industries fuelling the overall sectors growth and contributing to a positive outlook for the year.

The services sector continues to be a key pillar of Indias economic strength, with financial, real estate, and professional services estimated to grow by 7.2% in FY 2024-25. At the same time, trade, transport, and communication services are estimated to grow by 6.4%, driven by an increase in economic activity and strong consumer demand.

Estimated to grow by 8.6% in FY 2024-25, the construction sector is benefiting from heightened infrastructure investments and strong government support. Key spending initiatives are driving growth, generating employment, and creating positive ripple effects throughout related industries.

Between April and December 2024, Indias retail inflation eased to a tempered 4.9%, driven by a spell of stability in food and fuel prices. This ebb in inflationary currents afforded the Reserve Bank of India a rare window for monetary easing—culminating in a 25-basis point rate cut in February 2025, the first such move in almost half a decade. This deliberate recalibration signals a renewed trust in the inflationary outlook and is set to invigorate both investment flows and household spending, thereby strengthening the nations economic cadence.

From a fiscal standpoint, the government has reaffirmed its consolidation trajectory, setting a fiscal deficit benchmark of 4.9% of GDP for FY 2024–25, marking a significant improvement from the prior years 5.6%. Simultaneously, the FY 2025–26 Union Budget has allocated 11.21 lakh crore, which is equivalent to approximately 3.1% of GDP, for capital expenditure. This substantial allocation underscores a strategic thrust toward infrastructure-led growth, aimed at strengthening structural capacities, expanding employment avenues, and generating multiplier effects across the broader economic spectrum.

Indias trade story seems ready for a slow but steady comeback. Exports are expected to rise, helped by solid global demand for staples like engineering goods, medicines, and electronics. On the other hand, falling oil prices and a stronger domestic manufacturing push through the PLI schemes should help reduce the need for imports. All this points to a shrinking trade deficit and a more stable external scene. The government is also stepping in with new trade deals and policies that promote exports, both of which could help India stand taller on the global stage.

Indias economy is expected to continue its strong growth in FY 2024–25, supported by growing domestic demand, more public investment, and smart policy changes. Even with global challenges and trade uncertainties, Indias shift toward digital innovation, a booming start-up culture, and a focus on manufacturing should boost its long-term resilience. With careful fiscal policies, rising productivity, and growth driven by innovation, India is set to keep its position as the worlds fastest-growing major economy, setting the stage for inclusive and sustainable development.

Indias economy is set to grow between 6.3% and 6.8% in FY 2025-26, driven by strategic reforms, digital growth, and an expanding consumer market. Programs like Make in India and the Production-Linked Incentive (PLI) schemes are strengthening the manufacturing landscape, attracting investments in electronics, semiconductors, and renewable energy. At the same time, large-scale infrastructure development spanning highways, ports, and smart cities is driving economic activity and job creation. With strong policy backing and ongoing investments, India is well-positioned for long-term growth, reaffirming its role as a global economic powerhouse.

Industry and Business Review

Global Tractor Industry

The global agricultural tractor industry continues to demonstrate resilience and growth, underpinned by the rising trend of farm mechanisation, technological advancements, and supportive government policies. As agriculture evolves to meet the demands of a growing population and climate resilience, tractors remain central to enhancing productivity and efficiency across diverse geographies. The industry is witnessing a shift towards smarter, fuel-efficient, and application-specific machines, reflecting a broader transformation in global farming practices. Despite economic and infrastructural challenges in certain markets, the overall outlook remains positive, driven by innovation, increasing adoption in developing regions, and sustained investment in agricultural development.

In terms of product segmentation, tractors with lower horsepower continued to be widely adopted, especially in regions with small and medium-sized farms. Two-wheel drive tractors maintained a strong preference due to their cost-effectiveness and suitability for various agricultural operations. Among applications, irrigation emerged as a key driver of tractor use, while the adoption of automatic and self-driving tractor technologies gained momentum as farmers sought to enhance operational efficiency and reduce reliance on manual labour.

Government support in the form of subsidies, financial assistance and incentives for purchasing agricultural machinery has been instrumental in accelerating tractor adoption worldwide. This support helps to stabilise food production, protect farmer incomes, and promote agricultural modernisation. Additionally, the rising demand for fuel-efficient and technologically advanced tractors is contributing to the evolution of the industry. Despite challenges such as high equipment costs and limited awareness among small-scale farmers, the global agricultural tractor market remains on a growth trajectory, driven by the increasing mechanisation of farming practices and ongoing innovation in agricultural technologies.

Indian Tractor Industry

India continues to stand tall as one of the worlds largest tractor markets, underpinned by a strong manufacturing foundation and an extensive range of models designed to meet diverse farming needs. Home-grown manufacturers have consistently evolved in step with the changing expectations of farmers, offering machines that balance power, efficiency, and affordability. While mid-range horsepower tractors (30-50HP) continue to dominate, there is a noticeable shift towards 40 horsepower plus and four-wheel drive variants, as farmers seek versatile machines that can perform across both agricultural fields and commercial sites.

The Indian tractor market is poised for robust growth driven by increasing agricultural mechanisation, supportive government initiatives, and rising demand for higher horsepower and technologically advanced models. Regional disparities in mechanisation offer opportunities for tailored solutions, while collaborations with technology firms are expected to accelerate the adoption of precision farming. Although challenges such as financing, infrastructure, and skill development persist, expanding distribution networks and strong after-sales support are expected to bolster customer satisfaction and loyalty. Overall, the sector is set to benefit significantly from evolving farmer preferences and continued modernisation efforts.

Indian Railway Industry Overview

In FY 2024–25, the Indian Railway components sector remained robust driven by demand for rolling stock and the expansion of the national railway network. The growth has been fuelled by strategic investments in manufacturing capabilities, including the upgrading of facilities and the development of advanced technologies to meet the evolving needs of the Indian Railways.

The sectors expansion was further supported by the emphasis on modernising and scaling up the production of railway components such as wheels, axles, and brakes, all of which are crucial to enhancing the efficiency and safety of the railway network. As part of the broader vision for railway modernization, several initiatives focused on upgrading existing infrastructure and improving the operational capabilities of the Indian Railways. This includes a significant boost to the production of high-performance components and the introduction of more sustainable practices in manufacturing, which are crucial for achieving the Indian Railways long-term goals of reducing carbon emissions and improving the overall operational efficiency of the rail system.

On October 23, 2024, the Board of Directors approved the sale/transfer of the Railway Equipment Division (RED Business)—engaged in manufacturing, assembly, sales, servicing, and R&D of railway equipment and related parts—as a going concern on a slump sale basis, in accordance with Section 2(42C) of the Income-tax Act, 1961. In line with this decision, the RED Business has been classified under discontinued operations with comparative figures for previous periods reclassified as per Ind AS 105 – Non-current Assets Held for Sale and Discontinued Operations. The decision aligns with Escorts Kubotas shift in focus core business areas, allowing the company to streamline its operations and allocate resources more effectively in line with its long-term growth objectives.

For the year ended March 2025, Revenue from Railway Equipments Segment came at 912.8 crore as against 950.4 crore in the previous year. PBT for the year ended March 2025 came at 188.7 crore up by 5.6% as against 178.7 crore in the previous year.

The Companys cost optimization program aims to mitigate inflationary pressures on various cost elements to maintain product prices and competitiveness. Throughout the year, the Company faced cost pressures due to inflation and new regulations. To counteract these challenges, the Company implemented initiatives such as localizing imports, value engineering, yield improvement, energy efficiency, and stricter overhead controls. Collaborating with suppliers, the Company continually seeks cost-saving and efficiency improvement opportunities.

Escorts Kubotas strategic cost structure emphasises operational

As of March 31, 2025, Escorts Kubota had a team of 17,205 employees, spanning permanent, temporary, casual, and contractual roles. The successful completion of the merger has led to the seamless integration of talent from both legacy organizations, enhancing the Companys human capital and aligning the workforce with a unified strategic vision.

This transformation, anchored in the spirit of One EKL, is being driven by a strengthened Human Resources function that prioritizes talent development, employee engagement, and continuous mastery, innovation, and sustainable value creation. Leveraging economies of scale, optimising procurement, and adopting advanced manufacturing techniques, the Company has developed a lean and efficient business model. A robust supply chain, local sourcing, and strong vendor partnerships enable cost control without compromising quality. Investments in automation and digital technologies enhance operations, boost productivity, and reduce waste, ensuring long-term cost sustainability. At Escorts Kubota, every resource is maximised for optimal performance and profitability. Strategic focus on infrastructure, production, and learning. Strategic HR initiatives are focused on fostering a high-performance culture that supports innovation, operational efficiency, and leadership development.

Escorts Kubota places strong emphasis on employee well-being and is committed to nurturing a workplace distribution optimisation ensures sustained growth while upholding performance standards. With a commitment to in-house R&D, backward integration, and strategic sourcing, the Company effectively manages costs without sacrificing quality. Smart marketing strategies and a strong dealer network enable efficient customer connections. This approach has facilitated the introduction of innovative products that meet market demands. Emphasising operational excellence and growth segments, Escorts Kubota maintains a competitive edge, driving sustainable growth and customer satisfaction.

culture that is inclusive, agile, and growth-oriented. Detailed insights into the Companys human capital strategy are available in the Human Capital section of the Integrated Annual Report.

Making a difference in the communities it serves remains a key priority for Escorts Kubota. Through initiatives focused on health, education, and environmental care, the Company continues to align its business values with a strong sense of social responsibility. In FY 2024-25, several meaningful programs were introduced as part of its CSR strategy, each designed to create impact where its needed most. A detailed account of these efforts is available in the CSR Report.

Escorts Kubota is dedicated to fostering open dialogue and providing top-tier investor services that align with industry standards. With investor relations desks in both India and Japan, the company ensures that communication with its investor community is seamless and insightful. Under the guidance of the Chairman & Managing Director, Deputy Managing Director, Whole-time Director, Group Chief Financial Officer, and Investor Relations Team, global investors engage in a continuous exchange of trust with the company.

To maintain transparency and accessibility, Escorts Kubota makes critical company information easily accessible on stock exchanges and its official website, www. escortskubota.com. The Investor Information section serves as a comprehensive hub, offering shareholders a wealth of details including director profiles, shareholding patterns, financial reports, press updates, and unclaimed dividend data. Interactive earnings calls, alongside transcripts and audio recordings, are available for investors to access conveniently. The Company prioritises keeping investors informed by promptly communicating important developments to stock exchanges and updating its website with any information that could impact quarterly earnings or revenue. Investors have access to a wide range of information, from regulatory filings and quarterly reports to investor presentations and scheduled analyst interactions. A shareholder handbook with answers to frequently asked questions can be found in the Governance section of the Investor Relations page, along with regular updates on unpaid dividends. For any queries or feedback, the company commits to responding within three working days through investor.relation@escortskubota. com

Over the past year, EKL IT transformation efforts have significantly enhanced the efficiency, scalability, and future-readiness of our organization. Following the merger of EKI, and KAI into EKL, we successfully integrated the network and security infrastructure, laying a solid foundation for seamless application functionality. A major milestone was consolidating all three companies under a unified ERP system, standardizing processes, improving transparency, and ensuring reliable audit trails.

Furthermore, we swiftly completed the IT setup for our new subsidiary, EKFL, well ahead of schedule. This encompassed implementing ERP, core applications, and a secure infrastructure to facilitate compliant and efficient business operations from day one.

The launch of our unified Dealer Management System, EKDMS, replacing legacy systems ESMS & KDMS, has streamlined dealer operations, enhanced user experience, and provided valuable data-driven insights across our network.

To enhance supply chain planning, we introduced a standardized PSI template in collaboration with the Sales team, supported by automation tools. This initiative has resulted in improved forecast accuracy, reduced manual effort, and optimized inventory management throughout the value chain.

We also upgraded our Product Lifecycle Management system to the latest version, improving user experience and accelerating innovation cycles. Our sales analytics now leverage AI/ML for personalized customer engagement.

To bolster cybersecurity and ensure reliable connectivity, we implemented SD-WAN across all plant and office locations. Our achievement of ISO/IEC 27001:2022 certification underscores our commitment to robust information security practices and data protection. Looking forward, our technology roadmap continues to align closely with our business vision, focusing on driving innovation, operational excellence, and long-term value for all stakeholders. These strategic investments and initiatives reflect our dedication to building a digitally empowered organisation primed for sustainable growth.