Escorts Ltd Management Discussions.

Economic Environment

Global Economy1

The COVID-19 pandemic caused the fourth worst global recession in the last century-and-a-half, surpassed only by the two World Wars and the Great Depression2. An unprecedented crisis in terms of its speed and synchronised nature, it forced countries to go into lockdown over variable periods in order to control the spread of the virus. The pandemic distressed all, from large conglomerates to small businesses, leading to a contraction in the global economy by 3.3%3 in 2020. The impact was uneven across countries as each country was impacted based on their individual geographic, social, economic, and political factors. The advanced economies contracted by 4.7%, Emerging Market and Developing Economies (EMDE) contracted at a lower rate of 2.2%.

Governments and central banks across the globe announced a slew of expansionary fiscal policies to cushion the impact. Several countries announced sizeable fiscal and financial sector counter pre-emptive measures to forestall the economic freefall. One year into the pandemic, it is estimated that the contraction could have been three times worse had it not been for the extraordinary policy support.4 Measures to provide assistance to the unemployed, and regulatory actions to ensure continued credit provision, limited widespread bankruptcies. In retrospect, the solidarity and resilience shown by the world in its fight against the pandemic is unprecedented. This is also reflected in the multiple positive revisions of estimates by the International Monetary Fund (IMF) during the year and, ultimately, the lower- than-expected economic impact across the globe in comparison to previous projections during the peak of the crisis.


The rising human toll worldwide and the unemployed millions are grim markers of the extreme social and economic strain that the global community still confronts. Meanwhile, virus mutation and new outbreaks continue to be cause for concern. Even though high uncertainty remains about the future course of the pandemic, light at the end of the tunnel is increasingly being visible with the ongoing vaccination drives across the world that are reducing the frequency and severity of the infections. Recently announced additional fiscal stimulus in some economies, including in heavyweight US, and continued monetary accommodation are easing the bounce back process for economies. The fast adaption of business and consumers to post-pandemic life is also responsible for the overall stronger-than-anticipated rebound of the global economy across regions despite subdued mobility and the continued restrictions in parts of the world.

Indian Economy5

Trepidation over the COVID-19 outbreak in India can be traced back to the far end of March 2020. As a preventive measure, the Indian government closed the borders and enforced a complete lockdown in the country. The policy of ‘lives over livelihoods brought an already frail economy to a standstill, restricting all movement except for essentials. The countermeasures to prevent the spread of the virus sent the economy on a tailspin, leading to an economic contraction by a whopping 7.3%6 in FY 2020-21 in terms of GDP and 6.2% in terms of Gross Value

Added (GVA). The Indian economy saw the worst contraction - by 22.4%4 - in recorded history in the first quarter of FY 202021. The economy saw a V-shaped recovery led by low base, government support and continued normalisation in economic activities with a phased lifting of lockdown restrictions from June 2020 onwards. The pent-up and festive demand from an optimistic public provided the much-needed push to the economy in the second half of the year.

GVA at Basic Price for 2020-21 (at 2011-12 prices)


Q1 Q2 Q3 Q4 FY 21
Agriculture & Allied Activities 3.5 3.0 3.0 3.1 3.6
Mining & Quarrying -17.2 -6.5 -6.5 -5.7 -8.5
Manufacturing -36.0 -1.5 -1.5 6.9 -7.2
Construction -49.5 -7.2 -7.2 14.5 -8.6
GVA -22.4 -7.3 -7.3 3.7 -6.2

The Government of India announced one of the worlds biggest fiscal and monetary policy stimuli to cushion the economic fall and fast-track recovery. The calibrated support aimed to mitigate losses suffered by the vulnerable during the lockdown and catalyse consumption and investment post unlocking. AatmaNirbhar Bharat Abhiyan, with a clarion call for a selfreliant India, was first announced in May 2020, helping boost homegrown consumption with a stimulus package of Rs.20 lakh crores, worth 10% of Indias GDP. Together with the subsequent packages, this stimulus package aimed at providing support and stimulate development across the five pillars of an Aatmanirbhar Bharat - an economy that can make quantum leaps, infrastructure that can become the identity of modern India, systems that are technology-led, democracy that derives its strength from Indias vibrant demography and lead to Indias self-reliance and a beneficial demand cycle that should be fully utilised. Benefits across industries and sectors were announced with a special focus on Micro, Small and Medium-sized Enterprises (MSMEs) and agriculture, and the vulnerable lower strata of society, including farmers. Additional tranches announced in October and November 2020 to support the festive demand and assist the fast turnaround took the package to an estimated ~15% of the GDP.

Increased government expenditure was used as a tool to pandemic-proof demand, with earlier initiatives such as the National Infrastructure Pipeline expected to continue providing mid- to long-term aid in economic recovery. Measures to maintain ample liquidity and provide credit relief were taken, with the Reserve Bank of India (RBI) announcing a slew of measures worth Rs.8,01,603 crores1.

Additional policy changes that aimed to ease business operations helped maintain capital flow and buoyancy in the market.

To maintain consumption at the grassroots level, 80.96 crores beneficiaries covered under the National Food Security Act, 2013 (NFSA) were provided an additional 200 LMT free foodgrains worth over Rs.75,000 crores under the Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) till November 2020. The 8 crore migrants not covered under NFSA were provided 5 kg foodgrains per person per month for four months between May-August 2020 at a cost of Rs.3,109 crores to the exchequer. This was in addition to the Rs.30,000 crores

Additional Emergency Working Capital provided to farmers through NABARD, Rs.2,00,000 crores credit boost to 2.5 crore farmers under Kisan Credit Card Scheme, MSP purchases worth Rs.74,300 crores, PM KISAN Fund transfer of Rs.18,700 crores, Rs.1,00,000 crores Agri-Infrastructure Fund for farm- gate infrastructure apart from the other measures announced for farmers.

The massive government spending on agriculture-driven rural economy, rural development schemes and welfare measures taken up as relief operations following the great exodus back to the villages, drove the rural economy. Given that most rural economic activities remained unaffected as they fell under essential services, the first wave of the COVID-19 left its mark mostly on the urban economy. Millions of households in rural India retained a semblance of their old life and even saw an increase in discretionary spending capacity. Employment under MGNREGS increased agriculture activity, cash and credit transfers provided income support, while major expenses were reduced by virtue of the distribution of free staple food and money saved on rent and additional expenses incurred in workplaces in the cities. Indias rural economy, normally overshadowed by its more vibrant urban counterpart, emerged as the saviour of the economy during the first wave of the pandemic.


The outlook for FY2021-22 seems optimistic. However, the second wave of COVID-19, sweeping across the country, may elongate the recovery process.

State governments, learning from their past experience, are enforcing localised lockdowns. With most manufacturing activities being spared from restriction, and the formal sector having made a drastic digital transition, there appears to be a silver lining. Strengthening of the vaccination drive, public adaption to new lockdown norms and increased global demand are expected to mitigate the current waves negative impact on the economy. The health outcome will continue to determine Indias growth trajectory this year as well. Encouragingly, however, most major rating agencies and forums, although cautious, remain buoyant on Indias overall growth story.

Industry and Business Review

Tractor Industry

Indias agriculture sector contributes to ~16%7 of Indias GDP and employs 43% of its workforce. With increasing farmer education and focus on mechanisation, the sector has seen growth in yield and production over the years. Even though Indian agriculture has come a long way, it is still plagued by chronic labour shortage in peak season and low productivity, which can be reduced by further improving farm mechanisation. The Government of India has been providing policy support in the form of growing institutional credit, introduction of new schemes such as Paramparagat Krishi Vikas Yojana, Pradhanmantri Gram Sinchai Yojana, Sansad Adarsh Gram Yojana and others while increasing exports of wheat and rice. Cash support in form of direct bank transfer of Rs.6000 per year to ~9.58 crore farmers under PM-KISAN scheme is also contributing to the spending capacity of rural India engaged in agriculture. With the sustained government focus, the sector is expected to see continued revival in investments.

Tractors have historically played a dominant role in farm mechanisation and increasing productivity across the world. The first tractors in India were bought in 1940s , but their use became more widespread in the early 1960s with full-fledged entry of homegrown companies into the scene. Over the decades, India has become the largest producer of tractors in the world and a major exporter, though the domestic industry retains its growth potential with significant headroom. The country has significantly lower mechanisation levels compared to the rest of the world. Inter-state differences in mechanisation levels also present considerable opportunity for growth

Industry Performance

The Indian tractor industry saw a phenomenal bounce back after lockdown last year and witnessed the highest- ever recorded growth across the domestic and exports markets. The domestic industry saw an impressive growth in volumes of 27% to 8.99 lakh tractors in FY 2020-21 as compared to 7.09 lakh tractors in the previous year. The domestic industry was buoyed by continued government support in the agriculture sector and favourable macro- and micro-economic factors, resulting in strong rural cash flows. Favourable crop production, crop prices, water facility, reverse migration of labour, availability of retail finance, increased savings and good monsoon augured well for the industry. This was further aided by a record crop procurement by the government last year.

Domestic Tractor Industry Segment-wise Performance

(in lakh units) (%)
FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 y-o-y growth 5-year CAGR
<30 HP 0.5 0.5 0.8 0.8 0.7 0.8 15 8.7
31-40 HP 1.8 2.0 2.6 2.8 2.4 2.5 6.7 7.0
41-50 HP 2.3 2.8 3.4 3.7 3.5 4.8 39.3 16.3
>50 HP 0.3 0.4 0.6 0.6 0.6 0.9 49.3 21.2

Tractor Industry Outlook

All major macro-economic factors remain strong for the industry, including prediction of a consecutive year of very good and timely monsoon. Other factors also continue to remain positive on account of a record rabi harvest and sustained crop prices. Although the second wave of the pandemic reaching the rural heartland and the ongoing restrictions have been a dampener, government efforts and increased awareness around the pandemic are expected to help stabilise the situation. As last year, we expect to see some reprieve through pent-up demand once conditions improve. Overall, we expect growth to remain positive in the range of midsingle digit for the tractor industry throughout FY 2021-22.

Escorts Agri Machinery (EAM)

We are the forerunners of the tractor industry in India, having started our journey at the inflection point of the introduction of farm mechanisation in the country. We today offer our more than 1.8 million domestic customers more than 225 options in the 12-75 HP segments under our four marquee brands

- Farmtrac, Powertrac, Steeltrac and Digitrac.

Over the years, we have added crop solutions, engines, spare parts and lubricants, SHIP (Sprayers, Harvesters, Implements and Planters) and gensets to our portfolio.

JV with Kubota

To further augment our technology, global presence, and capacity, we tied up with Japans Kubota through a JV towards the end of 2018 to set up Indias most advanced tractor manufacturing facility. This partnership was further strengthened in early 2020 through cross investing in each others operations. The JV plant started producing Kubota series of tractors in September 2020.

EAM Performance

In concurrence with the market, we registered a strong performance during the year, registering a 24.1% growth in volumes for FY 2020-21, and highest ever EBIT margins at 18.2% went up by 521 bps as against 13% last year. The record profitability is on back of our acute focus on cost efficiencies, better product mix and higher operating leverage. Clocking a 29.9% growth, the export segment grew at a faster rate than the industry average in FY 2020-21, driven by new product introduction and penetration in new markets. On the domestic front slight drop in market share, which stood at 11.3% as of March-end 2021 as against 11.6% in the previous year.

Owing to the supply chain challenge caused by the pandemic we were unable to capitalise on the sudden demand revival in the domestic market and the peak festive season sales in the initial three quarters. Our policy of maintaining a lean inventory both at our own depots and dealerships also impacted us adversely in this unforeseen scenario. Nevertheless, we accepted the challenge and bounced back as the supply situation improved, posting a higher- than-average market share of 12.7% in the last four months of the year.

In terms of segment distribution, we saw an uptick in our above-40 HP tractors segment, which accounted for 62% of our domestic sales in FY 2020-21 against 51% in the previous fiscal. This resulted in significant model mix gains and is also reflective of the success of our new products in the higher HP range. With continued efforts around channel expansion, our total dealer count in India is now more than 1,100. We will continue to further expand our dealer network in line with our dual distribution strategy for both our key brands with a primary focus on our target markets.

EAM Domestic Market Share Performance

FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21
< 30 HP 1.9 2.1 3.5 4.7 6.3 6.7
31-40 HP 12.8 12.6 14.5 16.5 15.2 13.3
41-50 HP 10.9 11.7 10.4 10.8 11.0 11.8
> 50 HP 6.1 6.9 7.9 5.9 6.7 7.1

New Products

We launched two new series in both our key brands-Farmtrac "Powermaxx" Series and the new Powertrac "Euro Next" series, setting new benchmarks of performance and quality in the Indian market. Our future product pipeline remains robust, we will be soon launching new and innovative products bridging any residual gaps in our product offerings.

Opportunities and Threats

• One of the oldest and prominent players in the segment with a significant market share and brand value

• Capability to increase production with increase in demand

• Well diversified product range catering to a wide range of customer requirements

• Strong product innovation ability, helping in being ahead of the curve in terms of upgrading product technology

• Proactive initiatives to step up the emissions compliance of our products and minimise our carbon footprint, to combat climate change

• Institutionalisation of a robust framework for risk governance as part of our sustainability strategy

• Strategic alliance and strengthening of product and distribution network to aid entry in new markets, especially Europe,

Africa and South East Asia

• Sudden supply chain and network distribution disturbances can impact the business negatively

• Early obsolescence, and government policy changes are temporary risks to the business

• Government focus on increasing farmer income to increase demand

• Increased agriculture production requirement with growth in population will require focus on mechanisation

• Increased farmer education and adaptability to increase demand

• Increased competition and product option with multi-national players entering the market, especially as the industry flourishes and may lead to pricing pressure

• The agriculture industry is dependent on multiple environmental factors especially the monsoons in India and can impact demand

• Geopolitical occurrences, industry volatilities and rising fuel prices remain a threat

EAM Outlook

Inflation continues to pose a concern with commodity prices seeing a strong upward trend. However, we expect that going forward commodity prices will stabilise. We have already made two price increases lately, one in mid-November last year and another in the beginning of April this year to partially pass on the impact. While such frequent price increases are unprecedented in our industry, we see another price escalation in the latter part of the first half of this year, offsetting the impact of inflation for the ongoing year.

We see a continued uptrend in the demand going forward, in order to capture and meet the robust demand, we have undertaken an immediate expansion of our production capacity at our facilities from 1.2 lakh per annum to 1.5 lakh per annum which is to be completed in current year.

Our focused market strategy of developing dual distribution strategy for our brands, along with our unswerving product innovation, positions us well to expand our market share. Our financing solutions for channel partners, technology-driven sales management and comprehensive after-sales support give us a unique advantage. Additionally, we see a strong development in our global position, post the kick-off of sales late last year through the global Kubota network.

Construction Equipment Industry

The construction equipment industry has a strong positive correlation with the progress in road construction and mining activities. The application industries have received massive boost from the government in the form of expenditure support, especially in infrastructure. The recently announced Production Linked Incentive (PLI) scheme worth Rs.6,322 crores for speciality steel industry will also further boost activity in the downstream steel industry.

The three major heavyweights in the industry are earth moving equipment (backhoe loaders), contributing the lions share by value, material handling (cranes) and road building (compactors). These three high muckamuck alone account for 63% of the industry. With the addition of the excavators to the mix, the concentration goes to 87% of the total market.

Industry Performance

Overcoming the slump caused by the pandemic in the first half, the construction equipment industry grew ~35% in the second half of the year, averaging a growth rate of 9% in terms of overall sales in FY 2020-21. Overall construction equipment sales for the year were ~92K units, with exports accounting for ~5% of the volume. The ‘Concrete equipment segment registered the highest growth in the industry, growing by 62%, even though ‘Earthmoving equipment continues to be the most dominant driver for overall sales. Scope of growth remains robust. Even with strong recovery and signs of stability post the COVID-19 first wave, total sales are yet to reach the pre-pandemic levels of FY 2018-19.

Our served industry of Backhoe Loaders, Pick-N-Carry (PnC) cranes and Compactors grew by 11% during FY 2020-21. The growth was predominantly driven by the Backhoe Loaders and Compactors segments, which grew by ~15% and ~10% respectively. Overall, crane industry growth remained flat for the year, adversely impacted by the pandemic and cash flow issues in Pick N Carry crane segment, shifted towards the price-sensitive Hydra segment.

Served Industry Volume Growth

FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 y-o-y growth 5-year CAGR
Backhoe Loaders 22.8 30.7 38.6 47.2 39.7 45.6 15 14.6
Cranes 3.4 4.5 8.1 10.2 7.4(*) 7.4 0 16.8
Compactors 3.0 3.6 4.2 5.0 4.4(*) 4.8 9.9 9.9

*Revised as per industry body

Construction Equipment Industry Outlook

The industry has been adversely impacted due to COVID-19 second wave. We expect the situation to improve with the accelerated vaccination programme and other measures being adopted by the government in the near term. From the mid-and long-term perspective, given the governments thrust on monetisation through disinvestment and huge investment through projects under NIP, we expect the industry to show stronger recovery going forward.

Escorts Construction Equipment (ECE)

We are one of the leading players of construction equipment, primarily in the material handling, earth moving and road building segments. We provide an exhaustive range of products to our customers and are one of the worlds largest manufacturers of pick-and-carry hydraulic mobile cranes.

JV with Tadano

The JV with Tadano provides us an opportunity to fill key white spaces in the high margin cranes segment. The portfolio, including rough terrain and truck mounted cranes, in the fast growing 20-80 tonnage category caters to big construction companies servicing oil refineries, metro rail projects, smart city construction, solar power projects and ports, among others.

Alliance with Doosan Infracore

Our distributorship agreement with Doosan Infracore has enabled us to cater to a much larger proportion of the overall construction equipment industry, with crawler excavators and wheel loaders.

ECE Performance

Our total volumes, including both manufactured and traded products, saw a marginal degrowth of 3%, recording a sales volume of 3,911 machines in FY 2020-21 against 4,042 machines in FY 2019-20. However, we outperformed the market in the second half of the year, with our volumes growing at 41% despite the continued supply chain challenges. Our revenues also saw some pressure due to the ongoing pandemic, standing at Rs.776.1 crores as against Rs.839.8 crores the previous year. We were able to maintain our EBIT margins overcoming hurdles such as loss of operational leverage and an unfavourable product mix. We saw an increase of dominance low-margin PnC from the Hydra category to 58% as against 47% seen in the previous year.

New product

Innovation and technology upgrade is a continuous process at ECE leading to enhanced customer experience. Despite the limitations caused by the pandemic, we followed all safety norms to launch multiple products in ECE segment.

Whiteline Series

We have successfully launch the next generation of construction equipment technology and product line—our

Escorts White Line- XT1610 Backhoe Loader

Escorts White Line Backhoe Loader XT1610 provides exceptional stability, durability, reliability, performance and serviceability.

Differentiating Features:

• Saves over 10% of fuel per hour

• Intelligent monitoring system with virtual control

• Simultaneous multiple movements

• Additional 20% productivity and performance per litre

• Effortlessness and extra loading

• Best-in-class dig/doze productivity

• 20% more spacious and liveable cabin

• Easy access point for daily and regular maintenance advanced "Escorts Whiteline" series. The hi-specification range has been designed for the value conscious buyers, both in the hiring and end-user segments who are looking for higher safety, integrated telematics, compactness, ease of manoeuvrability, travel speed, and fuel efficiency along with other ergonomic features. The series is unique because it provides the ultimate combination of industry first features, strength and stability.

Escorts Whiteline- 5511 Soil Compactor

The soil compactor has the highest travel speed in Indian CE industry, reducing idle time at site and during travel from one site to other which is very advantageous specially for the hiring segment customers.

Differentiating Features:

• Incomparable travel speed

• Reduced number of passes for achieving desired compaction

• Low fuel consumption and maintenance

Escorts Whiteline- 5090 and 5030 Tandem Compactors

The higher static liner load, low turning radius and compact design make the machines extremely adaptable for all types of application.

Differentiating Features:

• Lower maintenance cost

• Versatile application

NXT series

We also launched the NXT series which comes with a three-section telescopic boom and arrangement. The series aims to especially target customer interest in the hiring segment of the intensely competitive lighter capacity mobile crane business.

Launch in Export Markets-Digmax 3E

The newly designed exterior and interior provides the user a host of benefits in terms of comfort and ease of maneuvering the equipment.

Differentiating Features:

• Redesigned ergonomics for better operator comfort

• Outstanding all-round visibility

• Improved air ventilation

• Ease of communication to the back of the machine

• Specially positioned controls for easy access and faster control

• Provision for storage compartments and bottle holder

Opportunities & Threats

• Availability of low cost well-educated and skilled labour, along with training opportunities to fill the workforce requirement

• Strong momentum in private sector housing and commercial building in favourable locations across the country

• Advantageously structured national transportation network

• Availability of raw material and natural resources in the country

• Distance between construction projects can reduce business efficiency

• Higher cost in case of sudden increase demand of large labour

• Lack of clearly defined processes and procedures for construction and its management in a predominantly unorganised sector

• Enormous capital requirements

• Increased and easy availability of financial supports like loan and insurance, and growth in income of people is boosting demand in the real estate sector, especially in the private sector housing

• Public sector projects being implemented through Public Private Partnerships open new doors in the industry

• Focus on renewable energy projects, leading to development of major projects such as dams, solar plants, and nuclear plants

• Government policies inviting foreign companies in India through initiatives such as, Make in India and allowance of FDI in multiple sectors will increase demand for commercial project such as factories and plants

• Emphasis and increased demand in the educational and research sector will lead to a construction of new universities, schools, and institutions

• Long term market instability and uncertainty may damage the opportunities and prevent the expansion of training and development facilities

• Current economic situation may have an adverse impact on construction industry

• Political instability, unstable security conditions and delayed legislative enforcement measures remain a threat across industries in the country

• Safety is a challenging task in construction industry

• Lack of political willingness and support on promoting new developmental strategies

• Natural disasters such as earth quake and floods are unpredictable and can delay or interrupt the construction boom

External Challenges

High-end construction equipment is facing challenges in terms of imports from low-cost manufacturing countries that are expanding their distribution centres and after-sales network in India. Although these multi-national imports have been considered to be a threat, quality consciousness among Indian consumers will curb large-scale imports. The foreign players are expected to drive competition against Indian construction equipment exports in the developed markets also. We are able to mitigate the threat being well placed in the segments we serve, particularly after the JV with Tadano to manufacture rough terrain and truck cranes.

ECE Outlook

The ongoing second wave has adversely affected our production due to the shortage of certain critical items, including industrial oxygen. We expect the situation to stabilise and the segment to grow in the higher single digit during FY 2021-22. We foresee further expansion in our margins, led by our longterm strategic operating metrics and cost control measures undertaken over the past years.

On the longer horizon, the Indian government proposing significant spend on infrastructure also opens up multiple new opportunities. We endeavour to leverage high-end cranes and expand our network in the existing geographies while augmenting our export footprint through collaborations and cross-business synergies.

Railway Components Industry10

India, with the worlds largest under single management and overall fourth largest railway system, is only behind the US, Russia and China which have more than three times Indias land area. Indian Railways is the single largest employer in the country and eighth largest in the world, employing close to 1.4 million people.

The Indian rail network has 123,542 km of total tracks over a 67,415 km route and about 7,300 stations. The railways run close to 13,000 passenger trains that carry over 23 million passengers daily on average and carries 3 MT plus of freight daily. Despite the COVID-19 challenges, Indian Railways closed FY 2020-21 with record freight loading of ~1233 MT and earning of Rs.1,17,386 crores.

10 World Bank, Invest India, IBEF

The Railway component industry is intrinsically correlated to Indian Railways spending and has become increasingly indigenous over the years. The governments recent AatmaNirbhar Abhiyan provides a further boost to the homegrown business in the segment. The Railway component industry, as the name suggests, caters to the railway industry, and is directly correlated to its performance.

Railway Components Industry


We expect a strong recovery in the segment after a slowdown in tendering due to the pandemic. The mid to long-term factors remain strong, supported by a slew of expansion and upgradation projects being undertaken by the Indian Railways. The industry also continues to be buoyed by increasing urbanisation, rising disposable incomes across rural and urban India, and growing industrialisation across the country along with private sector participation.

Indian Railways aims to add 1.5% to the countrys GDP by building infrastructure to support 40% modal freight share of the economy. Two Dedicated Freight Corridors (DFCs) have been fast tracked, while three new DFCs were announced in the current year FY 2021-22 Budget. Indian Railways is looking to electrify the entire network by 2025, which will lead to energy savings of US$1.55 billion. The government has also prepared the National Rail Plan 2030 focused on infrastructure development.

In recent years, the Government of India has undertaken multiple policy changes, making the sector more investor- friendly policies, and is looking at increased interest in the form of foreign direct investment and public-private-partnerships. All these factors set the industry on a strong growth trajectory.

Railway Equipment Division (RED)

We are Indian Railways approved source and present across diversified product offering in safety and comfort component for railways and metro, with more than six decades of experience. We are present across major rolling stock categories and supply advance components for Brake Systems, Couplers, Suspension Systems, Shock Absorbers and many others.

We are trusted supplier of Indian Railways and from time to time in its modernisation efforts, supporting with our cutting- edge technology-driven products. Our world-class research and design facility, and collaboration with leading technology providers aid us in creating a niche for ourselves in terms of providing safe and reliable products.

RED Performance

Indian Railways passenger operations have been severely impacted by the COVID-19 pandemic situation, in spite of record freight segment trajectory. The unprecedented events have led to some revision in the production plan, affecting fresh order tendering and order inflow.

Despite this, we were able to not only maintain our revenues but also saw a marginal growth in our revenues from Rs.477.2 crores in the previous year to Rs.479.0 crores in FY 2020-21. During the year we make entry into the Metro segment. Our EBIT margins saw some pressure at 16.0% as against 18.0% in the previous year, impacted primarily by product mix and one-off provision towards GST rate differentials. We executed 59% of the total orders from the New Products category, with high import content and lower margins as compared to the previous year, when it was only 39%.


• ISO 9001:2015 and ISO 14001:2015 certified Conforming to Indian Research Design and Standards Organisation (RDSO)

• Meeting International standards- UIC and AAR, among others

• One of the few in India to have the prestigious International Railway Equipment Standard (IRIS) ISO TS/22163 certification

• Pioneers in the industry with decades of experience

• Technical know-how and experience in navigating the administrative system

• International Railway Equipment Standard (IRIS)

ISO TS/22163 certification

• Prolonged approval process requiring consent from multiple departments

• Long gestation period before new product launch

I H.Ani

• Increased government expenditure and focus on modernised of the railways

• Buoyancy in freight movement with growing industrialisation to boost demand

• Government clarion call for increasing consumption of domestic manufactured products through schemes like Atmanirbhar Bharat and Make in India to increase purchase from home-grown manufacturers

• Increased competition with allowance of 100% FDI allowed in railway infrastructure under the automatic route

New product

We have recently received the Research Designs and Standards Organisation (RDSO) approval for our new products-air spring, brake disc and brake pads for passenger coaches. The products have been launched for field trials and are expected to be commercialised by FY23-FY24.

RED Outlook

As the situation improves, we expect the tendering process to get back to the pre-COVID level by the end of second half of the current year. The order book for this division stood at more than Rs.340 crores as of March-end 2021 and is expected to be executed within the first three quarters of the year. As the department releases fresh tenders, we expect the pent-up demand to provide a boost to the segment, and revenue to grow in the initial double digit, although the operating margins for the segment are likely to remain of around 16~18%.

With strong long-term macro factors in place, we expect the segment to be back on a sturdy footing soon again. We are committed to attaining a zero-defect manufacturing culture through our state-of-the art in-house R&D capabilities, advanced testing facilities, technical collaborations, and precision manufacturing capabilities. We endeavour to continue setting industry benchmarks with our product innovation as we constantly expand our range of new products and explore inorganic growth opportunities. We are taking measures to enhance localisation of the imported content of our new and existing products, and thus further strengthen our margins. We are also increasing compliance with additional international standards widening our export reach.

COVID-19 Update

This second wave of the COVID-19 in India is way more severe and is affecting our operations. At Escorts, the safety and health of our employees, customers, dealers, suppliers, and wellness of our business ecosystem is of utmost importance. The Company is taking all measures in line with government advisories, including mass testing and vaccination drive to cover all its eligible employees.

COVID-19 has impacted our operations and the industry as a whole, but the industry is already on its path of revival. We continue to remain committed to our social responsibility controlling the spread of infection. We are focused on securing the health and safety of our employees and stakeholders. We follow all government advisories that are issued and continue to enforce stringent safety and social distancing precautions across all our facilities, while sanitising our spaces at regular intervals. With support from the local administration, our employees conducted various outreach programmes around Faridabad, India. We continue to look for opportunities to strengthen our connect with local communities, especially during this difficult time.

Managing COVID-19 Challenges

In line with the government and COVID-19 protocol all safety and hygiene measures were followed across our units. Our meetings were shifted to virtual meeting and travel curtailed unless critical, contact was minimised following the moto of "DO GAJ KI DURI, BAHUT JARURI". Adopting to the new normal, equipment and process were upgraded including initiatives like bar-code-based attendance, installation of automated sanitisers, foot operated water cooler and so on. Understanding the impact of the pandemic on the mental and physical health of employees, multiple sessions were conducted to provide them support and insight on adapting to the new normal. Online Learning Management System (LMS)- ESTAR and other digital learning platforms were launched during the year to reduce contact and gatherings at the units.

Please refer to page no. 72 of this report for more details.

Rational Cost Structure

We are exploring ways to lower margins, improve personnel costs, maximise productivity and monitor quality even as we devote attention to developing new products and indigenise design. Our cost efficiency has been in evidence as divestment of non-core operations has freed up capital from non-current investments. Various projects are helping Escorts further rationalise costs, including legacy bottlenecks, materials, manufacturing, and overheads, while strengthening our initiatives with prudent resource allocation and outcome mapping.

Human Resources

We are committed to providing an energetic, enabling, and open work environment for our employees. We have ~11,058 employees on our payroll, including temporary, casual, and contractual workers who are engaged in various roles across the businesses. A detailed review of the initiatives undertaken by Escorts to transform its human capital.

Please refer to page no. 100 of this report for more details.

Understanding Our Women Employees

We have taken a conscious decision enhance the current diversity ratio in terms of gender, demography, age and other such parameters as a part of our sustainability project D&I. During the year we focused on better understanding the requirements of our women employees through an Engagement Survey in addition to multiple other initiatives including:

• Focused Group Discussions were conducted in multiple batches to know their ideas for the organisation and their expectations from us to become their preferred employer.

• We marked Womens Day as an inclusion day, with the launch of the initiative, "Other side of ME", wherein we asked women employees to share their passion or hobbies. The objective was to enhance the inclusion, by helping our women employees connect with their colleagues.

• Interactive sessions were scheduled, where women employees got an opportunity to interact with leadership team, share their expectations and what measures can help to attract and retain more women employees in organisation.

• We checked Hygiene factor for our women colleagues- Separate Female ward at all OHCs (Occupational Health

Centre/ Dispensary) has been established so that women get some privacy when unwell

- New restrooms have been ensured wherever the restroom location was far and many have been renovated

- Installation of additional sanitary napkin dispensers at various locations

- A new creche has been established in Plant 1; the opening has been delayed due to the ongoing pandemic

• Gender diversity is being monitored on monthly basis and shared with leadership regularly to keep the focus on hiring more women across levels in the organisation.

Going forward we will be taking multiple other initiatives to improve diversity across various parameters.

Community Empowerment

Our corporate commitment means more than fulfilling the statutory requirements. Our corporate social responsibility efforts span across the areas of health and wellness, education, and environment safety, among others, and define our approach towards engineering holistic community development and environment.

Please refer to page no. 108 of this report for more details.

Investor Relations

We constantly endeavour to improve our investor services and benchmark our performance against industry best practices. We have a dedicated investor relations desk, which caters to the interest of the investing community through regular contact and by providing timely communication, engaging global investors and shareholders in ongoing management meetings. In FY 2021, we quickly embraced virtual methods for our investor outreach, including meetings, virtual NDRs and conferences. In concurrence to the COVID-19 protocol we also held a virtual Annual General Meeting last year.

The Chairman and Managing Director, the Executive Director, the Group Chief Financial Officer, and investor relations team manage and represent our Company in interactions with investors, the media, and various governments. We ensure that all critical information about our Company is available to all investors by uploading such information on our website ( The site contains a dedicated ‘Investor Information section where relevant information meant for shareholders is available, including information on the Directors, shareholding pattern, quarterly reports, financial results, annual reports, press releases, details of unpaid/unclaimed dividends and various policies. The quarterly earnings release is accompanied by an earning call, with the transcript and audio available on the website. Material developments during the quarter that might impact revenue or earnings are intimated to the stock exchanges and through the website. Quarterly results, regulatory filings, transcripts of earnings call, investor relations presentations and schedules of analyst and investor interactions are available at

Periodic reminders for unpaid dividends are sent to the shareholders, as per our records; they are also accessible on the website. For any queries/suggestions, one can write to and we will revert within three working days.

The ‘forward-looking statements which are part of the Management Discussion and Analysis on economic indicators are based on our best estimate of the current environment. This may be subject to change, based on external macroeconomic factors out of control, including, but not limited to raw material availability and prices, cyclical demand and pricing in our principal markets, and changes in government regulations, tax, and economic policies.

Information Technology (IT)

As we transform, IT plays a critical role in further enhancing our revenue, improving efficiencies, and reducing costs. We have implemented IT-enabled business processes that leverage new technologies to deliver on digitisation as well as digitalisation. Our digitisation processes improve productivity and controls, while we have implemented digital projects to increase customer outreach.

FY 2020-21 has been a year of terms like "unprecedented" and "unanticipated." We learned many valuable lessons in the past one year, quickly adapting to them. When the pandemic induced lockdown started, we rapidly moved the workforce to work from home model, by creating a secure work environment provisioning laptops having security agents and VPN. Being an environment-conscious organisation, we are committed to move towards becoming paperless in our daily activites. The IT team has taken many digital initiatives to enable workflow to reduce paper movement to achieve this objective.

As an organisation which is constantly growing, we need to continuously upgrade and expand our data centre infrastructure. We have recently upgraded our data center storage with "IBM Flash 5100 storage" to meet the demand of high throughput of large amount of file data and business applications with better performance.

We have also planned projects to further transform to meet the ever-increasing demand from the digital marketplace. We have divided the initiatives into multiple pillars like customer centricity, operational excellence, product engineering and analytical layer to leverage the data for informed decision-making. Going forward we will be undertaking required changes as per leading industry practices as we keep evolving in our digital journey.

Internal Controls

A strong risk management and internal control system formed the backbone of our robust corporate governance practices. We re-appointed EY as our internal auditors, to deliver a reasonable assurance of recording the transactions of operations in all material respects and providing protection against significant misuse or loss of assets, among others.

Our IT team department undertook various strategic initiatives for better control and transformation of business. Some of the major initiatives include the Data Loss Prevention Project (DLP) which has reached a very high level of maturity and Escorts is now able to monitor all the data which is generated and transmitted over the network.

Hard disk encryption software - Using this software the entire laptops hard disk is encrypted. In case of any theft or loss of laptop, the data cannot be reused by any unauthorised source as the data cannot be de-encrypted by any means. Additionally, we endeavour to focus on enterprise risk management by speeding up the process of implementing risk assessment methodology, developing, and implementing risk responses on behalf of management and delivering services that improve organisation risk management and control processes. We have a defined risk management policy at the Board level, based on pre-identified types of risks, risk events or factors that require regular assessment and probability-based responses.

Risks and Mitigation

We recognise that proactive risk management is both an essential element of sound corporate governance and a crucial enabler to realise opportunities.

Please refer to page no. 34 of this report for more details.

Financial Performance

Our consolidated revenue from operations stood at Rs.7,014.4 crores in FY 2020-21, up by 20.7% as against Rs.5,810.1 crores in FY 2019-20. Consolidated Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) stood at Rs.1,126.8 crores in FY 2020-21 as against Rs.662.4 crores in FY 2019-20. Consolidated Profit Before Tax (PBT) stood at Rs.1,154.8 crores in FY 2020-21 as against Rs.625.2 crores in FY 2019-20, while Profit After Tax (PAT) stood at Rs.871.6 crores in FY 2020-21 up by 85% as against Rs.471.7 crores in FY 2019-20.

In accordance with the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2018, we are required to give details of significant changes (change of 25% or more as compared to the immediately previous financial year) in key sector-specific financial ratios. We have identified and listed the same below along with some key figures:

(in Rs. crores)



FY2020 FY2021 FY2020 FY 2021
Revenue from Operations 5,810.09 7,014.42 5,760.95 6,929.29
Material Costs 3,841.10 4,644.64 3,819.62 4,593.67
PAT 471.72 871.63 485.54 874.06
Revenue Growth -7.22% 20.73% -7.03% 20.28%
EBITDA 662.40 1,126.76 675.82 1,129.23
Operating Profit Margin 11.40% 16.06% 11.73% 16.30%
Net Profit Margin 8.12% 12.43% 8.43% 12.61%
Basic EPS 55.04 92.15 40.63 68.14
Trade Receivables 731.86 657.58 756.52 698.40
Trade Receivable Days 46 34 48 37
Inventory 883.36 718.16 822.20 674.46
Inventory Turnover 84 56 79 54
EBIT 652.78 1,168.86 663.52 1,168.09
Interest Expense 17.23 13.34 15.46 10.98
Interest Coverage Ratio 37.89 87.62 42.92 106.38
Current Ratio 1.63 2.73 1.65 2.76
Debt 19.95 2.54 6.65 -
Equity 3,122.50 5,025.22 3,480.08 5,391.59
Debt Equity Ratio 0.01 0.00 0.00 -
Networth 3,122.50 5,025.22 3,480.08 5,391.59
Return on net worth/Equity 15.11% 17.35% 13.95% 16.21%
No of Shares O/S 85,802,335! 98,240,142! 119,502,3662 131,940,1732
M Cap (As per BSE) 5,688.27 12,661.68 7,922.41 17,005.11
Revenue Multiple 0.98 1.81 1.38 2.45
PE Multiple 12.04 13.99 16.32 18.91

1 Excluding 3,37,00,031 shares (FY2020: 3,37,00,031 shares) held by Escorts Benefit and Welfare Trust and 28,94,393 shares (FY2020: 30,74,512 shares) held by Escorts Employees Benefit and Welfare Trust.

2 Excluding 28,94,393 shares (FY2020: 30,74,512 shares) held by Escorts Employees Benefit and Welfare Trust.


Note: The forward-looking statements part of the Management Discussion & Analysis on economic indicators is based on our best estimate of the current environment. This may be subject to change based on external macro-economic factors out of control, including but not limited to raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in government regulations, tax, and economic policies.

About Sustainability Reporting

Escorts Limited presents, its second Sustainability Report for FY 2020-21, in which we disclose our sustainability imperatives, initiatives, and performance, and outline our plans to transform ourselves while positively impacting our clients and industry. The Report has been prepared in accordance with the GRI Standards: Core Option and focuses primarily on the activities undertaken during the reporting period from April 1, 2020 to March 31, 2021.

The scope and boundary of the Report covers the operations of Escorts Limited, its subsidiaries, associates, and joint ventures in India and Poland, unless otherwise stated. The Report focuses on aspects of Escorts business that have been identified as "material topics" through stakeholder engagement and materiality assessment. Additionally, the Report is also aligned with the United Nations (UN) Sustainable Development Goals (SDGs) that are relevant to our business and discloses how we are contributing to the SDGs that apply to our context.

Feedback, questions, or comments on this report are welcome. Please email us at:

Bharat Madan

Group CFO & Corporate Head

Escorts Limited

Corporate Centre and Registered Office,

15/5 Mathura Road,

Faridabad - 121 003 Haryana.