Escorts Kubota carves out earthmoving as separate vertical

Faridabad-based tractor and machinery major Escorts Kubota is all set to establish a new earthmoving vertical to focus on the growing demand for the construction equipment segment. 

At present, Escorts addresses 54 percent of the total domestic construction equipment industry with its range of backhoe loaders, pick-and-carry cranes, and compactors. According to Sanjeev Bajaj, chief executive officer of the construction equipment business, the earthmoving segment will be operational in the early part of the financial year 2023-2024, and it will initially have two major products: backhoe loaders and mini excavators.

"Currently, we have only 2 percent market share in backhoe loaders, but we aim to be one of the leading players in this segment. Similarly, we will also be tapping the expanding market of mini excavators through this vertical, where we aspire to be number one. The new vertical will be given special focus by the organization, and we are also looking at channel expansion. We will make sure that this vertical stands out as one of the key pillars for us going further," Bajaj told Autocar Professional.

Going forth the company also plans to add skid steer loader, which is presently a niche segment in India, from Kubota's global product portfolio, he stated.

Notably, the earthmoving segment is the largest in the Indian construction industry, followed by material handling and road construction equipment. 

The company sees a huge scope for growth in the mini excavator segment with the growing government impetus on infrastructure and irrigation in both urban and rural spaces. Currently, the total industry volumes of mini excavators stand at 2,500 units annually, with Escorts Kubota being the second-largest player with a 26 percent market share at 660–670 units. 

Keeping in view the pace of urbanization and rural development, Bajaj believes that the mini excavator industry in India will grow to 7500–10,000 units in the next 4–5 years. 

“The market acceptance of mini excavators is rising due to space constraints, where a normal excavator or a backhoe loader cannot operate for work that requires greater efficiency and speed. As part of our mid-term strategy, we have set a target to be the leader in mini excavators in the country, capturing a market share of about 35 percent by the financial year 2027-2028,” Bajaj highlighted. 

The company is also focusing on outpacing the domestic industry’s growth by launching new products across backhoe loaders, pick-and-carry cranes, and compactors and doubling its distribution network.

When asked about the investment, Bajaj said that the group is investing around Rs 4,000–4,500 crore under its midterm business plan until the financial year 2027-2028. “ Of this total planned capital expenditure, about Rs 900-1000 crore will be directed towards the construction equipment segment,” he added. 

During the April-January period of the ongoing financial year, the company sold  3,544  units, up 10.5 percent as compared to 3,206 units in the same period a year ago. As per market estimates, Escorts Kubota is expected to touch a volume of 4,446 units with an 8 percent YoY growth in this financial year, led by the government's thrust on infrastructure. The company also plans to expand its footprint overseas to about 35 countries from 20 countries currently. 

“Construction Equipment has been growing in high double-digit in the past normal years, despite tough competition in the market. We aspire to double our market share in the existing products, and this will be driven by expansion in the product offerings and increasing channel expansion faster,” Bajaj added. 

For the Escorts Kubota group portfolio, the construction equipment segment is the second largest contributor to the overall sales mix with a 14 percent share, followed by the railway segment at 9 percent. Tractor and farm equipment hold the largest share, contributing 77 percent to the group’s revenue. 

For the nine months ended December 2022, the company's revenue from operations was at Rs 6214.2 crore as against Rs 5396 crore in the same period year ago. During the period under review, the construction equipment segment revenue went up by 19 percent at Rs 794.1 crore as compared to Rs 667.3 crore in the corresponding period last fiscal.