VST Tillers Tractors Ltd. - ZENMoney

Company Profile: VST Tillers Tractors Limited (VTTL) promoted by the VST Group was incorporated in 1967 in technical collaboration and joint venture with Mitsubishi Group of Companies, Japan. The company in JV with Mitsubishi manufactures Tractors, Tillers, Diesel Engines, Harvesters, Reapers, Binders, Transplanters/Planters, Trench Cutters, Front end Loaders and all kinds of allied agricultural, plantation and horticultural machinery including attachments, components, accessories, spare implements and other equipments. The manufacturing plant is located in Whitefield Industrial area near Bangalore. It has 75,000 Sq. Mtrs. of land and a built up area of 15,000 Sq. Mtrs (Approx). Presently the manufacturing capacity of the company is 25,000 Power Tillers, 32,000 Engines and 5000 Tractors. Few of it's products are exported to Africa , Middle East, Asia and Europe countries. Company commenced work on establishing a new tractor manufacturing plant, with an installed capacity of 36,000 units, in Hosur, Tamil Nadu with capex of Rs 70 crore.

Strengths:

- Has nearly 50% market share in the power tillers business and more than 20% market share in smaller tractors (less than 20 HP segment) except in Eastern India.

-Has technical collaboration and joint venture with Mitsubishi Group of companies.

- Strong balance sheet with zero debt on books.

Concerns:

- Low cost tillers imported from China resulting in severe competition.

- Any delays in collecting subsidies from Government of India could put pressure on working capital cycle of the business.

Outlook: The company's low cost farm products of small sizes required for Rice and other plantation crops are best suited to fragmented land owners. Above normal monsoon in most parts of India & in South which is the company's major market and various subsidy schemes announced by state governments for power tillers & small tractors along with the new capacity (which is expected to be fully operational in 2013) are expected to drive VST's growth in the coming quarters. Though the company faces stiff competition from Chinese equipment, it's strong market share, new capacity in Tractors, quality products (Power tillers, low HP tractors, Rice transplanters) and service back up supported by strong balance sheet are expected to enable it to overcome the competition.

Source : Equity Bulls

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