CRISIL Ratings has revised the outlook on Escorts Kubota Limited’s (EKL) long-term bank facilities to ‘Positive’ from ‘Stable’, while reaffirming the rating at ‘Crisil AA+’. The short-term rating remains at ‘Crisil A1+’. This revision is primarily driven by the increased integration with parent Kubota Corporation, leading to expanded export capabilities and sustained robust financial health, including debt-free status.
CRISIL Upgrades Outlook Following Strong Integration
CRISIL Ratings announced on February 12, 2026, that it has revised the outlook on the long-term bank facilities of Escorts Kubota Limited (EKL) to ‘Positive’ from ‘Stable’. The long-term rating has been reaffirmed at ‘Crisil AA+’, and the short-term rating is confirmed at ‘Crisil A1+’.
Key Drivers for Outlook Revision
The primary impetus for the outlook revision stems from the increased integration of EKL’s operations with its parent, Kubota Corporation (rated ‘A/Stable/A-1’ by S&P Global Ratings). Key factors supporting this include:
- Export Expansion: Approximately 50% of current exports are routed through Kubota’s distribution network, with plans to substantially increase this over the next 3-4 years, leveraging Kubota’s global reach.
- Global Hub Status: Kubota aims to utilize EKL’s local manufacturing to develop it as a global export manufacturing hub.
- Financial Strength: The rating continues to benefit from EKL’s debt-free status, healthy annual cash generation, and large cash surpluses.
The report notes that Kubota’s shareholding increased to 54.07% in August 2024 following the amalgamation of joint ventures.
Financial and Operational Highlights (Nine Months FY2026)
EKL demonstrated strong operational performance:
- Revenue Growth: Revenue improved by 9.91% to Rs 8572 crore in the first nine months of fiscal 2026, driven by an approximate 14% improvement in overall tractor volumes due to favorable rural conditions.
- Tractor Volumes: EKL’s tractor volumes surged by 16.3% year-on-year in the last 10 months of fiscal 2026. Export volumes rose significantly by 46.6%.
- Operating Margin: The operating margin improved to 13.0% in the first nine months of fiscal 2026, up from 11.3% in the prior corresponding period, aided by better operating leverage and increased exports, despite the divestment of the high-margin railway engineering division.
The company is debt-free, and adjusted networth is expected to improve above ~Rs 12,000 crore by the end of this fiscal, supported by profits and a one-time inflow from the sale of the railway engineering division. Cash surplus reached ~Rs 9,000 crore as of September 2025.
Key Rating Weaknesses
The strengths are partially offset by:
- Market Dependence: High dependence on the cyclical domestic tractor market, accounting for approximately 95% of total sales, amid stiff competition and limited presence in Southern India.
- CE Segment Performance: The construction equipment (CE) segment witnessed a revenue share decline to around ~13% in the nine months of fiscal 2026, though performance is expected to gradually recover.
- Raw Material Volatility: Exposure to volatility in prices for raw materials like steel and pig iron.
Consolidated Financial Indicators (FY2025 vs. FY2024)
Consolidated figures show robust performance leading up to the rating date:
| Particulars | Unit | 2025 | 2024* |
|---|---|---|---|
| Revenue | Rs crore | 11152 | 10754 |
| Profit after tax (PAT) | Rs crore | 1265 | 1077 |
| PAT margin | % | 11.34 | 10.01 |
| Adjusted debt/adjusted networth | Times | 0.00 | 0.04 |
ESG Commitments
EKL highlights strong ESG commitments, including goals to reduce Scope 1 and 2 GHG emissions by 25% by fiscal 2030 compared to 2023 levels, and achieving carbon neutrality by 2050. The company also aims to become a water-positive organization by 2030.
Future Outlook & Rating Sensitivities
CRISIL believes EKL will sustain its strong financial profile despite sizeable capex plans (Rs 3,000-3,500 crore over the next 4-5 fiscals). Upward factors include a sustained increase in exports and market share gains in Southern and Western regions. Downward pressure could arise from a sharp deterioration in domestic market share to below 7-8% or a material weakening of Kubota Corp’s credit profile.
Source: BSE
