Escorts reports decent Q3 financial performance

Notwithstanding the overall slump in the automobile sector, that has also impacted the tractor sales, Escorts Limited, the country's second largest tractor manufacturer after Mahindra & Mahindra, has reported a decent financial performance for its third quarter ended Jun '12.

Supported by an impressive top-line growth of over 17% year on year, the company's operating margins have improved significantly from 4.3% in Jun '11 quarter to 6.5% in Jun '12 quarter.

A drop in the company's expenditure, as a percentage to sales, is one of the key reasons for the margin improvement. While the raw material cost as a percentage to sales has dipped to 59%, which is the lowest for the Jun quarter since 2008, the employee cost as a percentage to sales has also dipped from 11.5% in Jun '11 quarter to 10.7% in Jun '12 quarter.

That the company has imposed significant control measures, especially with respect to the other expenditure, are visible.

Not only have the other expenditures grown by just a little over 1% year on year, as a percentage to sales, the same has dropped from nearly 13% a year ago to 11% in the current quarter.

Notwithstanding this sound performance, the mutual fund shareholding in the company has however taken a backseat. Mutual Funds held just a little over 6% in this company for the quarter ended Jun '12 against over 11.5% shareholding held until Mar '12 quarter. The current shareholding is in fact the lowest shareholding by the MF industry in this company since Dec '06.