Escorts Kubota Ltd

Dear Shareholders,

We at Escorts Kubota are paving a new path forward, respecting our rich history of Escorts' 76 and Kubota's 132 years. The infusion of culture from Japan and India is ready to give shape to an organisation which embeds the strengths of two legacies.

Our vision is to become a Company that is truly loved and sought after by society and employees, provide solutions to society for a sustainable world and to become a manufacturing hub for the world from India by utilising the capability and potential of our country.

We are delighted to present our 2nd Integrated and 77th Annual Report, showcasing our commitment to creating value for you over the past seven-and-half-decades.

In FY2023, we witnessed a gradual return to normalcy in supply chains, energy and food markets. The Indian Tractor market had double-digit growth with a peak volume of 9.45 lakhs.

The government's support through various policy measures, thrust on domestic manufacturing driven by its self-reliance mission, coupled with reduced private sector debt and increased investment in infrastructure projects, positions India as a major player in the global economy. India is poised for even greater success and prosperity in the coming years.

As reported by Morgan Stanley about India's journey in the next decade, first, the Indian population will touch 1.5 billion by 2030, which means growing demand for food and second that India is estimated to have a surplus

of 245 million skilled labour, which indicates that the world will invest in India and become a hub for the world markets. The infrastructure requirement to bring the Indian economy into the top three economies of the world will require large investments and thus, also increase the scope for construction and railway businesses at EKL.

At Escorts Kubota Limited, we take pride in actively contributing to India's journey of growth and progress. Our unwavering focus on enhancing farm productivity through mechanisation underscores our commitment to improving food security. We are dedicated to forging a safer and technologically advanced future for the construction industry in India by introducing innovative products and solutions. As a trusted partner of Indian Railways, we remain steadfast in catering to the evolving needs of the sector. We are actively involved in developing products that meet the requirements of ongoing rail transport and metro projects, ensuring our commitment to serving the nation's emerging needs.

We are resolute in our mission to be a catalyst for positive change, supporting the socio-economic development of India and delivering solutions that make a lasting impact. The strength of Escorts' speed, agility and frugality and Kubota's technology, processes, and quality will jointly be embedded at Escorts Kubota to discover ways of newer opportunities and give a new experience in the farming and industrial space. This is an opportunity for us to offer an exceptional experience to our society, customers, and an exciting path for both our stakeholders and shareholders.

Our partnership with Kubota has created a powerful synergy, blending our frugal manufacturing expertise, engineering excellence, and value consciousness with Kubota's diversified global presence, technological leadership, and strong market position.

We have three critical mission statements, Sustainability, Contribution and Solution - the first is to work towards sustainable growth, second in contributing towards the living environment, where people (especially, farmers, women and socially vulnerable people) can live comfortably and the third to work towards further mechanisation and providing total solutions for our customer needs.

We have accelerated towards digitisation, bringing in agility, and relooking at our costs and business model to deliver great customer engagement and enhanced experience.

A Year Of Resilience.

As we reflect on the past year and look ahead to the future, we are proud to share the progress and potential of our collaboration with Kubota in Escorts Kubota Limited. Our partnership with Kubota has created a powerful synergy, blending our frugal manufacturing expertise, engineering excellence, and value consciousness with Kubota's diversified global presence, technological leadership, and strong market position. Together, we are on the path to becoming one of the largest Indo-Japan agriculture collaborations which will contribute towards future farming practices.

In FY2023, we achieved a growth of 16.0% in standalone revenue from

operations, reaching H8,345.0 crores, compared to H7,196.9 crores in FY2022. This growth was driven by strong volume and revenue growth across all three business segments.

However, our EBITDA for the year declined by 21.6%, from H995.5 crores in FY2022 to H780.4 crores in FY2023. This decline was primarily due to the steep inflation in commodity prices and other costs, which adversely impacted our margins. Our PAT for the year stood at H607.0 crores, a decline of 20.7% compared to H765.6 crores in FY2022. The decline was largely due to the provision made on account of the impairment of investment in Tadano Escorts India Private Limited and its wholly-owned subsidiary Escorts Crop Solutions Limited.

In terms of segment-wise performance, our tractor volumes grew by 9.6% to 1,03,290 units, and we maintained our strong position in the domestic tractor market with a slight decline in market share by 26 bps to 10.1% in FY2023 from 10.3% in FY2022. Looking ahead, we expect demand momentum to continue across geographies in the agribusiness segment, with better crop prices, improved finance availability, and good water reservoir levels.

In our construction equipment segment, sales volume increased by 12.2% to 4,620 units. We witnessed growth across material handling, earthmoving,

and road segments. The current market sentiments are positive, and demand is expected to remain buoyant due to the continuous focus of the government towards infrastructure projects.

Our railway equipment segment also delivered strong growth, with revenues increasing by 32.3% to H841.9 crores. Our railway business has also been consistently growing, and the focus on the rail network and connectivity will further provide impetus to the segment.

As we move forward, we will continue to offer state-of-the-art technology and solutions to our customers for increased productivity and operational efficiency. Our investments in expanding coverage, building capacity, and producing innovative product lines will continue for enhanced customer reach and product experience. With our strong market position, diversified portfolio of products and services, and focus on operational excellence, we remain confident of delivering long-term value to our stakeholders.

Our efforts are aligned with our Mid Term Business Plan for achieving targeted growth in the coming years.

Unleashing Potential Through Our Mid Term Business Plan (MTBP)

With an unwavering commitment to solving societal issues and driving sustainable growth, we embark on our Mid Term Business Plan (MTBP) with a powerful vision—to become a revered and sought-after Company, deeply cherished by society and our valued employees. Harnessing India's immense capabilities, we strive to establish ourselves as a strategic hub, making a profound and lasting difference on a global scale.

This has been jointly prepared by Kubota and Escorts team, keeping in mind our desired growth plan in both domestic and export markets. This is a strategic plan till FY2028.

The main pivot of the plan revolves around:

• We aspire for our revenue to grow 2.5 times, this growth will come from both the Indian and Global markets.

• We will invest in creating a global R&D centre and create abilities to design and produce products for the three brands of tractors, namely Kubota, Farmtrac and Powertrac.

• We will also create a shared service centre within R&D, to support Kubota's global needs, such as digital transformation, R&D design support, engineering support and other innovative projects partnership.

• We will leverage our channel strength both in the domestic and global market to reach aspiration for growth.

• All our manufacturing to be aligned with KBT‘s manufacturing standards and excellence.

• We will focus on profitable growth, work towards reaching our EBITDA targets and be mindful of ROI

on our investment and creating shareholder wealth.

We have identified 5 major concepts to achieve our vision, mainly:

O Expansion of Existing Businesses

We will significantly enhance the product variety and launch jointly developed products for all the brands Farmtrac, Powertrac and Kubota.

For the sales channel, we will be introducing Kubota's customer-oriented sales policies and practices in India and global markets. Based on dealer and customer feedback, we will improve product, supply chain, and service, and further strengthen our sales network in terms of both quantity and quality. In addition, we will enhance our retail finance and training systems. For exports, we will work closely with Kubota Group companies to supply made-in-India products to the world with good prices and quality and

take a leadership position in India-led exports. Another critical focus will be on strengthening retail finance.

e Manufacturing and Sourcing

We will revamp the layout, including the green field, along with capacity and business expansion. Aligned with our expansion goals, we plan to establish a state-of-the-art Engine Manufacturing Facility. This positions us as a global hub for affordable manufacturing while ensuring BS-V readiness to meet stringent emission regulations, showcasing our commitment to environmental sustainability. Also, through adopting Kubota Production System and digital transformation initiatives, we will realise more efficient and stable quality.

O Quality Assurance ?

Furthermore, in the field of quality assurance, we will establish a Company-level quality assurance system and its standard workflow.

This will enable us to visualise the best quality and cost. We will enhance product competitiveness through quality improvement and cost optimisation.

0 An Engaging, Motivating and Progressive Corporate Culture

We aim to create a common corporate culture with Kubota based on its slogan of "On Your Side". It is to respect our colleagues, along with the business partners such as dealers and suppliers and achieve goals as a team with all the stakeholders. From now on, under "On Your Side", we will pursue the maximum output with everybody's participation.

Readying for the Next Phase of Growth

To become the total solution provider to solve the issues of society and create a sustainable world, our aspiration will need significant enablers.

Well-Differentiated Brand Strategy

We are well-equipped to cater to various customer segments with our well-differentiated brand strategy.

The Kubota range will offer premium products for enhanced customer experience, the Farmtrac range will cater to customers seeking productivity and power for advanced equipment while the Powertrac range will address the mass customer segment requiring fuel efficiency and total cost of ownership.

EKL collaboration will provide access to all three brands to operate in various geographies, leverage opportunities, and plug product gaps.

Implements As Added Portfolio

We plan to realise EKLs expanded vision of the 'tractor-implements' total solution. We will have to be a comprehensive farm solutions provider including tractors and smart farm implements. In addition to tractors, we will expand the product offering such as combine harvesters, rice transplanters, and other implements from Kubota to expand our business significantly.

As the total solution provider for the farming sector, we are committed to becoming the number one brand that contributes to nation-building and urbanisation, offering comprehensive solutions and leading India-led tractor exports and implements businesses.

New Products To Lead the Way

Some of our new launches, in the market or on field trials have provided extended opportunities.

• Under Powertrac, we launched 434 DS Plus and 439 DS Plus - Haulage Special Tractor with Hub Reduction Anti Lift Technology and

37 HP and 41 HP Engine Power, respectively. With these products, the Powertrac brand will grow in the haulage segment.

• Euro 50 Plus Next - Fully loaded,

50 HP power, 2000 kg Sensi 1 Lift, with bigger tyres cater to the requirement of operating emerging implements, fulfilling customer requirements for higher productivity and output.

• Under Farmtrac, Farmtrac HERO was launched with a 35 HP engine category to address the vacant 30 to 35 HP entry-level segment. This will ensure entry-level farmers also get access to advanced technology and features of Farmtrac.

• We are preparing to launch a new World Maxx series in Farmtrac which will help us reposition ourselves in the 50 HP and above premium segment.

• Construction Equipment Business launched various new products last year based on customer needs and created an impactful presence in the market. New models are F15 Fighter, TRX 17 and TRX 30

in Material handling, HD85 Plus in Road machinery and Jungli HT in the Backhoe loader segment. A new vertical of Earthmoving Machinery is carved out to focus on the existing Backhoe Loaders business and Mini Excavator from Kubota. Expansion of the common channel under this vertical will complement both product lines across geographies.

• In the Railway business, we received the first-ever purchase order for Locomotive's HVAC and Vande Bharat Train's Brake system, Dampers and couplers. We have put an indigenously developed Axle Mounted Disc Brake System for LHB coaches into the field trial with Indian Railways. These would provide further impetus to the existing business growth.

Expanding Market Coverage

We are continuously expanding our reach and coverage. We have increased our dealer base from 1,100 in FY2022 to more than 1,200 in FY2023. This will help us in leveraging opportunities across strong and opportunity markets and reach out to a wider customer base.

Leveraging Export Business

We have been steadily growing our exports with the introduction of new products and opening new markets. We launched our tractors in new markets of Estonia, Bulgaria, Zambia, Mozambique, Kenya, Trinidad and Tobago. We also launched the E-KUBOTA products in Malaysia and Tanzania. This will further support our export growth and provide us with new opportunities across geographies.

In FY23, EKL achieved the highest Y-o-Y industry growth among all leading brands.

EKL has also taken the lead in introducing Stage-V and Tier-IV compliant products for the European and American markets strengthening EKL's resolve to build quality products complying with strict global emission standards.

In the EV category, Electric Hydrostatic Tractor has been our new launch. EKL has pioneered the development and export of Electric Tractors from India to developed markets of the USA and Europe. Our 25G Electric Tractor continues to win global awards for its environment-friendly approach with the latest being the Climate Positive Award 2022 on Energy Transition by Green Cross UK.

Cost-Efficient and Value-Driven Manufacturing

Driven by our commitment to delivering high-quality products, optimising costs, and ensuring sustainable growth, we have our focus on plant improvements using the Kubota Production system as a tool and investments in new facilities for capacity expansion and technological upgradation.

The adoption of the Kubota Production System (KPS) is helping us streamline our manufacturing processes and enhance efficiency across the value chain. Through the end-to- end deployment of Total Quality Management principles, we aim to achieve number one in quality and ensure customer happiness.

To support our volume growth, we have planned significant investments in smart facilities and technologies.

A cornerstone of our manufacturing excellence is our commitment to kaizen and innovation.

Capital Allocation

Under the MTBP 2028, we are looking forward to selectively allocating more capital for initiatives undertaken for setting up a green field facility, expanding vendor capabilities and introducing new products, innovation and technology.

In addition, we foster a socially responsible and inclusive culture, ensuring the well-being and safety of our employees. We actively engage with local communities and support social initiatives. By integrating sustainability into our core strategies, we create long-term value for stakeholders and strive for continuous improvement. Our ESG vision drives responsible business practices and positive impact.

At Escorts Kubota Limited (EKL), we (I are committed to becoming carbon neutral by 2050, actively reducing our environmental impact and promoting resource recycling. Our goal is to achieve zero landfill waste by 2026, ensuring that our operations are sustainable and do not contribute to the accumulation of waste in landfills.

In our efforts to conserve and protect water resources, we aspire to become a water-positive organisation by 2030.

By implementing responsible water management practices and investing in efficient technologies, we aim to not only minimise water consumption but also contribute to the replenishment of water sources. To accelerate the transition to renewable energy sources, we have set a target to achieve a threefold improvement in our renewable energy share. By increasing our reliance on clean and sustainable energy, we aim to reduce our carbon footprint and contribute to the global effort of combating climate change.

At EKL, we focus on diversity as part of the ESG target. EKL aims to increase women's diversity in the workforce to 7.5%, build a younger organisation with the average age of Managerial employees at 34 years and increase employee engagement and satisfaction by 2025.

In addition to these goals, we are actively engaged in tree plantation drives to multiply our green area coverage. Recognising the importance of preserving biodiversity and creating a healthier environment, we are committed to planting trees and expanding our green spaces to enhance ecological balance and improve air quality. We understand that sustainability is a collective responsibility, and we value the support and collaboration of our stakeholders in this journey. By working together, we can create a lasting positive impact on the environment and contribute to a sustainable future for generations to come.

By leveraging our expertise and technological advancements, we aspire to be at the forefront of the industry, empowering farmers, supporting infrastructure development, and contributing to the nation's socio-economic growth.

In a moment of great pride, Escorts Kubota has become the first Indian manufacturer to receive European Union Stage-V emission certification for our in-house 90-110 HP engine tractors under the FARMTRAC range. This historic achievement not only demonstrates our technological prowess but also sets a new milestone for India.

Our commitment extends beyond business success. We strive to create a conducive living environment, empowering all individuals, including farmers, women, and vulnerable communities, through further mechanisation and comprehensive solutions. Guided by our core values of inclusivity, sustainability, and continuous improvement, we lead with integrity, transparency, and responsible corporate citizenship.

Fostering a Vibrant and Inclusive Workplace

Our commitment to an efficient organisation structure, streamlined processes, and a positive work culture positions us for sustained growth and excellence.

Cultivating a cohesive and peoplecentric work environment lies at the core of our organisation. We recognise that our work culture plays a vital role in driving success and fostering people engagement. Our culture focuses on performance, diversity and process efficiency. We believe in continuous learning and development that empowers our people to stay ahead in a rapidly evolving landscape.

To optimise our operations, we have implemented a lean and agile structure with clear reporting levels and a span of control. This enables faster decision-making and responses to market dynamics and customer needs. It also allows us to stay competitive and adapt to changing business landscapes.

Our people policies are carefully crafted to align with industry benchmarks and tailored to our specific organisational context. We have embraced digital transformation to enhance our HR processes, leading to increased efficiency and enhanced employee experience. With the use of technology, we have streamlined our HR processes for better engagement and consistent employee experience.

To stay competitive, we focus on nurturing and developing young and diverse talent for navigating today's challenges and shaping our future.

We empower our people to reach their full potential and contribute to our collective success.

Sustainable agriculture practices are integral to our CSR efforts. We establish model farms at EAFI, Kurukshetra, and ETDC, Bengaluru, showcasing sustainable intensification of agriculture to improve yield.

Through our CSR initiatives, we are committed to making a lasting difference in the lives of individuals and communities, promoting sustainable development and ensuring a brighter future for all.

Embracing a Culture of Being "On Your Side"

At Escorts Kubota Limited, we embrace a customer-centric approach as one of our core Strategic Values, deeply ingrained in our organisational culture.

Our unwavering focus revolves around listening to our customers, understanding their unique requirements, and designing products that precisely address those needs.

We constantly anticipate customer desires and diligently strive to provide services that go beyond expectations. With this, we enable them to choose us as their preferred partner and become advocates for our brand.

Our "On Your Side" culture extends beyond our customers. We value our people and strive to create a nurturing and inclusive work environment that encourages growth, innovation, and rewards dedication. We maintain open and transparent communication channels for our suppliers and business partners to foster strong collaboration and mutually beneficial partnerships. By working together, we achieve shared objectives and drive sustainable growth.

For our shareholders and investors, we remain dedicated to delivering long-term value and financial returns. We uphold the highest standards of corporate governance, ensuring transparency, accountability, and responsible decision-making.

We are committed to the communities in which we operate. Through various corporate social responsibility initiatives, we strive to make a positive impact on society, addressing social challenges and contributing to the overall wellbeing of the communities we serve.

At Escorts Kubota Limited, we understand that the success of our business is intertwined with the support and trust of our stakeholders. We value the engagement and feedback of all our people and are dedicated to continuously improving and exceeding their expectations.

Reinforcing Our Partnership For a Better Tomorrow

Our joint venture positions us uniquely to capitalise on the growth trends and meet the rising demand. We are pleased to share that our partnership with Kubota in Escorts Kubota Limited has been warmly received by all our stakeholders and investors, and the integration process has been seamless. We are now well- positioned to play a significant role in India and the world's pursuit of food security, sustainable agriculture, and smart farming practices. Our joint venture is strategically positioned to leverage these opportunities, deliver long-term value to our stakeholders,

and contribute significantly to India's growth story.

By leveraging our expertise and technological advancements, we aspire to be at the forefront of the industry, empowering farmers, supporting infrastructure development, and contributing to the nation's socioeconomic growth.

As we move forward, we will stay focused on operational excellence, cost management, and leveraging our partnerships to seize growth opportunities. By investing in research and development, embracing digital transformation, and fostering a culture of innovation, we aim to be at the forefront of technological advancements in the industry.

We thank the Escorts Kubota family, our Board of Directors, partners, suppliers, dealers, customers, investors and union leaders for their support. We would like to thank each one of you for placing your precious trust in our vision and committing wholeheartedly to our mission.

We look forward to a better tomorrow at Escorts Kubota Limited. Please do reach out in case you have any feedback or suggestions.