Mumbai: India’s largest tractor maker Mahindra and Mahindra Ltd (M&M) says it expects tractor sales to pick up after a good run of monsoon rain that would have helped improve harvest and increase agricultural output.
“We expect to have a marginal 2-3% growth in tractor sales this year with a generally good monsoon in most parts of the country,” said Gautam Nagwekar, chief operating officer, M&M, farm equipment sector.
The farm and equipment segment, representing the tractor business of M&M, contributed around 40% to Rs2,612 crore in net sales for the quarter ended June. Of the profit before tax of Rs255 crore for the quarter, 54% came from farm equipment.
The company saw a dip of 1% in its sales in the April-August period of this financial year and sold 40,850 units. Overall in fiscal 2007, it has sold 352,827 tractors—a growth of 20%. Growth this year slowed down as banks increased their interest rates by around 200 basis points.
Nearly 95% of tractors in the country are sold on credit taken from banks.
Exports, which contribute about 8-9% of total tractor sales for the company, have also dropped by 3% in the April-August period as demand from the US market slowed down.
The US accounts for around 80% of company’s exports and demand in the market has been damped by a mortgage crisis and an overall slowdown in lending.
“We are targeting the neighbouring countries to increase our export,” said Nagwekar.
The company, which is the market leader in most popular 31-40 horse power (hp) tractor category, is also looking at higher contribution from tractors of 45 hp and higher capacity.
“There is an increasing demand for higher horse power tractors for versatile uses,” says Nagwekar.
These tractors are increasingly used as load carriers for construction work and also used for harvesting paddy crops.
The company is expecting these tractors to contribute around 28% to the total sales in next three years, up from 24% now.