Good rains put tractor sales in higher gear

Good rain puts tractor sales in higher gear

  The first four months of the financial year pushed tractor volumes of market leader Mahindra & Mahindra by 20 per cent, due to bountiful rain and overall increase in rural incomes.

The Mumbai-based company’s volumes rose to 88,101 units in the   April-July period, compared with  73,423 units in the corresponding period last year. M&M has 40 per cent of the domestic tractor segment.  

Led by M&M, tractor volumes are expected to bounce back this year after three dull years in a row. Industry volumes declined 22 per cent last year, to close at 493,764 units as against 634,151 sold in 2013-14.

Rating agency ICRA expects tractor volume growth to be moderate this year, at six to seven per cent. It predicts compounded annual growth of eight to nine per cent for the industry over the next five years, saying the long-term drivers remain intact.  Rajesh Jejurikar, president of M&M's farm equipment and two-wheeler division, said: “We sold 16,452 tractors in the domestic market during July, growth of 15 per cent over July 2015. With normal rainfall and its improved spread across India, kharif sowing has been more than last year. We hope for improved agricultural output and tractor demand in the future.”

Domestic tractor volumes for the industry showed a positive growth rate over the past five months, driven by region-specific factors. Although overall farm sentiment continues to remain weak, select markets have seen partial recovery, driven by good rain, government support programmes, a better-than-expected rabi production and festive impact in certain regions, ICRA said.  

Subrata Ray, its senior group vice-president, said: “Farm sentiments have also been alleviated by expectation of a healthy monsoon season; the progress in on a pan-India basis has remained satisfactory till now and largely in line with expectations. While the larger markets such as Uttar Pradesh, Rajasthan, and Punjab continue to witness weak tractor volumes, there have been green shoots in select states like Andhra Pradesh, Tamil Nadu, Maharashtra, Bihar, Odisha and Madhya Pradesh, which raises hopes of recovery in domestic volumes.”

However, the growth in volumes is on a low base and a sustained improvement in industry demand remains to be seen. Meanwhile, “tractor loan portfolios across originators continue to show heightened stress, with no improvement in 90+dpd (days past due) delinquencies for 2014 and 2015 vintage, unlike commercial vehicle loans where the stress has subsided for recent vintages. While the agency maintains a negative outlook on tractor loans, it does not expect transactions’ ratings to be impacted, based on a build-up of credit enhancement as a result of the higher speed of amortisation than delinquencies,” stated an India Ratings report.