Aided cash flows to farmers, kharif sowing, and government spending, tractor sales in India continue to grow. Mahindra & Mahindra’s Farm Equipment Sector (FES), which is part of the $19.4 billion Mahindra Group, reported an 18 per cent growth in domestic sales of 19,174 units, highest ever July sales.
Hemant Sikka, President, Farm Equipment Sector, Mahindra & Mahindra Ltd told T E Narasimhan the company noticed a turnaround in tractor business in Decembe. Things were going very well, said Sikka. Edited excerpts from an interview.
What are the key factors driving tractor sales?
This is the peak season for tractors. The strong demand momentum continued, aided by positive sentiments due to good cash flows to farmers, higher Kharif sowing, a timely and normal monsoon cumulatively across June and July, and continued higher rural spending by the government. While it is too early to share target figures for the entire year, it is expected that this demand will continue to remain buoyant in the coming months
How much of these sales are happening with the help of loans (in percentage terms)?
With about 75 per cent of tractors sold on finance, we have aligned finances very well starting in May itself building out further in June and July.
In addition to land preparation, tractors provide machine power for performing various farm applications and can be used to pull a variety of farm equipment, while also relieving the burden on farm labour and improving farmer's livelihood.
Were you able to address the supply chain constraints?
With tractor capacity at nearly 95%, some localised lockdowns enforced in certain cities are hampering the ramp-up of the supply chain, thus affecting production at OEMs. More than 90% of our dealers have started.
Any fresh capex on the pipeline?
We are completing a peak of Capex.
K2 is a large investment, and K2 will -- bulk of it will be over by the end of this financial year, some will be [before] FY22. (Under K2 project, the company is creating a new platform on which a new range of tractors, developed in collaboration with Mitsubishi of Japan, to further strengthen its position, both in the domestic).
The company also made engine investments in the recent past. We have made an investment in Swaraj tractor also. So, the point of it is that it's not that we're compromising with the products for the future. It's just that we are completing a peak of Capex in this Capex cycle.
While FES has a strong tractor portfolio, we are building technology skill sets beyond it and working on introducing a range of farm machinery, with the idea of taking technologies used in large landholding farms around the world and making them affordable and accessible to small landholding farmers. This is based on having established three global technology Centers of Excellence in Japan, Finland & Turkey, through acquisitions we made over the last couple of years, from which we will launch new products in FY21.
Simultaneously, we are also focussing and developing our Farming as a Service vertical (FaaS), which will focus on giving farmers advisory and precision farming technologies to help our farmers increase their productivity and get more output from their efforts.