M&M bets on tractors despite rain-forecast dampener
SHAHKAR ABIDI | Thu, 6 Apr 2017-07:15am , Mumbai , DNA
Brushing aside concerns over the forecast for below-average rainfall in the coming monsoon season, Mahindra & Mahindra (M&M) on Wednesday launched a new platform – Jivo – for its tractor division, targeted at affluent farmers dealing in row crop and horticulture farming.
This is the third such platform for tractors launched by the company in as many years.
Commenting on the concerns relating to the rain forecast and why it may not have much of an impact on the economic scenario, Rajesh Jejurikar, president - farm equipment sector and member of Group Executive Board, M&M, said, "The forecast of 5% below the average rainfall is never a cause of panic as it depends upon several factors like water reservoir level, last year's crop, minimum support prices, availability of finance, etc." He predicts the industry to grow in double digits this fiscal.
According to a report prepared by rating firm Icra, tractor volumes in the domestic market have reported a positive growth trajectory, clocking around 18% rise in last financial year on favourable farm sentiments as south-west monsoon performance remained healthier as compared to previous two fiscals.
As per Pawan Goenka, MD of M&M, horticulture production is now higher than food grain production at 284 million tonne. "So there is a market to be tapped," he said.
According to the company officials, Jivo is an attempt to address mechanisation needs of affluent farmers dealing in land between 5 to 20 acre. The company officials estimate that the segment constitutes around 10% of the total tractor sales in India, with sale of over 50,000 units per year.
The Jivo platform tractors have been priced at Rs 3.90 lakh and Rs 4.05 lakh for the dual-tone model. M&M will initially introduce the products in the states of Maharashtra and Gujarat followed by Karnataka, and Madhya Pradesh in the next phase.
On the export front, the company is eyeing neighbouring countries including Bangladesh, Sri Lanka and South Asian countries.
As per the Icra report, competitive intensity in the domestic tractor market remains high; although there have been subtle changes in market share over the past few years, the market structure has remained largely similar. M&M continues to maintain its market leadership status, constituting 44% of the total domestic industry in FY17.
TAFE, the second largest player, has lost market share across various markets over the past two years, owing to aggressive product launches by competition. Escorts, the fourth-largest tractor manufacturer in the country, has gained market share across most regions, benefiting from enhanced management focus and improved product portfolio post new launches.
According to another report released by IDFC Securities on Wednesday, M&M's domestic tractor volume grew by 29% year on year, while Escorts reported a growth of 31%. Momentum in tractor volumes continued primarily driven by expectations of a bumper Rabi crop.