May 13, 2013 04:28 PM IST | Source: CNBC-TV18

See 6-8% industry growth in FY14 for tractors: M&M

Mahindra is one of leading players in the field of farming equipment and machinery, including tractors and other agriculture products since 1960.

Tractor sales growth seen in April was partly due to the festive season (Gudipadwa and Ugadi), which led to a 38 percent jump in total sales and gain in market share, M&M’s Rajesh Jejurikar said.

The home grown auto major’s total tractor sales in April 2013 stood at 23,202 units versus 16,800 tractors in the same month previous year.

Given the improvement seen in market sentiment, Jejurikar, who heads the tractor and farm mechanization division of M&M, remains upbeat on the segment in the medium to long term.

He expects FY14 to be a better year than FY13 for the industry as a whole, expecting 6-8 percent sales growth for tractors.

"We are expecting a normal monsoon. There will be years which are slow growth or negative growth, but look at the industry over either a 5 year of 10 year period; the CAGR has been very robust at 10-11 percent on a long scale basis," he told CNBC-TV18.

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Below is the verbatim transcript of his interview to CNBC-TV18

Q: Tractor volumes have been extremely robust for Mahindra & Mahindra (M&M) and generally in terms of an industry trend. What do you make of it though? The observation seems to be that there is usually a pre-election boost to these figures and then it starts tempering down. What do you expect to see in terms of volume trends over the next few months?

A: It has been a great April for us. We have had a 38 percent growth, combined of both our brands Mahindra and Swaraj together which has been a very good robust trend. We have also gained some share points in April in this process. We went into April feeling very positive.

We were seeing positive sentiments and we were prepared for a good volume to be done in the month of April. Some of the April growth has been on account of the festive moving. Normally the Gudi Padwa and Ugadi happen in March, but this time they happened in April, so some bit of growth has happened on account of that.

We must understand that the tractor industry does have its ups and downs. If you look at either a 5 year Compounded Annual Growth Rate (CAGR) or 10 year CAGR it has been at a very robust 10-11 percent. So, we see a big opportunity as we go forward in the medium to long-term in the tractor business.

Q: FY13 was a bumpy year. Volumes declined 2 percent. Do you think FY14 with the positive start in April could be a much better year for volumes?

A: We expect FY14 to be at about 6-8 percent industry growth. Right now the news on monsoons is good. We are expecting a normal monsoon, which is something to keep smiling about. Though the effect of a good monsoon normally will be seen more in the second half of the year, but broadly we would expect FY14 to be better than FY13.

There will be years which are slow growth or negative growth and FY13 was one such year. However, when one looks at the industry over either a 5 year of 10 year period the CAGR has been very robust at 10-11 percent on a long scale basis.

Q: You spoke briefly about market share gains. Can you just take us through where these gains are coming? Are they primarily in south and west India and what kind of market share increases have you been able to strike out?

A: The gains for us have been across most parts of the country. The gain is of the order of about 0.7 share points in the month of April. So, it has been across most of the country. We need to keep in mind though that we are very particular about how we manage our dealer inventory.

We have not gone in for any stock build up in the month of April. Our billing has been very much in line with what we have seen as deliveries happening to customers over the period of the month.

Q: There were some reports suggesting that perhaps you had lost some market share in the south and demand there had fallen quite a bit. Even in terms of region wise trends where is it that you have seen a gain in market share and more traction in terms of sales?

A: I can answer this question little more specifically, but we must keep in mind that one month market share either a gain or a loss is only an indication of what is happening. Different people follow different billing and inventory build up strategies in the course of a month.

We know in the course of this month we have not built inventory and we have gained some share points. South is traditionally a very strong market for Mahindra and Swaraj, particularly both the brands. We are more than 30 percent share in most of south. So south is a very strong market for us.

Q: For many other segments of the auto industry sharp discounts have had to be taken because of poor demand. What kind of pricing elbowroom do you guys have? Can you increase prices a bit or do you think you would have to hold them stable right now?

A: We have actually taken a price increase in April. We took Rs 2,300 price increase across our tractor range on 1st of April. So, we have taken a price increase in April and we have not done anything abnormal by way of discounting or incentives in the course of April.

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