M&M sees only 10% growth in the tractor industry in FY13

41951 Investors following Mah and Mah. Share this News with them.

0

Like this story, share it with millions of investors on M3

M&M sees only 10% growth in the tractor industry in FY13

On the sidelines of the Delhi Auto Expo, Pawan Goenka, president-automotive sector at M&M told CNBC-TV18 that the months of November and December is traditionally a weak time for tractor sales.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Mah and Mah See previous management interviews See what other Experts & Brokerages are saying about Mah and Mah Mah and Mah BSE | NSE 29/05/12 Are Mutual Funds betting on Mah and Mah?

Mahindra & Mahindra 's Farm Equipment Sector (FES) division reported its tractor sales numbers for December 2011. M&M sold a total of 15315 units in December 2011 as compared to 15135 vehicles during the same month last year.

On the sidelines of the Delhi Auto Expo, Pawan Goenka, president-automotive sector at M&M told CNBC-TV18 that the months of November and December is traditionally a weak time for tractor sales. "January onwards, they begin to improve again," he said.

Even though his outlook on agriculture is positive this year, he expects only 10% growth in the tractor industry in FY13.

Below is an edited transcript. Watch the accompanying video for more.

Q: There was a little bit of worry when the tractor numbers came out this month from M&M, any signs of a slow down that you can share with us?

A: The November and December month in the tractor industry has been somewhat flat after having had a very good festive season ending in October. One shouldn't get concerned too much with one or two months, Normally, November-December are very slow months. Overall for the industry, in the nine months of this fiscal we have had a very good growth of 18-19%. January-February are very good months for tractor sales so we should be watching January and only then decide whether there is a sign of slowdown.

Right now we think that overall agriculture is doing well. The rabi crops are supposed to be very good and we are quite optimistic about January-February. But one should not expect to see 20% growth in these three months. We will get a single digit growth which is what we had anticipated at the beginning of the year and that is what we should be looking for.

Q: The concerns seems to stem not just from what has happened with your company but other two-wheeler makers as well in that rural growth seems to have slowed down. For the calendar year 2012, would you be able to hold out any sales growth target right now for the tractors first?

A: In 2011, the growth was significantly higher than what we had anticipated. In the tractor industry for 2012 we will not be looking for double digit growth - growth touching 10% will be a good growth for us in the tractor industry. This depends on a lot of other factors that will come into play. Monsoon will play a role. Right now we do not know how good the monsoon will be.

The interest rates will play a role; commodity prices will play a role. Overall, what happens to the agri investment at the time of budget will play a role. But if I was to see what the kind of pattern has been in the last few years I would expect to see about 10% growth.

Q: Some analysts have raised concerns that along with this deteriorating volume, the hit will come directly to your profit performance and that may decelerate sharply. With reference to pricing and what is happening on the margin front, how would you call this year?

A: If you look at margin profitability as is looked at sometimes it becomes a little deceiving because as the unit selling price goes up and the profitability will automatically come down even if you are making a good absolute number profit. We have had growth in profit although we have had a lower profit margin. That is something that will be the order of the day.

The profit margins that we have seen in the last couple of years were extremely high. I won't expect to get to that kind of high profitability numbers but we will see a growth in profit inline with growth in volume and not inline with the growth of topline because the topline is affected by inflation and price rise.

Q: Are there any other factors you think which is leading to the flatness in the market and the single digit growth that you are alluding to for this quarter?

A: Yes, there are. Right now because of very high level of crops, the revenue for the farmers that is the farm gate price is coming down somewhat and there has been an increase in input cost for the farmers. Therefore the overall revenue or profit in the farm is going down so that will have an affect and it will depend a lot on what is the farm gate price for Rabi crop which will then determine affordability of the tractors for the farmers.

Fortunately for Mahindra we do have the Yuvraj tractor which is a very low cost tractor. If the affordability goes down I would expect to see further growth in Yuvraj volumes so we are covering the whole range of tractors from Yuvraj to the high end Arjun and therefore we are reasonably well covered.