M&M eyes 6-8% growth in FY09 tractor sales

Excerpts from CNBC-TV18's exclusive interview with Anjanikumar Choudhari:

Q: What has been the reason for slippage in the numbers?

A: We have grown by 7% during July. The cumulative right from April to July is 10%. The domestic market has been difficult because of the price increases because of material cost increases. The domestic market has grown by 1% and exports have done well. They have grown by 65%. Overall, we have grown by 7% in this month. That is Mahindra and Mahindra (M&M) Limited.

Punjab Tractors has grown by 41% because we had lower base last year when we were correcting the pipeline of Punjab Tractors.

Q: What's the forecast going forward given the kind of financing issues that most four-wheelers are likely to face in the light of rising interest rates? What's the guidance that you are offering? What are the kind of numbers you are working with in terms of volumes in the next few months?

A: I would not be able to comment about four-wheelers.

Q: What about the tractor space?

A: I will restrict myself to tractors. There are two-things that we are very concerned about as an industry. The first has to do with the increase in material prices, which have to be passed on in terms of price increases. It will also have a certain dampening effect in terms of the demand for tractors.     

The second is the increase in interest rates, which will again dampen demand. The availability of credit was a problem last quarter. There is some improvement but the banks have not yet ramped it up. M&M Group has an advantage in terms of M&M Financial Services, our own in-house finance operations helps us in terms of retail financing. So we have an advantage.

For the rest of this financial year, I could look forward to something like 6-9% for the entire industry. That's not M&M Limited or Punjab Tractors Limited, that's for the entire industry, somewhere between 6-8% growth over last year.

Q: Purely in terms of the kind of capacities that you are looking at, are you looking at making any investments of enhancing capacities or will you keep capacities at current levels?

A: We have very high capacity utilisation at M&M, but with the acquisition of Punjab Tractors, and its capacity of 60,000 tractors, which is currently being utilised at around 50-55%, we have spare capacity in Punjab Tractors. It will be used to manufacture Mahindra tractors so that we get synergy out of that acquisition. Therefore, we are not looking at an increase in manufacturing capacity in the immediate future.

Q: But what kind of utilisation levels can we expect from the company? How much increase in utilisation will we see?

A: In M&M currently, we are already at utilisation level which is in excess of 80-85%. In the case of Punjab Tractors, they have a capacity of 60,000 tractors, last year they produced about 27,000 tractors, which then works out to probably a little less than 50%. Punjab Tractors will do much better this year and we should have a capacity utilisation somewhere around 55% or so.