Eyeing 5-6% growth in tractor segment during FY13: M&M

Mahindra & Mahindra announced their Q4 earnings yesterday. Net Profits rose about 44% to Rs 870 crore against Rs 606 crore in the year ago period. The bottom-line performance however incorporates an exceptional gain of Rs108 crore. In an interview with CNBC-TV18, Pawan Goenka, President of Mahindra & Mahindra gives his outlook on the industry and informs about the product launches in the pipeline.

Goenka said, "Current growth projection for the tractor segment for this financial year is about 5% to 6%, which is about half of what happened last year. I must admit that tractor industry right now is going through a struggle, where the month of April and perhaps in May we will see a negative growth and this will continue for the quarter. We should start seeing a turnaround happening in the second half of the year. Even 5 to 6% growth will take lot of effort from the tractor manufacturers to achieve." Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video. Q: New product launches last year helped the automotive segment to post such a spectacular number. Going forward, what are the kind of launches we are seeing in this segment because that is going to be the driver again for Mahindra in FY13?
A: We have planned several product launches. In fact, last year, between tractor and automotive we did about 12 product launches. Each one of them succeeded in what it was supposed to do. This year also we have several product launches.
In the automotive field we will have six very important product launches. SUVs, Rexton, electric vehicle, the sub four meter Verito, a new hard top van will be launched during this year. That is the reason why we think Mahindra will continue on the growth path we have had.
On the tractor side, we will be launching three or four variants for very specific voids that we have in our offering. We are also looking at launching a brand new tractor during this year. It should happen towards the end of this year. Q: How do you plan to save your margins, because raw material cost has been a big issue for the entire industry and passing on the cost to the customer has been a tough challenge for companies like Mahindra and other industrial players? How will you protect your margins this year?
A: As far as passing on the cost increase due to high commodity prices is concerned, we have managed to do that during the last year. All the increase in absolute term has been passed on. What we have not been able to pass on is the profit margin on the increase.
Therefore, when you see a drop in margin, it is primarily coming from the fact that we are not making profit on the cost increase and therefore, that will continue. If the commodity prices go up by Rs 10, I cannot increase price by Rs 12. At best, I can hope to pass that on.
We also have tremendous effort going on for material cost reduction by other means such as value engineering. We also constantly reduce our percentage of fixed variable and personal cost. This year also that went down by almost 70-80 bps.
Therefore, we are able to maintain industry leading margin in both the automotive and tractor business. If you compare Mahindra's performance this year in both the businesses, you will see that we are significantly ahead of all published data that you have for margins.