With an overwhelming focus on investment for growth in sectors like infrastructure in the Union Budget 2021 the corporate sector may also fall in line and restart the investment cycle in the coming financial year, Pawan Goenka, Managing Director, Mahindra & Mahindra said.
New investments in the auto sector could flow in for setting up new factories as well as for resumption of new product launches that got severely disrupted because of the COVID-19 pandemic.
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Speaking to Moneycontrol, Goenka said: “Once we have that turnaround cycle which will be the April-June quarter of next year then you will see investments happening. I am sure many corporate heads like Mahindra & Mahindra are looking at scenarios and planning investments and making their budgets. But all the signs are pointing in the right direction we have to be optimistic that the investment cycle is about to begin."
Demand for passenger vehicles (PV) like cars and SUVs have gone through the roof in the last three months with most of the top five carmakers struggling to meet demand despite running their capacities to their full strength. According to data shared by the Society of Indian Automobile Manufacturers (SIAM) the October-December period recorded 11 percent growth in PV sales compared to the same period last year.
“Many automakers held back their launches due to the slowdown and all of those will start coming up this year. So, investments for new launches will happen over 12-18 months,” Goenka said.
Investments of nearly Rs 5,000 crore have been announced by three companies – Bajaj Auto, Fiat Chrysler and Ola Electric – towards setting up of new factories as well as for research and design over the last 4-6 weeks. Where COVID-19 sucked out the demand momentum in FY21 it will be regained in FY22, said Goenka on the back of positive demand sentiments and a favourable Budget.
“We have seen positive growth in the last 5 months averaging about 10-12 percent. But as there was no growth in April and May, we would end the year with degrowth of 10 percent. But we will make up for the fall next year and go beyond to 13-14 percent growth,” Goenka added.
The pandemic has had very minimal effect on the tractor industry which has closed 2020 with the best-ever figures. Tractor sales within India closed at 802,670 units in 2020, 11 percent higher than 2019 volumes and 1 percent more than the previous all-time record, set in 2018.
With the government’s continued efforts to boost farm income, demand for new tractors is expected to stay robust in FY22 as well.
“The tractor industry which has grown 17 percent in April-December should end the year at 19-20 percent. This industry will see investments in new capacities. Next year it would be unreasonable to expect the industry to grow at 19-20 percent on a high base but given the agri sector remaining buoyant I would expect the sector to grow very good next year also,” Goenka added.
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