‘Tractor demand to remain buoyant in coming months’

Tractor sales continued to grow aided by good cash flows to farmers, higher kharif sowing, and government spending. Mahindra & Mahindra’s Farm Equipment Sector (FES), part of the $19.4-billion Mahindra Group, reported 18 per cent growth in domestic sales at 19,174 units, its highest-ever July sales.

HEMANT SIKKA, president of FES, tells T E Narasimhan, that the company started seeing a turnaround from December. Edited excerpts:

What are the key factors driving tractor sales?

This is the peak season for tractors. The strong demand momentum continued, aided by positive sentiments because of cash flow to farmers, higher kharif sowing, a timely and normal monsoon, and continued higher rural spending by the government. While it is too early to share target figures for the entire year, it is expected that this demand will remain buoyant in the coming months

How much of sales are happening with the help of loans?

With about 75 per cent of tractors sold on finance, we have aligned finances very well, starting in May and building out further in

June and July.

How is the capacity utilisation? Were you able to address the supply chain constraints?

With tractor capacity at nearly 95 per cent, localised lockdowns enforced in certain cities are hampering the ramping up of the supply chain, thus, affecting production at original equipment manufacturers (OEMS). Over 90 per cent of our dealers have reopened.

Any fresh capex in the pipeline?

We are completing a peak of capex. K2 is a large investment, and the bulk of it will be over by the end of this financial year, some will be [before] financial year 2021-22. (Under K2 project, the company is creating a new platform with a new range of tractors, developed in collaboration with Mitsubishi of Japan, to further strengthen its position). The company has also made engine investments in the recent past, apart from investment in Swaraj Tractors. So, it’s not that we’re compromising with products for the future. It’s just that we are completing a peak of capex in this cycle.

While FES has a strong tractor portfolio, we are building technology skill sets beyond it and are working on introducing a range of farm machinery, with the idea of taking technologies used in large farms around the world and making them affordable and accessible to small farmers. This is based on having established three global technology Centers of Excellence in Japan, Finland, and Turkey, through acquisitions we made over the last couple of years.

Simultaneously, we are also focussing and developing our Farming as a Service (Faas) vertical, which will focus on giving farmers advisory and precision farming technologies to help increase their productivity.