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auto | IST

Expect 8-10% growth in tractor industry over the next 2-3 years, says Mahindra and Mahindra

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Mahindra and Mahindra (M&M) reported a mixed Q4. With tractor margins down for a third consecutive quarter, brokerages have downgraded the stock on weak FY20 guidance. M&M CFO VS Parthasarathy, shares his views and outlook for the company.

Mahindra and Mahindra Ltd on Wednesday reported a net profit of Rs 969 crore in the fourth quarter ended March 31, down 16 percent from a year ago quarter. Total revenue from operations stood at 13,807.88 crore in the March 2019 quarter, compared to Rs 13,188 in the same period last year.
It was a mixed fourth quarter for Mahindra and Mahindra (M&M). With tractor margins down for a third consecutive quarter, brokerages have downgraded the stock on weak FY20 guidance. M&M chief financial officer VS Parthasarathy, shared his views and outlook for the company.
“I have been watching the tractor space for a fairly long time since I joined M&M in 2000 and there has been talk about this cyclicity but what I have found is that when you do a straight line diagram for over 30 years then the growth of the tractor industry has been 8-10 percent but if you look at the last decade, the growth has increased to about 10-11 percent. That is what it has been in between. If you look at medium-term of 3-4 years, 8-10 percent growth is very much possible and probable. Our own set of assumptions and projection show that and so does the industry’s projection,” he said.
He added: “Five percent is the projection for this year with some possibility for an upward movement but over the next 2-3 years, the bet is around 8-10 percent market growth. So I won’t say the market growth is a concern at all. There is huge potential of mechanisation for the tractor industry. Therefore, you should not only look at tractor volume but you should look at the attachment, implements and accessories that will be used along with tractor and that may grow much faster for M&M than even tractors and therefore overall revenue growth may be even higher than the tractor growth,” he added.
About the automobile sector, Parthasarathy said: “We just had three very successful product launches which is Marazzo, Alturas G4 and XUV300. All these products have hit their ground running and therefore, we can look forward to full year of volume on this and therefore growth in this segment.
"From an industry point of view, cars will be set to be muted and I am no industry expert so I will not comment on that but I think utility vehicles (UV) will be on the higher end of it and will grow a little faster than cars and we are in a very good position because of the launches that we had last year so we should be able to move the topline. We will watch for the profit growth in auto as well.”
With the Bharatiya Janata Party-led National Democratic Alliance set for its second five-year term, Parthasarathy said: “Whatever the government has put in its manifesto and whatever the government was doing prior to elections — continuing what is put in the manifesto and continuing what they were doing is all it takes to revive the rural economy. They can do more projects around rural, which can up the household income and that revives the cycle.
"What we need now is more action on the ground. I see it very positively and their programme augurs very well for rural and farm. Therefore, I am very optimistic in terms of what the second half could be for this country and for farms,”