Mahindra and Mahindra (M&M) chief financial officer VS Parthasarathy spoke positively last month of the tractor market and M&M’s future growth, despite the company reporting a mixed fourth quarter ended March 31st. Net profit was reported at Rs 969 crore ($139,148,400) in the fourth quarter, down 16% from the same period last year. Total revenue from operations stood at 13,807.88 crore ($1,982,828,800) in the March 2019 quarter, compared to Rs 13,188 ($1,893,796,800) in the same period last year. With tractor margins down for a third consecutive quarter, brokerages have downgraded the stock on weak FY20 guidance. However, Parthasarathy gave a positive outlook on the tractor industry and shared his optimistic projections for the company.
“. . .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%. But if you look at the last decade, the growth has increased to about 10-11%. . .If you look at the medium-term of 3-4 years, 8-10 percent growth is very much possible and probable. Our own set of assumptions and projections show that and so does the industry’s projection,” he said.
Parthasarathy 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% market growth. I wouldn’t say the market growth is a concern at all. There is huge potential of mechanization for the tractor industry. Therefore, you should not only look at tractor volume, but you should look at the attachments, implements and accessories that will be used along with tractor. That may grow much faster for M&M than even tractors, and therefore overall revenue growth may be even higher than the tractor growth.”
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. . .What we need now is more action on the ground. I see it very positively and their program argues very well for rural and farm.”