Mahindra & Mahindra, the country’s largest tractor maker, plans to invest Rs 5000 crore in the next three years to build market share and retain its bottom line in the competitive Indian tractor market.
The maker of Arjun, Yuvo Tech, and Oja tractors will spend this money on expanding capacity at its Nagpur, Rudrapur, and Zaheerabad plants, expanding its product portfolio under its Oja range, and preparing to meet the future TREM V emission norms.
Reviewing the FY24 earnings, Anish Shah, MD of Mahindra & Mahindra, said, "The farm business also has done very well in maintaining margins, increasing market share, and, therefore, actually showing higher profits than the prior year in a tough industry.”
The company spends about Rs 1000 crore annually on building products, adding capacity, and maintaining plants. An additional amount of Rs 600 crore has been set aside to meet future emission norms of TREM V
Hemant Sikka, President of Mahindra & Mahindra's farm equipment sector, told Autocar Professional that the company expects the tractor market in India to grow at a CAGR of over 6% in the mid-to long term, and M&M is preparing to participate in this growth.
“We will continue to invest to prepare for future growth. We are market leaders and want to further grow our business with equal focus on the growth of volumes, market share, and margins. The investments made in the Oja and Target platforms will help us bring incremental growth,” he added.
Mahindra & Mahindra sold over 3.75 lakh units, posting a decline of about 7.2% in volumes, ending with a market share of 41.6%, gaining 40 basis points share from the competition. This was the company's highest market share in the last five years.
Thanks to the launch of new light tractors under Mahindra and Swaraj, the company increased its share by 12.8% in the competitive 20-30 horsepower segment in FY24. The company has posted a CAGR of 10% in the last three years in its farm business.
While this Rs 5000 crore is mainly for the domestic market, any global inorganic expansion may require additional investment. Interestingly, the company is setting up a new plant in Brazil, for which the land has already been acquired and will help the company strengthen its presence in this strategically important agri market.
The company is also banking on Oja for growth in international business, with the launch of the range in the US, Europe and Thailand.
In the last financial year, the company opened its regional office in Southeast Asia as part of its initiative to grow international volumes by 100% in the next three years.
Sikka said he is confident of growing the international business by 100% in the next three years.
For the domestic market, the company has guided for a growth of 5% in FY-25 as it expects farm output to recover on the back of an above normal monsoon and Agri exports are also likely to thrive.
The Indian Meteorological Department has predicted an above-normal monsoon in FY25, boosting sentiment and driving tractor demand. The company expects the positive benefit of a shift in Navratri festival in Q1 FY25 and Q425.