Agricultural machinery

Industry Code (as per CMIE Prowess): 0101014001250000'

June 2022

Individual Parameters Contributing to the Score

Moderate Demand

Government has focus on improving Agri productivity and modernisation of the Agri sector to provide impetus to the agricultural sector. The tractor industry showed resilience during FY21 on the back of robust demand from agricultural sector. During April 2021-March 2022, tractor companies sold 970,902 units, 1.7 per cent lower compared to a year ago. According to CMIE’s CapEx database, the industrial infrastructure sectors are poised to see investments worth over Rs.4.3 trillion in 2022-23. The usage of tractors for non-agricultural purposes (haulage) is also likely to increase, keeping pace with the growth in construction and infrastructure sectors. Increasing labour costs and costs of financing will continue to have a bearing on tractor demand.

Neutral

There were only a few established players in the key product segments such as tractors. Given the demand potential in this market, several multinational players have already made an entry into the market. Market Share of tractors for FY21, Mahindra & Mahindra is the market leader (market share ~34%), followed by John Deere, International Tractors Ltd. & Escorts Ltd. with market shares of ~14%,13% & 12% respectively.

Stable Regulatory environment

The large budgetary outlay for the development of the agricultural sector in India indicates strong regulatory support for the farm equipment sector. Subsidies have been made available for the purchase of various equipment such as tractors and solar pumps.

Largely predictable supply of inputs from diversified sources or Raw Materials with rare, occasional disruptions / fairly predictable price band

The industry is vulnerable to the increase in prices of key raw materials such as steel but given the expected demand scenario, it has the ability to pass it on to a large extent. The established tractor players have moderately healthy operating margins.