April 30, 2021

M&M to arrange a brand new tractor plant, scouting for land in Punjab, elsewhere

Mahindra & Mahindra, the nation’s largest tractor maker, is scouting for land in Punjab, and another states to arrange a brand new manufacturing facility to satisfy future demand as its current crops are working over 100% capability.

“We’re actively an extra manufacturing unit and for this we may have a land parcel of about 50 acres,” Hemant Sikka, president of farm tools division at M&M, advised ET.

He stated the maker of Swaraj model of tractors is absolutely maxed out on capability. The debottlenecking measures the corporate has taken throughout its manufacturing models will enhance its output incrementally and assist meet the demand this fiscal 12 months. “However past that, we have to add a brand new plant,” Sikka stated.

“We’re already in contact with a number of state governments and the choice is prone to be taken shortly.”

In accordance with individuals within the know, the brand new tractor plant is predicted to have a minimal capability of 50,000 models a 12 months.

The precise quantum of funding is but to be outlined as the corporate is deliberating over what operations to outsource or handle internally.

Knowledgeable estimated that establishing a greenfield plant that may construct 50,000 tractors a 12 months would price Rs 250-300 crore.

M&M stated Punjab is its most well-liked location for a brand new tractor plant. Nonetheless, it stated it’s in talks with a number of others as effectively with out naming any state.

Indian tractor market grew 26% 12 months on 12 months to about 899,000 models throughout 2020-21 regardless of the Covid-19 pandemic and resultant lockdowns, helped by above-normal monsoon rains and the truth that rural areas have been largely unaffected by the pandemic.

With the meteorological division and personal climate forecaster Skymet predicting regular and wholesome monsoon this 12 months, the tractor business expects the expansion momentum to proceed.

“An above regular monsoon is optimistic for progress of the agri sector and augurs effectively for the tractor business,” Sikka stated. “Additional knowledge on quantum and spatial distribution of rainfall will assist strengthen this outlook.”

M&M, although, has been struggling to maintain up with its friends similar to TAFE and Worldwide Tractors.

The corporate’s quantity progress trailed the general business by 9 share factors final fiscal and consequently, its market share dropped by three share factors to 38% in FY21 from 41% within the earlier 12 months, primarily because of provide constraints.

M&M suffered larger manufacturing and provide disruptions than most its friends due to its huge manufacturing base in Maharashtra, the worst pandemic-affected state within the nation.

The corporate at the moment has three tractor crops throughout Mumbai, Zaheerabad, and Nagpur with a mixed capability of three.6 lakh models a 12 months, in accordance with analyst’s estimate.

“Despite working at our highest ever capability ranges, we aren’t in a position to develop on the market price,” Sikka stated. “A variety of it was due to provide chain constraints.”

Poor availability of elements for superior 4 wheel-drive and power-steering tractors additionally impacted the corporate’s market share, significantly within the southern market.

Regardless of a lack of market share, M&M is prone to put up its highest but revenue margins for FY21. “The corporate even had a damaging working capital cycle, which was for the primary time ever in our historical past,” Sikka stated.

And the corporate is now eager to grab again its misplaced market share. “We are attempting to claw again the market share this 12 months,” Sikka stated.