November 11, 2020

Working at over 100% capability but have pending orders: Hemant Sikka, CEO, Farm Gear Sector, M&M

Mahindra & Mahindra, the nation’s largest tractor maker, is witnessing sturdy demand for tractors in the midst of the festive season. Working at over 100% capability and but having pending orders, the corporate has determined to divert manufacturing meant for exports to satisfy the native demand, M&M’s Farm Gear Sector (FES) chief govt, Hemant Sikka, tells Ketan Thakkar. Edited Excerpts:

You took cost of the enterprise when the economic system was severely hit by Covid-19. How has the expertise been up to now?
After I took over FES on 1st April, frankly I didn’t know what enterprise I used to be taking on, with the whole lot in lockdown and there was no enterprise operating at the moment. Now the issue that I’m grappling with is methods to produce sufficient to feed the market. We’re working at greater than 100% capability utilisation and nonetheless not capable of feed the demand. I’m pleasantly shocked with the sort of demand we’re witnessing within the midst of a pandemic.

What has shocked you by way of demand and earnings?
There’s a very sturdy pull from the agricultural market. On the finish of October, the (tractor) business has grown by 11% (this fiscal 12 months), and that is after shedding virtually two months of manufacturing because of the lockdown. There are nonetheless supply-side shortages to satisfy the demand. So, demand may be very strong.

The agricultural money flows are very sturdy. A key indicator of the identical is financing. Farmers are placing extra upfront margin cash. This 12 months will certainly be a optimistic progress 12 months, however by how a lot, we will inform solely after the festive season.

How are you managing the elevated demand?
We’ve got undertaken a collection of debottlenecking actions in our vegetation and at vital suppliers to get greater output. Lot of labor is occurring by way of line balancing, course of optimisation and kaizen to get extra out of put in capability. We’re additionally giving precedence to the home market over export. In truth, there are a whole lot of again orders on the export aspect and we’ve got requested our sellers outdoors India to carry on until Diwali. So, home is getting extra allocation than exports however we are going to honour our commitments to abroad clients and course of export orders publish Diwali.

What’s your view on the festive season and the way do you see the 12 months ending?
Festive shopping for is occurring very properly and we are actually a really sturdy Dhanteras and Diwali. Total, the 12 months will finish on a optimistic word. We had been anticipating a mean September however it got here out very sturdy. We anticipate the market to develop 10-12% this (fiscal) 12 months.

How lengthy do you anticipate this cycle to final and what’s the de-risking plan?
At the moment the demand is strong, we’re operating on very low stocks, so the present manufacturing plans will proceed over the following quarter. Festive season is occurring very properly. What occurs past that is determined by the following monsoon cycle. Hopefully we get one other good monsoon. That shall be so good.

Although the business is cyclic, the long-term development is progress of about 7%, primarily based on information of the final 30 years. Regardless of an up or down cycle, Mahindra Tractors has at all times delivered very sturdy margin efficiency. In the previous couple of quarters, when enterprise was down, our margins had been nonetheless holding sturdy. We’ve got demonstrated this over the a number of years that we’re capable of constantly drive efficiency.

Our abroad income to home income ratio is about one-third to two-thirds. And clearly it helps. Since our 30% income is coming from abroad operations, it actually helps when the cycle is enjoying in a different way. Plus, the mechanisation enterprise will begin providing new levers of progress.

M&M is pushing for farm mechanisation, how large is that chance for the corporate?
The mechanisation potential is big. The worldwide farm mechanisation market is $160 billion every year, out of which tractors is $60 billion, which is about 40%.

The Indian tractor business is 10% of the worldwide tractor business with income of $6 billion. The share of India in mechanisation is simply 1% at about $1 billion (excluding tractors). So, you possibly can see the potential to develop? We imagine mechanisation is at an inflection level to develop and we are going to see newer and related merchandise will drive this progress.

The farming practices in India want to alter from conventional previous practices to extra productive practices, together with farm mechanisation. As an business chief, we are attempting to deliver that change by way of Krish-E, our farming-as-a-service vertical. One other is to herald world-class applied sciences of farm mechanisation, that we’re bringing by way of our corporations in Turkey, Finland and Japan and that too at Indian costs. We’re doing localisation in two steps; first frugalisation to develop related merchandise after which localisation to satisfy Indian value factors.

M&M group market share (round 40%, together with the Swaraj model) has remained on the identical degree, do you see any upside?
I imagine we’ve got a powerful product pipeline and have shared our plans concerning the K2 platform. We’re constructing a powerful product. Let me inform you that the Indian tractor market is a really aggressive market. We’ve got a number of methods mapped in to do properly available in the market and execute our methods. All this can assist us to do excellent enterprise within the coming years

In case you may share the potential of the Gromax and the K2 platform…
Our two main manufacturers are Mahindra and Swaraj. Gromax is our crucial third model and we plan to develop the model. Varied methods are in place to attain this.

K2 is our most bold new product improvement mission. It’s a worldwide platform which is being collectively developed by Mahindra Analysis Valley and Mitsubishi-Mahindra Agri Equipment in Japan. We’re creating 4 distinctive platforms as a part of this mission. I can not share extra particulars at this stage.