Mahindra & Mahindra Ltd. is confident of its tractor segment growing 8-10 percent for the next two to three years backed by growing rural income and consumption patterns.
India's largest tractor maker has the momentum going into the new year, thanks to a number of tailwinds, Group Chief Financial and Investment Officer VS Parthasarthy told BloombergQuint.
Rural demand is growing not just because of good crops, but also due to increased rural infrastructure projects, a trade cycle pick up and an overall increase in household income, he said. ", Parthasarathy said.
The demand is sustainable at this point. Additionally, a normal monsoon after two years of good monsoons will accentuate the good basics.VS Parthasarthy, CFO & CIO, M&M
India's microeconomic conditions are improving with consumption picking up after two years of subdued demand after the twin shocks of Goods and Services Tax implementation and demonetisation. The indicators are further expected to strengthen on account of an early onset of monsoon with normal level of rainfall, as predicted by both the Indian Meterological Department and Skymet.
Risks
Rising commodity prices and a liquidity crunch in India's banking system could act as “speed brakers” to M&M's tractor sales growth, but these are not concerns for the company as of now he said. Commodity prices are rising at a healthy level as of now - acting like “good cholesterol,” he added.
The Anand Mahindra-led automaker reported a net profit of Rs 1,155 crore for the January-March period, an increase of 50 percent from the year-ago period. Revenue of the company rose 25.6 percent year-on-year driven by the farm equipment segment.
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