Will Give FY26 Estimates Once IMD Releases Monsoon Forecast In April: M&M | CNBC TV18

Summary

In a detailed conversation, Mr. Hmon Sika, President of Mahindra's Farm Equipment Sector, discusses the strong growth in the tractor industry, particularly the sustained 15% growth over the last few months. He highlights Mahindra’s market share, the impact of favorable monsoon conditions, and the government’s support through MSPs. Despite a strong performance, Sika notes that it’s too early to predict FY26 trends due to the uncertain monsoon outlook. The company remains focused on both its auto and farm sectors, with plans for continued growth and market share expansion.

Takeaways

• 😀 The agriculture sector, particularly the tractor industry, has experienced significant growth, with Mahindra outperforming the industry by growing 19% in February.
• 😀 Mahindra expects to maintain its momentum in Q4, with a guidance of 15% growth, while the industry is anticipated to grow by around 6.5% to 7%.
• 😀 As of February 2025, Mahindra's market share stands at 43.6%, a gain of 1.7% compared to the previous year.
• 😀 It is too early to provide estimates for FY26 due to the reliance on early monsoon forecasts from the Australian Weather Bureau and IMD.
• 😀 The government’s recent income tax relief and RBI rate cuts are not expected to directly influence demand, which remains driven by favorable weather conditions and strong crop production.
• 😀 A good monsoon season (108% of LPA) and favorable reservoir levels have contributed to strong crop outputs, particularly the Kharif and Rabi crops.
• 😀 Input inflation for farmers has reduced, while crop prices have remained stable, benefiting farmers and sustaining demand for tractors.
• 😀 The government’s increase in MSP for key crops, coupled with favorable terms of trade for farmers, has further supported growth in the tractor industry.
• 😀 Mahindra's agriculture business, which forms around 22-23% of the total revenue, continues to perform well, with no specific medium to long-term target for increasing its share.
• 😀 Mahindra’s U.S. manufacturing operations, including two large tractor plants, help meet 'Made in America' criteria, with no known negative impact from recent tariff threats.

Q & A

What were the key factors contributing to the growth in the tractor industry?

The tractor industry experienced growth due to strong monsoon seasons, high reservoir levels, favorable terms of trade for farmers, and government support in the form of MSP (Minimum Support Price) increases for key crops. These factors helped boost both the Kharif and Rabi crops, providing stability to the agricultural economy.

How did Mahindra's performance in February compare to the overall industry?

Mahindra outperformed the overall tractor industry in February, with the industry growing by 0.6%, while Mahindra saw a growth of 19%, which resulted in a significant market share gain.

What is Mahindra's market share in the tractor industry as of February 2025?

As of February 2025, Mahindra's market share is 43.6%, which represents a gain of 1.7% compared to the previous year.

What is Mahindra's growth outlook for Quarter 4 of the fiscal year?

Mahindra is optimistic about maintaining its growth in Quarter 4, projecting a 15% growth for the industry. With Mahindra's continued market share gains, they anticipate outperforming this industry average.

What is the expected growth for the agriculture and tractor industry for FY25?

The growth estimate for FY25 is expected to be around 6 to 7%, with the tractor industry anticipating a 15% growth in Quarter 4, which will contribute to this overall industry growth.

What factors make it too early to predict growth for FY26?

It is too early to comment on FY26 growth because Mahindra needs to wait for early monsoon forecasts from the Australian Weather Bureau and IMD, which are expected by April. These forecasts will help estimate the outlook for the industry.

How has the government supported the agricultural sector, particularly the tractor industry?

The government has supported the agricultural sector through an increase in MSP for key crops, which has helped farmers maintain favorable economic conditions. This has contributed to increased demand for tractors and other farm equipment.

Does Mahindra have any specific growth targets for its agriculture business?

Mahindra does not have a specific target to increase the share of its agriculture business in the company's overall revenue. Instead, the company is focused on ensuring both its automotive and farm sectors perform well.

How does Mahindra's presence in the U.S. market impact its business?

Mahindra has two tractor manufacturing plants in the U.S. (one in Hamilton and one in Pon), which allows the company to meet 'Make in America' criteria. Despite any potential trade tariff concerns, Mahindra's U.S. operations continue to be an important part of its strategy in the region.

What is the impact of the income tax relief and RBI rate cuts on tractor demand?

While the income tax relief and RBI rate cuts may influence demand in the broader economy, the primary factors driving tractor demand remain favorable monsoon conditions, good crop yields, and strong support for farmers, including the government's efforts to stabilize input costs and increase MSP.