‘Indian tractor makers set for strong 16-18% sales growth in FY17’

‘Indian tractor makers set for strong 16-18% sales growth in FY17’

Growth is expected to remain in single digits even for February and March, as farmers cope with the note ban, and gradually shift to using cheques and online transfers for making purchases.

MUMBAI: Indian tractor sales are likely to close fiscal 2017 with an impressive 16-18% growth, riding a monsoon-led surge in demand that was enough to offset the impact of demonetisation in the latter half, according to Crisil Research estimates.

The previous two fiscals had seen double-digit de-growth as monsoons played truant and farm sentiment wilted.

Sales revived as the south-west monsoon came in normal. Rains were 97% of the long-period average, timely and well-distributed, resulting in Kharif production increasing 10% on-year (according to second advance estimates), and Rabi sowing also 5.7% higher on account of sufficient reservoir levels. This helped unleash pent-up demand.

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So much so, October saw a record 44% spurt, lifting sales for the April-October period by a whopping 26%. The surge was brought on by festive cheer as the two major festivals – Dussehra and Diwali – coincided in October, and customers grabbed the lenient financing terms and credit period extension offered by dealers with both hands.

The fervor could well have continued, going by the inventory with distributors, but for the demonetisation move. Transactions in the rural areas, which account for the bulk of domestic tractor sales, are largely cash-based. With cash drying up, sales took a beating – with a de-growth of 13% in November, and a modest growth of 7% in December and 5% in January.

Growth is expected to remain in single digits even for February and March, as farmers cope with the note ban, and gradually shift to using cheques and online transfers for making purchases. Further, with financiers focusing on collection of installments delayed by the note ban, tractor loan disbursals – and thereby sales – are expected to be slow, says Crisil.

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But the impact is expected to be short-term, and sales should recover by the first quarter of 2017-18.

Says Prasad Koparkar, Senior Director, Crisil Research “Rabi sowing has defied the note ban impact and is progressing well, especially in states like Madhya Pradesh and Rajasthan. With faster acceptance of non-cash transactions in these states, demand for tractors is projected to see healthy growth going forward. However, the southern states – particularly Karnataka and Tamil Nadu – are reeling under drought conditions and demonetisation has only worsened the situation. Hence, recovery here is going to take longer.”

Indications are that the south-west monsoon will be normal this year as well. While there is a threat of El-Nino conditions developing in the second half of next fiscal, the Kharif season could very well escape unscathed. Tractor sales would also benefit from favorable budget announcements such as record farm credit disbursal of Rs 10 lakh crore and other rural development initiatives.

Based on this, we see tractor volumes picking up in coming quarters, though, for lack of a low base as was the case this year, fiscal 2018 could close with a relatively sober growth of 8-10%.

Says Binaifer Jehani, Director, Crisil Research “Maharashtra, Madhya Pradesh and Uttar Pradesh are expected to drive demand. Growth in the peninsular region would be driven by Andhra Pradesh and Telangana, and though Karnataka and Tamil Nadu could experience stress for a while, the overall region should perform well, given normal monsoons and consistent pace of rural development activities.”

Source by:-indiatimes 
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