It’s been a fantastic year for Mahindra’s farm business with strong volume growth, technological strides and an increasing global footprint. Rajesh Jejurikar, President - Farm Equipment Sector holds forth on its success and plans for the future.
Q. What were the key drivers for this strong volume growth in tractor sales during F-17?
Our success in F17 may be attributed to external as well as internal factors. Rainfall in 2016 has been recorded as normal, at just 3% below the long-period average. What’s better is that for the first time in 3 years, rains were well-distributed – only 33% of the districts saw deficient rains, compared with 49% in 2015 and 46% in 2014. The union budget released for the year 2016-17 was highly agri focused with the overall budget for the agriculture sector being increased to Rs. 35,984 crs., a 44% growth over the previous year. These external growth drivers built a positive sentiment in the market and helped boost rural income which in turn led to an increase in the demand for tractors.
We commenced the year with the launch of our blockbuster product, the Mahindra Yuvo, a technologically advanced tractor, built to do more, faster and better. It is probably the only launch in the tractor industry spanning across a wide range of the 30 – 45 HP segment. It has 5 products in different HP segments and targets 70% of the tractor industry. This was followed by the launch of 3 more products, the Mahindra Arjun Novo 49.9, the Mahindra 585 Di and the Swaraj 742 FE, all of which have been well received across India.
We have also worked on strengthening our channel as part of positioning ourselves as technology leaders. We have also been revamping our dealer network to make it more tech savvy.
A strong product portfolio, channel network and several other initiatives helped us achieve great performance in F17.
FES achieved total domestic volumes of 248,409 tractors & grew by 23% compared to last year. We outpaced industry growth of 18%. We gained 1.7% MS over last year to achieve highest ever Market Share of 42.7%
Q. How critical was the good monsoon in this sales performance?
As mentioned above, the monsoon was recorded as normal. This has boosted reservoir levels from the lows seen at the beginning of this fiscal, and done the confidence of farmers a world of good. Area coverage under all Kharif crop increased to 1,060 lakh hectare compared to 1,052 lakh hectare last year.
Good monsoon and reservoir levels also supported Rabi sowing. Rabi sowing reached 637.34 lakh hectares as compared to 600.02 lakh hectares in 2016-17.
And most important, MSPs for both Kharif and Rabi were increased by 5.3% and 12 %, respectively from the previous year. This improved the farmers’ cash in hand and thus boosted rural consumption.
These external growth drivers built a positive sentiment in the market, helped boost rural income which in turn led to an increase in the demand for tractors.
Q. How did Swaraj perform last year and what role did it play in boosting the Group’s tractor sales?
F17 was a stellar year for Swaraj which excelled in every aspect of the business, operational and financial. In fact, Swaraj achieved its highest ever market share gain in a financial year. In F17, Swaraj extended its lead as the No. 2 brand. It also achieved its highest ever tractor sales volume. On the financial front, it achieved its non-tractor revenue, overall profit and profitability.
Q. How are the needs and requirements of Indian farmers changing and evolving and how is Mahindra helping them meet these needs?
At Mahindra, in order to cater to this rising need we have brought in innovation in the way we reach out to our customers. We have worked on things starting from product positioning and advertising, to the way we explain the sales story on the ground. We aim to deliver FarmTech prosperity to 75 mn. farmers to help them to Rise.
We understand that we are in the midst of a digital revolution where the pace of change is rapid. Farmers needs live information and complete crop solutions. We play an important role by establishing an in-depth relationship with them, by understanding their environment, their challenges so that we can offer tangible solutions and a candid perspective. We need to innovate and continuously assess their needs and identify the best practice solutions for them.
With Trringo, our digital platform, we have forayed into the farm equipment rental services space, using new age technology and digitization. Through Trringo, our endeavor is to make tractors and implements more accessible to the small and marginal farmers. Trringo completed its first year of operations in March 2017, reaching 12,000 farmers and 4,000 hours of operation in 4 states.
The Customer Value Proposition (CVP) of both our brands has helped to define various initiatives for our customers. We go far beyond just selling machines to farmers; we work towards making a farmer more holistically aware about the mechanisation solution that goes with it, and the overall solution around farming. To further enhance the consumer experience, we have also introduced tablets for our dealer salesmen. Apart from the technological changes we have also put in efforts to train our sales team and have worked on the whole customer experience side. We are working to strike the right balance between using technology and building the right emotional connect.
Trringo completed its first year of operations in March 2017, reaching 12,000 farmers and 4,000 hours of operation in 4 states.
Q. Can you tell us a bit about the Sector’s global plans?
In the exports market, in F17 we sold 14583 tractor units to grow by 26% over the previous year. We were the highest exporters of tractors from India. All our 3 zones and MUSA exports had growth over the previous year.
We are expanding our global presence with three acquisitions in the past three years. These include Mitsubishi Mahindra Agricultural Machinery (MAM), Japan in 2015, Sampo Rosenlew, Finland in 2016 and Hisarlar, Turkey in 2017. MAM will help us address the global rice value chain, while Sampo Rosenlew will help us make inroads in the global combine harvester business. Hisarlar will help us expand out global footprint in Europe and act as a technology base for various farm implements and tractor cabins We are becoming a solution focused farm machinery company and are making concerted efforts to build a full range of implements that would cater to the complete crop value chain.
Mahindra USA (MUSA) a wholly owned subsidiary was established in 1994. It is ranked No.3 in the < 80 Hp tractor segment in the US. MUSA ended F17 with a channel coverage of ~540 locations across US & Canada. F17 was the “year of records” for MUSA as it performed exceptionally well in all aspects of the business. It achieved highest ever deliveries of tractors and UTVs, highest ever implements and parts revenue. It also increased its total revenue to above USD 500 mn.
In F17, we also established our presence in Brazil and Mexico. Brazil is working on plans to launch a new portfolio of tractors, Sampo harvesters and other implements. Mexico will be a wholly owned subsidiary of MUSA. It is expected to commence operations by Q1 in F18.