While the tractor industry and other major companies in the segment have posted marginal growth and negative growth, respectively, one company is bucking the trend. Tractors and Farm Equipment Ltd, the world's third largest manufacturer in this segment, reported 9.3 per cent growth in the first quarter. Mallika Srinivasan, chairman and chief executive officer, says long-term prospects are good for both the industry and the company. TAFE is confident of touching a turnover of $2 billion this year and plans to enter new markets abroad. Also on the cards, she tells T E Narasimhan, is making agricultural implements. Edited excerpts:
How is the current environment for the tractor industry, which has reported poor sales in the last quarters of 2011-12?
The growth has stabilised in the first quarter, compared to the fourth quarter of last fiscal. Everybody attributed the drop in growth to the monsoon, but it is just one factor. As the monsoons have started (again), we are hopeful to make up some lost ground in terms of growth.
More than the monsoon, it is sentiment which plays a major role. In the last five years, the support price of foodgrain has been good. As a result, farmers have money in their hand, but they were cautious in spending. The rain brought down the sentiment and this phase will be short-term. We are bullish about the long-term prospects.
What factors will drive the industry in the long term?
Prices of foodgrain, increase in labour cost and non-availability of labour, which calls for mechanisation, and aspirations of farmers are some of the growth drivers. Farmers are ready to invest for better quality and productivity, and to make farming easier. All this will increase returns for us.
Has the positive trend started reflecting in your sales?
Yes. While the industry has reported 2.77 per cent growth in sales during the first quarter, our growth was 9.33 per cent. In April-June, TAFE's sales were 36,669 units, as compared to 33,551 units a year before.
We will continue the tempo in terms of relative growth and we will continue to grow more than the industry, with the same percentage difference. As a whole, the industry is expected to report around five per cent growth during the current financial year.
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Any government action or initiatives required to accelerate the growth?
The government has to focus more on agricultural growth, especially post- harvest and food processing. The government should encourage private investment in both areas. It is both the government and our responsibility to see that the wastage should come down.
How are exports doing and what are your plans?
In 2011-12, TAFE sold 20,396 units across 73 countries. Now, the market is soft. To balance it, we are planning to expand to new countries, including parts of South America, Africa and in South Asia.
Last year, exports contributed around Rs 1,200 crore to the overall turnover of Rs 8,021 crore. This percentage will continue. We are planning to introduce new products for the export market, by the end of the year, which can go up to 105 Hp.
Any government action or initiatives required to accelerate the growth?
The government has to focus more on agricultural growth, especially post- harvest and food processing. The government should encourage private investment in both areas. It is both the government and our responsibility to see that the wastage should come down.
How are exports doing and what are your plans?
In 2011-12, TAFE sold 20,396 units across 73 countries. Now, the market is soft. To balance it, we are planning to expand to new countries, including parts of South America, Africa and in South Asia.
Last year, exports contributed around Rs 1,200 crore to the overall turnover of Rs 8,021 crore. This percentage will continue. We are planning to introduce new products for the export market, by the end of the year, which can go up to 105 Hp.
You also had a plan to enter agricultural implements. What opportunities do you see?
Globally, we see increase in farm mechanisation, due to labour cost and non-availability of labour, and for better productivity and quality, all applicable to India. Currently, the agricultural implements industry is dominated by small scale industry, due to government incentives. So we see, it as a good value-added or an allied product. The first product will hit the market by early next year and it will be for both domestic and international markets.
Giving the current slowdown in the sentiment. Any change in your investment and business plan?
No, our Rs 100-crore investment in Madurai for a new plant is on stream. It will start by next year and the $2-billion target before 2013 is also achievable. Post expansion, TAFE’s total annual capacity will be 250,000 units per annum. We are strong in our offerings. For instance, the company is ready with a programme to meet the emission norms for export products, starting from 2013.
Are you looking at an inorganic route for future growth and is this a good time for acquisitions?
We are looking at both organic and inorganic growth. We are financially strong, so we don’t see any reason why we should not look at the inorganic route.