M&M aims at top slot in tractors

Mahindra & Mahindra (M&M) is working on a plan that will propel the world's fourth largest tractor manufacturer to the top of the league in five years, overtaking John Deere, Case New Holland and ADCO, all of the US, which now occupy the first three places.

In the process, M&M is slated to double its capacity utilisation to the full installed capacity of 140,000 a year.

"While M&M took around 40 years to sell its first million units, the next million, we anticipate, will take around five years only," said Anjanikumar Choudhari, president (farm equipment), M&M.

M&M sold close to 70,000 tractors in 2004-05, of which about 10,000 were exported. In contrast, John Deere sold about 120,000 during the year.

Increasing production will not be much of a drain. "During the downturn a few years ago, M&M managed significant improvements in efficiency. Even if they manage to cross the 140,000 unit capacity, it would only take minimum capital expenditure to increase capacity," said Ramnath Subramanian, vice-president (research), SSKI Securities.

Choudhari pointed out that the current installed capacity of 140,000 units per annum (operating at 50 per cent) offered enough flexibility. Finding markets for the extra output should not be a problem. According to Subramanian, M&M's offices in critical markets will come in handy. "There is huge potential outside the country to be tapped," said Subramanian.

Choudhari also said the M&M will get more aggressive on the export front and said that expansion on this front would be strictly market focussed on major markets like USA, China, Israel, Serbia and Australia. Choudhari also said that the world domination would be in volume terms and M&M proposes to stay focussed on the 15-70 HP range of geared tractors.

M&M could also be scouting for opportunities for acquisitions, that would push them closer to the target of becoming the world's largest tractor manufacturer.

M&M plans to expand its market share both through the organic as well as inorganic routes. While the company is not actively scouting for any buyouts presently, Choudhari did not rule out the option.

He also said that the company was open to the idea of merging its partly owned (60 per cent) subsidiary, Gujarat Tractors Ltd (GTL), which currently has close to four per cent share of the domestic market. The state government of Gujarat has the remaining 40 per cent.

On the dealer network, M&M has around 540 outlets across the country. "This is by far the largest network in the country. We are also expanding out dealer network in interior parts in North," Choudhari said.

Over the next five years, M&M expects volume growth in the organic route to be the region of 6-10 per cent per annum.