KOLKATA: Banks financing tractors face a better lending prospect this year with demand is expected to scale a new high given the normal rainfall so far.
Rating and research firm CrisilBSE -0.75 % said it expects tractor sales to touch a new peak of over 6.5 lakh units this fiscal, given prospects of a successive normal monsoon coupled with falling interest rates and higher disposable fund with farmers getting loan waivers benefit.
Crisil said that tractor sales had risen 18% last fiscal on good rains, after declining more than 10% in 2015 and 2016, when monsoon had played truant – underscoring the strong correlation between weather and the top lines of tractor makers.
Monsoon rainfall was slightly above normal in July after being 4% in excess in the previous month.
Last fiscal’s sales at 5.8 lakh units were however lower than that of in 2014, suggesting some pent-up demand could manifest given conducive conditions.
Average tractor penetration in India is very low at about 20 per 1,000 hectare.
“That underlines the kind of headroom for growth available over the long term,” says Manish Gupta, director at Crisil Ratings.
Mahindra & Mahindra and TAFE are the two biggest tractor makers in India with a combined market share of around 65%. With capacity utilisation in the industry at about 60%, companies can easily address surges in demand without fresh capex, Crisil said.