After consolidating its position in the automotive space where its latest acquisition was South Korea?s Ssangyong Motors, Mahindra & Mahindra is sprucing up its farm equipment business. In an effort to become an end-to-end player in this segment, the company has drawn up a comprehensive plan to expand its tractor business to cover the entire value chain in the agriculture sector. This would include providing key agri-services like warehousing, transportation and irrigation help to farmers.
Pawan Goenka, M&M’s president of automotive division and farm equipment sector told FE that the company did not want to restrict its business to the tractor division but wants to encompass a wide array of services. ?Broadly, the areas that we are looking at include providing fertilisers to farmers, warehousing, irrigation and logistics,? Goenka said. He said the company was still working out the details of the move.
Currently, M&M enjoys a market share of over 40% in the tractor business. In order to fortify its position as the number one tractor maker, M&M acquired a controlling 40% stake in Punjab Tractors for an estimated Rs 1,000 crore in 2007. This helped the company increase its market share in the northern belt of Haryana and Punjab.
Sprucing up the farm equipment business makes sense because it contributes around 40% to the overall revenues of M&M.
Auto analyst with Angel Broking Vaishali Jajoo said the company?s decision to widen its agriculture focus would strengthen the company?s brand. She said that in fact, M&M already provides financing opportunities to farmers for buying its tractors, which has become very popular.
In the last two years, the tractor business has grown the fastest at 29%, while its car, truck and SUV business has grown at around 14%. M&M sells about 2 lakh tractors per year.
?The tractor business is still close to the heart of M&M. In fact, due to its powerful brand name in the rural areas, the company has leveraged it to penetrate the market for its SUVs like Scorpio and Bolero,? said an analyst.
In December, M&M?s total tractor sales jumped over 30% to 16,334 units against 12,439 units sold in December 2009. Cumulatively, during the April-December period, the total number of tractors sold by the company also increased 30% to 1,54,265 units as compared to 1,27,670 units.
According to analysts, Mahindras have earned the unique distinction of being present across product segments, from two-wheelers to commercial vehicles to aircraft, taking diversification to new levels.
Leader of automotive practice at PricewaterhouseCoopers Abdul Majeed said that every automaker has to be present across segments and verticals in the age of rapid change. On Monday vice-chairman and managing director Anand Mahindra unveiled the $7.1-billion group?s new tagline ?Rise.? The new focus for the company would be based on three pillars: accept no limits, think alternatively and drive positive change.
?Our challenge is create empowerment and to unleash the potential of our partners and employees,? Mahindra said. The tagline would also reflect the growing global ambitions of the group since close to 10% of its workforce are expatriates.