Covid crisis: Rural economy to recover much faster than urban, says Mahindra and Mahindra

By: |
June 4, 2020 2:00 AM

On Wednesday, M&M said that the company had estimated the quantum of loss due to Covid-19 lockdown to the tune of 87,000 vehicles and around 30,000 tractors for the three months of April-June 2020.

Higher prices would lead to better realisation to farmers and the outlook of a normal monsoon has also aided expectations of a good kharif crop.Higher prices would lead to better realisation to farmers and the outlook of a normal monsoon has also aided expectations of a good kharif crop. (Representative image)

Mahindra and Mahindra (M&M) expects the rural economy to recover much faster than urban. The recovery would be driven by higher minimum support prices, higher government procurement and a record rabi production.

In a regulatory filing, the company said that while it was difficult to predict the demand scenario for the immediate short term, it expects tractor demand to show good improvement on the back of several positive factors. Higher prices would lead to better realisation to farmers and the outlook of a normal monsoon has also aided expectations of a good kharif crop.

The company further said that positive factors in the rural economy were expected to lead to quicker recovery in rural India and rural demand was expected to improve sales momentum for the auto sector, while demand in the urban segment would take longer to come back.

On Wednesday, M&M said that the company had estimated the quantum of loss due to Covid-19 lockdown to the tune of 87,000 vehicles and around 30,000 tractors for the three months of April-June 2020. Meanwhile, the estimated quantum of loss due to Covid-19 lockdown for March 2020 was around 23,400 vehicles and 14,700 tractors.

The company’s revenue and profitability would also be impacted in line with the fall in volumes, it said in a filing to the stock exchanges. However, the company has gradually begun operations in a phased manner as was allowed with relaxations in the lockdown. Around 75% of the company’s dealerships have also opened.

With further opening up of the lockdown, M&M expects demand to revive, however it said it was difficult to estimate the definitive impact of Covid-19 on the operations of the company beyond the first quarter of the current financial year at this point of time. It added that the profitability of the company for the quarter and financial year ended March 31, 2020 would “definitely be impacted”.

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