India's Tractors Industry 2014

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TABLE OF CONENTS
RISK SCORE ................................................................................................................................................................... 5
EXECUTIVE SUMMARY .............................................................................................................................................. 6
OVERVIEW ..................................................................................................................................................................... 7
MACROECONOMIC SCENARIO ................................................................................................................................ 8
Glance at Key Economic Indicator ........................................................................................................................................8
Tradeoff between Growth & Inflation ............................................................................................................................... 12
Currency Movement ................................................................................................................................................................. 13
REGULATORY SCENARIO ...................................................................................................................................... 14
DEMAND SUPPLY SCENARIO................................................................................................................................ 15
Current Scenario ....................................................................................................................................................................... 15
Demand Drivers ......................................................................................................................................................................... 16
Exports .......................................................................................................................................................................................... 19
Imports.......................................................................................................................................................................................... 20
New Capacity Addition ........................................................................................................................................................... 21
Future Growth Prospect ......................................................................................................................................................... 23
COMPETITIVE SCENARIO ...................................................................................................................................... 24
FINANCIAL PERFORMANCE .................................................................................................................................. 26
Sales Growth ............................................................................................................................................................................... 26
Operating Cost ........................................................................................................................................................................... 27
Profitability ................................................................................................................................................................................. 28

Ratio Analysis ............................................................................................................................................................................. 29

Debt Equity Ratio ................................................................................................................................................................. 29
Interest Coverage Ratio ..................................................................................................................................................... 30
Other Key Ratios ................................................................................................................................................................... 31

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RISK SCORE
Higer level of mechanization is

expected to happen in Indian
agriculture as farmers explores ways
to increase effiicency.
Low availability of farm labor due to

rural urban migration too would
increase usage of tractors in
agriculture sector.
Demand drop in the US - India's

largest export market - has
impacted tractor exports from the
country. Since exports form an
integral part of the sector, this
slowdown has impacted the entire
tractor sector.
Any deficit in monsoons would
impact crop sowing pattern in the
country, in turn impacting tractor
demand

EXECUTIVE SUMMARY
India is the largest tractor manufacturer in the world accounting for close to one-third of
global production. The country is also one of the largest exporters of tractors, generating
close to INR 49 Bn through exports in FY 2014. Today Indian tractor manufacturers are
capable of producing wide range of tractors with capacities ranging from 20 HP to 90 HP.
Tractor penetration in the country is estimated to be close to 20 tractors per 1,000 hectares
of agricultural land, which is on par with global standards. Tractor usage in agriculture in
India initially picked up due to the governments effort on farm mechanization as part of
Green Revolution during 1970s. Supporting policy measures towards this initiative helped
in initial adoption of tractors.
Annual tractor sales in the country are estimated to have reached 700,000 units by the
fiscal year 2014, of which exports form 9%. Domestic sales of tractors reached close to
633,000 units by FY 2014, increasing by 20% over previous fiscal. More than 50% of
tractors sold in India are concentrated in the five states of Uttar Pradesh, Maharashtra,
Gujarat, Rajasthan, and Madhya Pradesh.
Demand for tractors is directly tied to the growth in agriculture sector. General increase in
crop production over the past few years due to scientific advances in agricultural practices
and increasing mechanization in agriculture has resulted in increased usage of tractors.
Additional demand rose from goods transportation sector where it is mostly used for short
distance haulage as well as from export markets.
Indian tractor sector is consolidated and close to 90% of total domestic sales is
concentrated among top five players. Mahindra & Mahindra is the clear leader in Indian
tractor sector, accounting for close to 42% of domestic sales. Tractors and Farm
Equipments Ltd, Escorts Ltd, International Tractors Ltd, Punjab Tractors and Eicher are
few of the key domestic manufacturers. Global tractor manufacturers like John Deere
Equipments Ltd and New Holland Fiat (India) Pvt Ltd too operate in Indian tractor sector.

OVERVIEW
India is the largest tractor market in the world and tractor production in the country account for
close to one-third of total global production. During earlier decades after independence, Indian
tractor sector was dominated by imports as indigenous manufacturing base was weak. However
promotion of indigenous manufacturing through technology transfer agreement with global tractor
manufacturers during 1960s helped in the growth of tractor manufacturing in the country. Since
then, private companies in the sector have developed indigenous technologies and perfected
tractor manufacturing. On the back of this strong manufacturing base India has become of the
largest exporters of tractors in the world.
Today Indian tractor manufacturers are capable of producing wide range of tractors with
capacities ranging from 20 HP to 90 HP. Based on the horsepower (HP) capacity the sector is
categorized into five classes: less than 20 HP, 21 30 HP, 31 40HP, 41-50 HP and above 50
HP. Tractors in the segment 31 40 HP form the largest among all five segments accounting for
close to 40% of total market
Tractor demand has inexplicably been linked to agricultural production - primary demand driver
and to a lesser extends to short distance haulage operations. Renting out of tractors to farmers as
well as for haulage is common in the country, which has reduced the useful lifecycle of the
equipment from 10 - 12 years to 8 10 years. Drop in lifecycle would speed up the rate of
replacement, leading to higher demand.
Tractor penetration in the country is on par with global standards, mostly due to the thrust
provided for farm mechanization in Green Revolution. Supportive government polices to promote
mechanization too has helped in increased acceptance of tractors in agriculture sector. Usage of
tractors in the country varies from region to region. Usage is highest in the states of Uttar
Pradesh, Maharashtra, Gujarat, and Punjab while lowest in North Eastern States where the terrain
is primarily hilly.

MACROECONOMIC SCENARIO
Glance at Key Economic Indicator
Indian economy continued to report below 5% growth in FY 2014. At global level, economic
growth performance in major economies continued to play a decisive role in deciding the growth
fortunes of developing countries including India. Indian economic performance was severely
impacted by the sustained weakness in USA, Euro Zone countries and China that are also Indias
major trading partners and source of foreign capital inflows. In CY 2013, world economic growth
slide further to 3% as compared to 3.1% in previous year while US GDP growth slowed down to
1.88% as compared to 2.8% in in previous year and Euro Zone as a whole reported a growth of
about 0.2%. Annual GDP growth of world fastest growing market i.e. China too slowed down from
the level of 10.4% in 2010 to 7.7% in 2013.
At domestic level, Indias investment and industrial growth prospects remained fragile and even
the services sector remained weak. Even though the Indian government took several steps to
arrest the volatility in foreign exchange rate and narrow down the current account deficit in FY
2014 but the growth momentum of the domestic economy faced unrelenting challenges.
Persistence of high consumer price inflation and interest rates, weakening performance of
services and industrial sector has let down all expectation of economic revival in the past fiscal.
Additionally, regulatory hurdles, administrative bureaucracy, and policy delay pertaining to land
acquisition process, obtaining license, and environmental clearance were further impediments to
growth. These factors dampened the countrys position at global level as well due to which, on
th
ease of doing business Index India ranks 134 amongst 184 countries and lowest amongst
BRICs peers. Lack of consensus on major economic reform and policy paralysis led to a declining
new-investment spending for the fourth consecutive year in row since FY 2011.

Macro Economic Indicator

8.91%
8.59%
8.23%
6.69%
5.28%
4.47%
5.5%
4.74%
2.7%
2.88%
-0.1%
FY 2010
FY 2011
FY 2012
GDP Growth Rate
1.10%
FY 2013
FY 2014 PE
FY 2015F
IIP Growth Rate
Source: CSO & D&B Forecast, (PE is Provisional Estimates)
As per provisional estimates on GDP number released on May 30
th
2014, Indias annual GDP
growth reported a marginal incremental growth of 0.3% over the previous year and grew at about
4.74% in FY 2014 as compared to 4.47% in FY 2013. Economic activity continued to exhibit
stagnancy on back of slowing industrial sector. Industrial sector growth as measured by the Index
of Industrial Production (IIP), registered a y-o-y decline of 0.1% during FY 2014.
As seen in the below chart, services sector registered maximum growth over the period FY 201014, followed by the agriculture sector and industrial sector.

GDP (Factor Cost, Constant 2004-05 Prices) by Economic Activity

Agriculture (INR Bn)
6,610
7,178
7,538
7,645
Industry (INR Bn)

8,005
14,807
14,949
15,002
13,733
12,769
FY 2010
FY 2011
FY 2012
FY 2013 RE FY 2014 PE
FY 2010
FY 2011
25,782
28,274
32,227
FY 2013 RE FY 2014 PE
CAGR (FY 2010-14)
Services (INR Bn)

30,130
FY 2012
7.54%
34,482
6.19%
4.91%
4.11%
FY 2010
FY 2011
FY 2012
FY 2013 RE FY 2014 PE
Agriculture
Industry
Services
Over all GDP
Source: CMIE Outlook, RE is Revised Estimated, PE is Provisional Estimate
In FY 2014, services sectors contribution towards GDP stood at 60.1%, followed by industry
(26.1%) and agriculture (13.9%). Also, the share of services to economic output is increasing,
while that of agriculture and industry segment declined over the period FY 2012-13.
The annual growth rate of services sector, industry and agriculture sector stood at 7%, 0.35% and
4.17%, in FY 2014 as compared to 6.96% 0.96% and 1.42% respectively, registered in previous
fiscal.

Yearly Q-o-Q change in Sectoral GDP (%)

7.2%
7.6%
6.9%
7.2%
7.2%
6.4%
6.3%
6.3%
6.3%
5.0%
4.0%
Agricuture
-0.4%
Industry
-0.2%
Q4: FY 2014
-0.4%
Q3: FY 2014
1.6%
Q2: FY 2014
0.8%
Q1: FY 2014
-0.4%
3.7%
2.6%
2.1%
Q4: FY 2013
1.7%
Q3: FY 2013
1.8%
Q2: FY 2013
Q1: FY 2013
1.8%
0.3%
Services
Source: CMIE Outlook

From quarterly trend, growth in agriculture sector expanded from sharply to 6.3% on sequential Qo-Q basis in Q4 FY 2014, while service sector economic output slowed down to 6.4% in last
quarter of FY 2014 from 7.2% in previous sequential quarter. Industry segment continued to report
a decline in Q4 FY 2014 on yearly q-o-q basis on the back of contracting economic output from
mining and quarrying and manufacturing segment in all four quarters (excluding Q2:FY 2014).
D&B expects economic growth to recover in FY 2015, albeit at moderate rate and grow at about
5.5%. With formation of a new and stable government, economic growth is likely to get impetus
from improved policy environment, early implementation of long pending reforms and revival of
large stalled projects.

Tradeoff between Growth & Inflation
Source: Office of the Economic Advisor; RBI

Monetary authorities kept the interest rate unchanged during April 2012-Dec 2012 as the
inflationary pressure continued to loom over the economy that impacted the fresh investments and
economic growth in FY 2013. In order to revive investment and push liquidity in the economy, RBI
reduced the repo rate thrice during Jan 2013 till May 2013 by 25 basis point each time. However,
with revival of inflationary pressure the repo rate was hiked by 25 bps thrice since September
2013. The latest hike of 25 bps in repo rate was made Jan 28, 2014. Rise in interest rates has
adversely impacted the overall GDP growth on the back of increasing project financing cost for
corporate and deterring the demand growth. India Inc. has been demanding a rate cut to spur
investment and promote growth as the monthly WPI index which measure inflation has shown
some decline trend since November 2013. However, RBI kept the policy rate unchanged in its
latest monetary policy review in August 5
th
2014 against the industry expectation. Repo rate
currently stands at 8%.

CRR another monetary tool used by RBI to regulate money supply has been reduced four times
(each time by 25 basis point) since March 2012 in order to infuse the primary liquidity in banking
th
system and supports the GDP growth. With last 25 basis point cut on 29 Jan 2013, the CRR
currently stands at 4.0% and CRR too remained unchanged in latest policy review.

Currency Movement
Indian currency entered into a prolonged period of depreciation by the middle of fiscal 2012 which
continued well into end of FY 2014. During this period rupee touched record lows. After a
prolonged period of depreciation the US dollar stabilized against Indian rupee in the range of INR
59 60. India being a major exporter of tractors this weakness in rupee has helped in shoring up
export revenue. However pull back in rupee to more strong levels of INR 59 60 has limited the
export earnings.
Source: Ministry of Finance, Govt of India

REGULATORY SCENARIO
Tractor usage in agriculture in India initially picked up due to governments effort on farm
mechanization to increase efficiency and productivity, as part of Green Revolution during 1970s.
Supporting policy measures towards this initiative helped in initial adoption of tractors. Increased
productivity due to a combination of better seeds, usage of fertilizers as well as higher levels of
mechanization encouraged farmers to increase tractor usage. Removal of production restrictions
during the economic reforms of 1991 helped tractor manufacturing, as it helped a host of other
manufacturing sectors. Since then domestic production has picked up and has grown at a healthy
rate.
India have signed trade concession agreements with Japan, by terms of which the tariff on import
of select products (covered under the agreement) will be gradually reduced over a fixed time
period as defined in the agreement. Tractors are covered under the agreement, which resulted in
lower tariff on import of tractors from Japan. Lower tariff helped in reducing the landed cost of
tractors imported from Japan, posing stiff challenge to domestic players.
In addition India has also signed Trade in Goods Agreement with countries in ASEAN block. The
agreement is based on Comprehensive Economic Cooperation framework. As per the terms of
this agreement, countries party to this agreement would open up in a phased manner, their
market for goods and commodities covered under the agreement to other signatories of the
agreement. Opening up of the market include measures like lowering trade barriers by reducing
tariffs and other costs. This agreement covers import of certain types of tractors from Thailand,
leading to a surge in tractor imports from that country.

DEMAND SUPPLY SCENARIO

Mechanization of Indian agriculture during Green Revolution and start of indigenous production
resulted in Indian tractor industry becoming one of the largest in the world. Lower production cost
coupled with international quality standards helped tractors gain acceptance in global markets.
Soon India became one of the largest exporters of tractors. Tractor penetration in the country is
estimated to be close to 20 tractors per 1,000 hectares of agricultural land, which is on par with
global standards.
Current Scenario
Annual tractor sales in the country are estimated to have reached 700,000 units by the fiscal year
2014, of which exports form 9%. Total tractor sales increased by a CAGR of 7% during the period
FY 2010-14. While domestic sales increased by a CAGR of 12% during the same period but
exports declined by 17%. Drop in exports was due to lower demand from the US, which is the
largest export market for Indian tractor manufacturers.
Domestic sales of tractors reached close to 633,000 units by FY 2014, increasing by 20% over
previous fiscal. Most number of tractors was sold in the state of Uttar Pradesh, accounting for
16% of total sales in the country. More than 50% of tractors sold in India are concentrated in the
five states of Uttar Pradesh, Maharashtra, Gujarat, Rajasthan and Madhya Pradesh.
Source: D&B Research

Demand Drivers
Demand for tractors is directly tied to the growth in agriculture sector. General increase in crop
production over the past few years due to scientific advances in agricultural practices and
increasing mechanization in agriculture has resulted in increased usage of tractors. Additional
demand rose from goods transportation sector where it is mostly used for short distance haulage
as well as from export markets.

KEY DEMAND DRIVERS

Farm mechanization was one of the features of green revolution
which was implemented in 1960s to increase crop production.
Initially capital intensive farm mechanization was supported by
government policies. However increased farm productivity brought
about by Green Revolution encouraged farmers to actively adopt
Mechanization in
all features that defined Green Revolution, including usage of high
Agriculture
yield seeds, increase usage of fertilizers as well as usage of

agricultural machinery.
Consequently usage of tractors in agriculture went up. In later
years pick up indigenous production which reduced the cost
compared to imports along with liberal farm credit helped in
wider adoption of all types of farm machinery, including tractors.
Usage of tractors for transporting goods over short distance has
Increased usage for

haulage
picked up in sectors like construction and infrastructure. It is also

used for transporting agricultural goods from farms to warehouses
/ agriculture markets. Currently usage for haulage forms the
secondary demand for tractors in the country.
Urbanization and growth in industrialization has led to migration of
people from villages to towns & manufacturing hubs, leading to
drop in availability of farm labor. This has forced farmers to relay
Drop in availability of
more on agriculture machinery to substitute farm labor.
farm labor
Rural urban migration pattern is set to continue as more jobs are

being created in towns and manufacturing hubs. Consequently
usage of tractors along with other agriculture machinery would
continue to grow.

From being a net importer of tractors, Indian tractor industry has

developed to become a net exporter. Indian made tractors are
currently exported to some of the largest markets like the US. By
FY 2011 approximately 137,000 tractors were exported from
Export Demand
India.
However tractor exports to the US Indias largest export market
fell after FY 2010 as recessionary situation led to drop in
demand.

Exports
Tractor exports from the country gained traction by FY 2000 and since then grew by ~56% per
annum in the next ten years (till FY 2010). Annual volume of exports increased from 2,700 units to
137,000 units during this period. Approximately 50% of tractor exports were headed towards the
US market, one of three largest tractor market in the world (along with India and China). By FY
2010 tractor exports were generating close to INR 15 Bn per annum. Tractor exports reached its
peak in FY 2010 with exports to the US alone accounting for 67%.
However demand fall in the US due to deteriorating economic condition and impacted tractor
exports badly. On the face of lower demand annual tractor exports to the US came down from
91,500 units in FY 2010 to 16,700 units in FY 2011, a drop of 82%. Consequently overall tractor
exports from the country declined by 59%. Although there was a surge in demand the following
year, it was due to sudden spike in demand from Sri Lanka but subsided to normal levels in the
following years. By FY 2014 annual export of tractors have fallen to 65,600 units, however export
revenue continued to increase due to the weakness in rupee which hit record low levels during FY
2013.
Source: CMIE Industry Outlook
Volume of exports to the US accounted for 21% of total exports in FY 2014, down from 67% in FY
2010 as demand fell. Algeria, Turkey, and Nepal were the next three major export markets
targeted by Indian tractor manufacturers. Together these three countries accounted for 32% of

total exports. Inability of Indian tractor manufacturers to develop alternate export markets (other
than the US) for their products and high reliance on the US led to the current scenario. Value of
tractors exported from the country reached INR 49 Bn in FY 2013. Further, exporter of cheaper
used tractors to South East Asian countries from developed countries created competition for
Indian manufactures who were exploring these South East Asian markets.
Imports
During 1970s India was completely reliant on imports for tractors; however start of indigenous
production and capacity building by private sector players led to a drop in imports. However over
the past couple of years tractor imports to the country has been increasing, with Japan emerging
as the largest exporter. Indian government has accorded preferential treatment to tractor imports
from Japan which includes reduction in import duty.
However few of the components required for tractor manufacturing needs to be imported, import
of these goods levy a higher duty when compared to duty levied on final product (tractor).This has
created an inverted duty scenario where Indian made tractors have become expensive than
tractors imported from Japan. This price differentiation led to higher demand for Japanese imports
leading to an increase in volume of imports from that country. General increase in the volume of
imports along with a weak rupee resulted in tractor import bill crossing the INR one billion mark.
Source: CMIE Industry Outlook

New Capacity Addition

New investments into the sector have declined in the past couple of years due to slow growth in
domestic demand and general credit squeeze prevailing in the corporate sector. Average annual
investment made in the sector declined from INR 20 Bn INR 3 Bn in FY 2013, while no new
investment was made in latest fiscal (FY 2014). Currently there are five projects under various
stages of implementation in the tractor sector and the combined cost of those projects is
estimated to be close to INR 12.3 Bn.
Source: CMIE Prowess, D&B Research
Major projects currently under implementation

Company
Project
Capacity
Mahindra & Mahindra
Nagpur
Ltd
Manufacturing
Plant
Tractors
Added
Expected
(units)
Completion
15,000
March 2015
24,000
December 2015
Capacity
Expansion Project
New
Holland
Fiat
Noida
Tractor
Expansion

(India) Pvt. Ltd.

Tractors
&
Equipment Ltd.
Project
Farm
Madurai
Tractors
60,000
December 2015
Manufacturing Plant Project

Source: CMIE Capex

Future Growth Prospect

Increased focus on improving crop productivity to feed a growing population would see changes in
Indian agriculture sector, including higher levels of mechanization. Further decline in availability of
farm labor due to migration to urban centers too would play a significant role in higher level of
mechanization in agriculture. Consequently demand for tractors would remain strong in the
coming years. Apart from long term demand for agriculture, demand would also increase from
haulage segment with the pick-up in mining and construction activity. However monsoon deficit in
FY 2014 would impact tractor sales in FY 2015. Average rainfall in FY 2014 has impacted sowing
leading to lower demand for tractors.
Consequently domestic sales growth would be muted in FY 2015, but is expected to pick up in FY
2016. However growth in FY 2016 hinges on monsoons and a weak monsoon would impact
growth. Going forward domestic tractor sales are expected to reach ~746,000 units by FY 2016.
Source: D&B Research

Exports which accounted for a significant percentage of sales till FY 2010 is expected to rebound
once demand for the US, Indias key export market picks up. However this demand pick up would
be gradual as US is still in the midst of economic slowdown with growth appearing to be slower
than anticipated.

COMPETITIVE SCENARIO
Indian tractor sector is consolidated and close to 90% of total domestic sales is concentrated
among top five players. Tractor manufacturing is characterized by the need for upfront capital
investment, well developed dealer network for maximum penetration in domestic market and
adherence to quality standards so as to meet export quality. These factors act as entry barriers,
preventing entry of smaller players into the sector. Mahindra & Mahindra is the clear leader in
Indian tractor sector, accounting for close to 42% of domestic sales.
Key Tractor Manufacturers
Mahindra & Mahindra is the largest tractor company in the world (by volume
Mahindra &
Mahindra Ltd
(Farm Equipment
sales). The company sells close 200,000 220,000 tractors per annum and till
date have sold close to 2 Mn tractors. Mahindra & Mahindra is also the largest
exporter of tractors, and also operates manufacturing units in the US and China.
The company sells Swaraj brand of tractors, one of the most popular tractor
Division)
brands in the country. Other tractor brands sold by the company include Arjun,
Bhoomiputra, Sarpanch, Shaan and Yuvraj.
Escorts Ltd
Escorts Agri Machinery division manufactures and sells tractors, crop solutions
(Escorts Agri
and engines & gensets. Apart from agricultural usage the companys tractor
Machinery)
portfolio also include tractors exclusively meant for haulage.

TAFE is the third largest tractor manufacturer in the world and second largest in
Tractors and
India. The Company sells 150,000 tractors per annum and is estimated to
Farm
account for 25% of total market. TAFE is incorporated in Chennai and has been
Equipments Ltd
operational since 1960. TAFE manufactures tractors in the range of 20 HP to 60
(TAFE)
HP. Apart from tractors the company also manufactures farm machinery, diesel
engines, batteries and transmission components.
International
Tractors Ltd
International Tractors Ltd established in 1969 is the makers of Sonalika brand of

tractors and farm equipments. The company manufactures tractors in segments
ranging from 20 HP to 90 HP.

The Company was incorporated in 1967 in Bangalore and started commercial

production of power tillers and diesel engines in 1970 in collaboration with
VST Tillers
Mitsubishi Heavy Industries and Mitsubishi Corporation, Japan. The company
Tractors Ltd
started producing tractors from 1984 in collaboration with Mitsubishi Agricultural
(VTTL)
Machinery Company Ltd, Japan. The company currently manufactures power

tillers, tractors, paddy transplanters, and diesel engines. Tractor brands
manufactured include VST Mitsubishi Shakti and Euro Trac
The Company - earlier known as Gujarat Tractor Corporation Limited was a
Mahindra Gujarat
Tractors Ltd
public sector enterprise which became a part of USD 16 Bn Mahindra Group in

1999 as part for the disinvestment drive of Gujarat Government. Name of the
company was changed to Mahindra Gujarat Tractors Ltd in 2000. The company
manufacture Shaktmaan and Hindustan brand of tractors.
HMT Tractors, incorporated in 1971 is the tractor business division of HMT
HMT Tractors Ltd
Group. The company initially started manufacturing tractors in collaboration with

Motokov which was based
in erstwhile Czekoslovakia. The company
manufactures HMT brand of tractors

Financial Performance of few Companies in the Segment (FY 2014)
Company
Sales
Change
over
previous fiscal
Operating Profit & % Change

over previous fiscal
VST Tillers Tractors Ltd
INR 6.2 Bn ( 29.6%)
INR 0.8 Bn ( 70.8%)
Mahindra Gujarat Tractors Ltd
INR 1.29 Bn ( 0.2%)
INR 0.05 Bn ( 4.9%)
INR 0.81 Bn ( 20.9%)
INR 0.9 Bn
H M T Ltd
Note: Financials of Escorts Ltd largest company whose financials are publically available is not considered
as the FY 2014 results is of 18 month period, due to the accounting period change undertaken by the
company. Consequently comparison of financials between FY 2014 (18 month period) and FY 2012
(previous fiscal results, 12 month period) would yield skewed results. Farm equipment division of Mahindra &
Mahindra is part of Mahindra Group which does not public segment wise financial results. Financial
information of TAFE and International Tractors are not available as they are not publically listed.

FINANCIAL PERFORMANCE
Sales Growth
Drop in export demand impacted the tractor sector impacted the sales in FY 2013. Volume of
tractors exporter dropped by ~30% during FY 2012-13 leading to lower sales growth in the sector.
Strong domestic sales prevented de growth in FY 2013.
Source: CMIE Prowess, D&B Research, Sample -3 Companies

Operating Cost
Operating Cost Margins
Year
Raw Material
Power & Fuel
Salary & Wage
SGA Expenses
Interest Expense
FY 2010
63.6%
1.1%
9.5%
6.2%
3.3%
FY 2011
64.7%
1.1%
9.5%
6.7%
3.3%
FY 2012
68.4%
1.0%
9.2%
5.8%
3.7%
FY 2013
66.8%
1.0%
9.5%
5.3%
3.4%
Source: CMIE Prowess, D&B Research, Sample 4 Companies
Steel and pig iron which are used to manufacture parts of tractors account for 75% - 80% of
raw material cost. For the past 4 5 years prices of both pig iron and steel has been volatile and
this volatility has spilled over to the raw material cost incurred by tractor manufactures.
Tractor manufacturing continues to be labor intensive as the level of mechanization involved in
manufacturing is yet to catch up. This has kept employee compensation expense high, accounting
for close to 10% of total revenue. Interest expense which accounted for ~3.3% of total revenue in
FY 2010 came down to 1.8% in FY 2014 primarily due to paring down of debt by few companies
in the sample.

Profitability
Profitability margin in the sector has steadily declined (as seen in the sample considered) during
the period FY 2010-13 due to slowdown in sales as demand from end consuming sector dropped.
Although raw material cost largest operating cost moderated during the period other major
expense heads like power & fuel cost as well as salary & wage expense increased.

Ratio Analysis
Debt Equity Ratio
There was a hike in borrowing by one of the companies in the sample in FY 2012 to fund its
capacity expansion plans. Overall growth in debt as a result of this led to a surge in debt equity
ratio in FY 2012. However repayment of debt by one of the companies in the sample helped in
bringing down the debt component in the sample. This helped in reducing the debt-equity ratio
from its FY 2012 levels.

Interest Coverage Ratio

In the period FY 2013-14 revenue of one of the companies in the sample surged on the back of
extra ordinary income accrued during the course of FY 2014. Resulting growth in operating profit
of the company led to an overall increase in operating profit in the sample. On the other hand debt
repayment exercise undertaken by a constituent in the sample helped in reducing the interest.
Consequently interest coverage ratio surged in FY 2014.

Other Key Ratios
Sample: 4 Companies (Source: CMIE Prowess)

Time Period: FY 2012,13 and 14
Ratios
Average Value
Gross Margin
22.6%
Net Margin
3.3%
Current Ratio
1.24
Quick Ratio
0.73
Account Receivables Days
38
Inventory Days
44
Account Payable Days
45
RONW
10.3%
ROA
10.3%
ROCE
15.4%
Long Debt-Equity
Net worth to Total Liabilities
0.86
35.9%
Interest Coverage Ratio
3.44
Fixed Asset Turnover
3.59
Asset Turnover
1.13
Inventory Turnover
(83.98)
Fixed Assets to Net worth
9.17
Sales to Capital Employed
0.88

Registered Office
Bangalore
Ahmedabad
ICC Chambers,
Saki Vihar Road, Powai,
Mumbai - 400 072
Tel: +91-22 2857 4190/92/94,
6676 5555
Fax: +91-22-2857 2060
Email: dbindia@vsnl.com
URL: www.dnb.com
# 7/2 Gajanana Towers,

st
1 Floor, Anna Swamy Mudaliar Street
Opposite Ulsoor Lake,
Bangalore 560042
Tel:+91-080-3316 / 3500
Fax: +91-080-3316 3540
Email: dnbblr@mail.dnb.co.in
001, Samruddhi, Opp.Old High

Court,
Income Tax, Ashram Road,
Ahmedabad 380 014
Tel: +91-079-27540558 / 27540559
Fax: +91-079-27540560
Email: dnbahd@mail.dnb.co.in
New Delhi Office
Kolkata
FB-01,NSIC STP Centre, NSIC

Bhawan,
Okhla Industrial Estate,
New Delhi 110 020
Tel: +91-11-4149 7900/01/
Fax: +91-11-4149 7902
Email: dbdelhi@mail.dnb.co.in
Chennai
166 B, S.P. Mukherjee Road,

Merlin Links,Unit 3E, 3rd Floor,
Kolkata 700 026
Tel: +91-33-24650204
Fax: +91-33-2465 0205
Email: dbkolkata@mail.dnb.co.in
Hyderabad
New no: 28, Old no: 195

st
1 Floor, North Usman Road
T,Nagar
Chennai 600 017
Tel: +91-44- 2814 2265/ 4289
7602/ 2814 2275
Fax: +91-44-2814 2285
Email: dbmadras@mail.dnb.co.in
th
504, 5 Floor
Babukhans Millennium Center
6-3-1099/1100, Somajiguda
Hyderabad 500 004
Tel: +91-40-6662 4102 / 6651 4102
Fax: +91-40-6661 9358
Email:dnbhyd@mail.dnb.co.in


India&#39;s Tractors Industry 2014

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Ratio Analysis ............................................................................................................................................................................. 29

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2014 Dun & Bradstreet All rights reserved.

Dun & Bradstreet Information Services India Private Limited

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Higer level of mechanization is

Low availability of farm labor due to

Demand drop in the US - India's

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Macro Economic Indicator

GDP Growth Rate

IIP Growth Rate

Source: CSO & D&B Forecast, (PE is Provisional Estimates)

As per provisional estimates on GDP number released on May 30

2014, Indias annual GDP

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GDP (Factor Cost, Constant 2004-05 Prices) by Economic Activity

Industry (INR Bn)

CAGR (FY 2010-14)

Services (INR Bn)

Over all GDP

Source: CMIE Outlook, RE is Revised Estimated, PE is Provisional Estimate

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Yearly Q-o-Q change in Sectoral GDP (%)

Source: CMIE Outlook

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Tradeoff between Growth & Inflation

Source: Office of the Economic Advisor; RBI

2014 against the industry expectation. Repo rate

currently stands at 8%.

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Source: Ministry of Finance, Govt of India

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DEMAND SUPPLY SCENARIO

Source: D&B Research

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KEY DEMAND DRIVERS

all features that defined Green Revolution, including usage of high

yield seeds, increase usage of fertilizers as well as usage of

Increased usage for

picked up in sectors like construction and infrastructure. It is also

more on agriculture machinery to substitute farm labor.

Rural urban migration pattern is set to continue as more jobs are

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From being a net importer of tractors, Indian tractor industry has

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Source: CMIE Industry Outlook

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Source: CMIE Industry Outlook

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New Capacity Addition

Source: CMIE Prowess, D&B Research

Major projects currently under implementation

Mahindra & Mahindra

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(India) Pvt. Ltd.

Manufacturing Plant Project

India's Tractors Industry 2014

India's Tractors Industry 2014