The company is upbeat and is expanding its capacity in two of its plants, to meet the increasing demand in the market, said Mallika Srinivasan, chairman and CEO of the company.
The tractor industry has bounced back to a record high of 711,478 units with a 22 per cent growth from the previous year, during 2017-18 and has recorded a growth of 10.6 per cent during this year so far.
The expectations are that the domestic industry will be posting a growth of around 10-12 per cent during this year.
"We will be growing faster than the industry," said Srinivasan. The company has a turnover of over Rs 90 billion. The industry growth is triggered by various factors including that the monsoon is expected to be good; there is water available in the reservoir; the Gross Domestic Product (GDP) is also growing well and infrastructure growth is happening.
Besides, there is a strong focus on the farm policy and both the central and state government are offering a good support to the industry. Allocation from the centre has gone up nine per cent in three years. In 21 major states, the allocation for agriculture has gone up by 47 per cent. The industry is expected to reach around 7,85,000-7,95,000 tractors in the domestic market this year.
The growth for the industry is led by the states including Bihar, Jharkhand, West Bengal and Assam, apart from Uttar Prades, Haryana, Tamil Nadu and Andhra Pradesh. However, demand has been declining in Rajasthan, while Maharashtra is slowing down.
Srinivasan said the company is also working on latest connecting technologies, IoT and big data analysis in its products.
At present, the company has a manufacturing capacity of around 1,58,000 tractors a year and the current capacity utilisation is around 110 per cent.
The company is adding an additional capacity of 50,000 tractors at two locations - one near Bengaluru and the other at Bhopal, which would be completed by March and September, next year respectively. The capital expenditure for the year 2018-19, is around Rs 2.5 billion.
Speaking on the exports, Srinivasan said almost 12-15 per cent of its production is exported.
"We are in a very volatile environment right now. There are many challenges and many opportunities. I think rescripting your export plan or your international footprint is really going to be the key job for any CEO. Trade-wars are taking centre stage, they are realigning all relationships, some areas we have favoured nations, in some area we have sanctions and we cannot get in, in some areas they want more protectionism. We were playing to a set of rules and all the rules have changed. We can't say that it is a global village where you produce anywhere, sell anywhere, make it the most cost-effective," she said. "The approach has to be to say how can we partner?" she added.
In India, the new Trem emission regulations, expected to be implemented in 2020 would have an impact on the tractors above 50 horsepower strength as it is expected to increase the price of these products, affecting the demand for a short while.
Out of the total, tractors above 50 hp were around 53,486 units, but it is growing at 16 per cent this year, compared to the 10.6 per cent growth for the overall tractor industry this year.
The tractor industry is expected to see seven per cent CAGR for the next five years, while some cyclicality may be there. By the time 2022 arrives and the Prime Minister's promise on doubling the farm income happens, the industry is expected to cross one million tractors.