Tractor Manufacturers Grab a Ride on Farm Machinery

Escorts Ltd, owned by the Nanda family, ran a multi-layered plan with Kubota Corp, a global farm machinery company, last week, bringing Osaka, Japan, a company stake of 53.50%. It has been a milestone in the history of the agricultural industry.

Escorts and Kubota, Japan's oldest tractor manufacturer, will finalize the next six to seven-year plan once the deal is finalized. Part of the goal is to significantly diversify the product line, which includes developing the agricultural machinery area, which now holds a small part of the business. Kubota will also use the money set up to establish a world-class R&D center, according to Bharat Madan, Escorts chief financial officer, at a call to investors last week.

This is also not a single strategic act. In a phone call after receiving money from the media earlier this month, tractor market leader Mahindra and Mahindra (M&M) said they expected the share of agricultural machinery market to increase from 10% to 30% over the next five years. This will lead to a 10-fold increase in revenue, with 4,000 crore domestic revenue and an export revenue of 1,000 million. This does not include money from farm machinery sold by its international subsidiaries.

"Given the average percentage of the domestic market run by organized players, agricultural machinery has great potential." In addition, India contributes only $ 1 billion to the global agricultural machinery market worth $ 100 billion, "said Hemant Sikka, head of the farm machinery unit Mahindra & Mahindra. Today, the domestic industry costs 5,000 crores. -12,000 crore by 2027. grows at an average annual growth rate (CAGR) of 18 to 20%, he noted.

In many respects, the industry of farm machinery y in India is unusual, and compared to other markets around the world, it paints a bleak picture.

Tractor imports into India, the world's largest volume market, have risen to 45-50 units per thousand hectares by the end of the 2020-21 financial year, above the global average of 30 units per thousand hectares.

Harvesters, transplanters, lawmakers, and other farm machinery, as well as materials used as cultivators, harrows, and plows, fall under this category. According to Hemal Thakkar, director of Crisil Research, firms in the agricultural machinery industry earn a fraction of the revenue from non-tractor operations worldwide, but in India, the revenue share does not match that of a tractor, about 90% from them.

"The market is very fragmented, and the living space is much smaller than in other parts of the world," he notes, "which hinders consumers from investing in mechanical equipment."

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