The Hindu Business Line : Cut in inventory drives tractor scrips

GOOD rains and corrective measures undertaken by the tractor industry have resulted in agri-machinery stocks hitting the accelerator over the past few months.

According to industry watchers, major agri-machinery stocks have raced ahead by upwards of 35 per cent since the beginning of this fiscal.

The scrip for Punjab Tractors, for instance, closed at Rs 202.10 on Friday, up from Rs 119.30 in the beginning of the fiscal. And an improved outlook for agriculture, which was affected by the severe drought in key states last year, could have a lot to do with it. Points out Mr Satish Ramanathan from ICICI Securities, "The good monsoon this year has improved sentiment and could have resulted in an overall recovery for tractor stocks."

In fact, if market watchers are to be believed tractor sales are set to ink growth in the next few months after seeing a double-digit decline in the last 3-4 years. "The industry is hopeful that the good monsoon would result in positive growth for the industry in the coming year," Mr R.C. Jain, President of the Tractor Manufacturers Association (TMA), had told Business Line earlier.

Further, the tractor industry's initiatives to improve the financial health of the industry also seem to have started paying dividends. According to industry officials, the inventory levels have been significantly reduced after the industry's decision earlier this year to curb production and halt the practice of advance selling (the credit given by the dealer to the customer).

According to TMA, the production levels of the tractor industry had declined to 36,186 units in the first quarter of the fiscal from 40,526 units in the same period last year. Seeing a revival in demand in the coming months, tractor makers are also undertaking steps to provide more attractive loan schemes to farmers and have inked a string of tie-ups with financial institutions.

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