Mahindra & Mahindra, the market leader in the tractor segment, may look at spinning off its farm machinery business in the hope of tapping growth opportunities in the future. However, the Mumbai-based company is not looking at demerging the tractor business from itself at the moment.

Anish Shah, Managing Director and CEO, Mahindra Group, said, “We may look at a spinoff of farm machinery business because that is one area where we see huge potential for growth and it may require a very different mindset for driving that growth which can actually be 10X growth in 3-5 years, potentially even more. But that is not finalised as yet. This is only for farm equipment and farm machinery. We are not looking of a demerger of the farm business right now.”

Over the years, M&M has strengthened its position in the non-tractor, farm equipment and machinery business where it makes tractor implements, harvesters and rice trans planters in partnership with Japanese and European companies. M&M has bought controlling stakes in Turkish companies for making such equipment which cater to land preparation, sowing, crop care, harvesting and post harvesting.

M&M also produces and sells implements like cultivator, disc harrow, bucket scrapper, potato planter, boom sprayer, threshers and shredder to name a few, under its own brand. The Indo-Japanese joint venture of Mitsubishi-Mahindra where M&M has 33 per cent stake, makes power tillers, mini rotors, horticulture machines.

Share in revenue

At present, M&M’s farm equipment business, which includes the tractor business as well, makes up 29 per cent of the total consolidated revenue. While the farm equipment segment saw a growth of 2 per cent during the December 2021 quarter compared to the same quarter last year, the company give separate revenue data of its non-tractor vertical.

The automotive segment, which houses, SUVs, trucks, buses and three-wheelers, generates the highest revenues for M&M, commanding 41 per cent of its total consolidated revenues. M&M has a market share of more than 40 per cent in the domestic tractor market.

In the past there have been suggestions from analysts to M&M to demerge the farm equipment business (including tractors) and make M&M as a purely automotive company. This would have facilitated value unlocking of the M&M stock. However, the tractor business has helped the company in tiding over the slump in demand for passenger vehicles on several occasions.

“The more interlocking things you do it becomes (that much more) difficult for competitors to imitate. If you spin off tractors, you make somebody happy in the short term but then you are like everybody else. You are a standalone tractor company. We are not the PE (private equity) guys, we are looking at what we have built overtime,” Anand Mahindra, Chairman, M&M, had said in a 2018 annual analyst meet.