Economy

Buoyed by monsoon, tractor firms now pin hopes on easy funding

G Balachandar Chennai | Updated on August 31, 2019

Over the years, domestic tractor volumes growth has largely been linked to the S outh-W est Monsoon   -  istock/SweetyMommy

A good monsoon and a change in rural sentiments have infused optimism for the tractor sector. The industry has seen two consecutive quarters of de-growth (15 per cent in Q1 of this fiscal and about nine per cent in Q4 of FY19) due to poor rural sentiments and tight lending situations.

Positive monsoon

“The monsoon has been good and we definitely hope that the sentiments will turn positive among the farmers. We hope the Finance Minister’s announcements will also lead to the availability of more funds for tractor funding,” TR Kesavan, President, Tractor and Mechanisation Association (TMA), told BusinessLine.

Over the years, domestic tractor volumes growth has largely been linked to the South-West monsoon. This year — after delayed onset and weak precipitation in June — the monsoon picked up pace in the last two months.

“On a cumulative basis, spatial distribution of monsoon was normal though rainfall has been somewhat weak in parts of eastern and northern India. Of the 36 Met sub-divisions across India, till date, seven have received deficient rainfall, 22 have received normal rainfall, and seven have received excess rainfall,” according to a report by Kotak Institutional Equities.

“Normal monsoon in most of the places is a positive news and some States are reporting positive sentiments. But we have to wait and see what happens during this festive season,” pointed out a top official of an NBFC.

While the tractor industry appears to be hoping that the worst is behind, there is only one factor that they expect may play spoilsport.

Funding trouble

“If everything is positive, one needs funding and if that comes at the right rate, it will help. If rate cut benefits are passed on to the customers not just by banks, but by NBFCs also, it will really be a big plus for tractor sales,” said Kesavan.

Pawan Goenka, Managing Director of Mahindra & Mahindra, had indicated that the issues were not about liquidity or interest rate, but about the norms in the financing, which had been made tighter due to various regulations, especially for NBFCs.

NBFCs are the major and preferred financiers for tractor purchases due to quicker processing time.

Goenka projected that the tractor industry could see growth from September, while Mahindra & Mahindra was expecting a 6-8 per cent growth during August-March 2020, on the back of normal monsoon.

Published on August 31, 2019

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