Manufacturers of agricultural pumps expect 8-10 per cent revenue growth this fiscal on higher demand, following normal monsoon and improved cash flows from a healthy rabi season last fiscal and increased rural electrification.

Higher volume-driven growth and stabilising input prices will lead to operating margin growth by 1-12 per cent this fiscal.

Steady working capital and moderate capex spending will keep debt at levels similar to last fiscal, supporting stable credit profiles.

The ₹5,000-crore sector is dominated by conventional pumps (grid-connected and diesel pumps), which account for 92 per cent, while solar pumps make up the rest.

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Anuj Sethi, Senior Director, Crisil Ratings, said that despite volumes declining on year by 6 per cent last fiscal, the sector’s revenue grew 17 per cent largely due to a steep rise in realisation, in keeping with higher input prices (mainly pig iron and mild steel).

The demand for conventional pumps is expected to grow 8 per cent this fiscal despite some headwinds, while solar pumps will see 15 per cent growth, propelled by government incentives.

Erratic power supply remains a key hurdle for conventional pumps as it impacts farm output. In addition, new and free grid connections for pumps are being curtailed, and diesel pumps have become dearer.

The Goods and Services Tax on conventional pumps was increased to 18 per cent from 12 per cent in the first quarter of this fiscal, making the pumps costlier. Rajeswari Karthigeyan, Associate Director, CRISIL Ratings, said solar pumps, despite being substantially costlier, are expected to benefit from the significant incentives under the central government’s Kusum Scheme.

Farmers need to pay only 10 per cent of the cost of the pump — which is almost the same as the price of a conventional pump — upfront, while government subsidy and bank loan will contribute the balance in a 60:30 ratio.

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