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Tractor majors underperform - Views on News from Equitymaster
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  • Aug 23, 2000

    Tractor majors underperform

    The tractor industry grew by only 1.2% in FY2000. In the current year for the 1QFY01, tractor sales fell by 17% YoY to 54,974 units as compared to 66,489 units in the same period of the previous year. In the month of June tractor sales fell by 14.9% to 21,241 units as compared to 24,968 units in June'99.

    This slowdown in the tractor industry in the current year can be attributed to many factors. The first being drought conditions in certain parts of the country in the beginning of the year. Another reason is that in FY2000, agricultural production fell by 1.9% YoY, this has had an impact on rural incomes in the current year. Hence the demand for tractors in the current financial year has been sluggish as a result of this.

    The tractor majors Punjab Tractors and Mahindra & Mahindra (M & M) have seen an erosion in their share prices over the past year, due to the above factors. In M & M's case its falling market share in the utility segment too has added to this underperformance.

    Share price performance in absolute and relative terms
      22-Aug-00 3 mths ago 6 mths ago 1 year ago
    Mahindra & Mahindra (Rs) 203 187 511 422
    Absolute (%)   8.4% -60.3% -52.0%
    Relative to BSE Sensex (%)   -5.0% -39.0% -45.0%
    Punjab Tractors (Rs) 248 212 288 509
    Absolute (%)   17.0% -13.9% -51.3%
    Relative to BSE Sensex (%)   4.0% 7.0% -44.0%
    BSE Sensex 4,461 3,943 5,642 4,792
    Absolute (%)   13.1% -20.9% -6.9%

    As per the CMIE estimates agricultural production in the current year is expected to go upto 4.2% in the current year. This is on the back of normal monsoons expectations in the current year. Hence we feel that the demand for tractors will start picking up in the latter half of the year for the next sowing season.



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