M&M's rural India outlook positive on good rabi procurement, cash flow

Mahindra & Mahindra (M&M) is in focus on the back of strong tractor sales in June. The total tractor sales went up 32 percent, export jumped over 90 percent and the market share rose to 42.5 percent. The company is optimistic about tractor demand in the coming months.

Hemant Sikka, President of Farm Equipment Sector at Mahindra & Mahindra, in an interview with CNBC-TV18, said that the rural outlook looks bright as demand has increased in June.

"Overall, the rabi procurement has gone around very well. Cash flow in the rural heartland is very positive. Also, with the second wave of COVID subsiding, confidence is coming back. So, it was a play of two factors, clearly a little bit of pent-up demand and also some fresh demand coming in and that is why June has played out so well for the industry overall," he elaborated.

The farm sector equipment industry has grown by 19 percent in June and Mahindra has outperformed showing 32 percent growth. Does this mean there will be a guidance revision too?

"Looking at the months, going ahead, we are getting into a very high base in Q2, Q3 and Q4 so I would suggest we wait for July and August, see how the monsoon pans out and then maybe at the beginning of September, we will be able to revise the guidance,” Sikka weighed in.

Inventory is another discussion point because of the enforced lockdown-like situations due to the second wave of the COVID-19 pandemic.

"None of the players have very high inventory. In Mahindra also, we have a very reasonable inventory. In fact, we have reduced inventory in Q1, so production will be running at full capacity," Sikka said.

Automakers have raised prices in recent times with most citing increased output costs as a reason. Mahindra too plans to gradually do so.

"We have taken our latest price increase only on July 1. We have taken a 3 percent price increase," Sikka said.