M&M sees higher lending rates a threat to tractor sales

Mumbai, Aug 14 (UNI) Growing lending rates and costlier tractor loans had a higher impact on the farm equipment sales of Mahindra&Mahindra (M&M) in the first quarter of this fiscal, M&M president (automotive) Pawan Goenka said today.

Though there is a proportional decline in number of farmers purchasing tractors against loans, tractor sales are likely to be affected in coming months also unless the borrowing rates come down, Mr Goenka told UNI.

''Buyers depending on loans for tractor purchase have dwindled to 70 percent in the first quarter of this year from the earlier 80-90 percent, which is a good sign. I hope the lending rates will come down by the year end.'', said Mr Goenka.

M&M, which is the largest multi-utility vehicle maker in the country, had a nine percent dip in domestic tractor sales in July this year, despite marking a 46 percent growth in total sales.

Company had sold 6,987 units of tractors in July as against 7526 units in the curresponding period last year, posting a dip of nine percent in tractor equipment division.

Also, higher interest rates for tractor loans compared to housing and car loans could well impact the repayment ability of farmers and thus the tractor demand despite the assured 2 percent subvention allowed to farmers.

To compete the risks emnating from fluctuation in forex rates, M&M has been taking appropriate steps to hedge currency exposure to limit the impact, said Goenka.

This apart, the company would continue to focus on cost cutting measures through effective value engineering.

''Domnestically, growing NPAs of banks are a concern for the company as this put pressure on the credit availability to farmers'', says the M&M annual report.

The Company would donate two Scorpios to UP based Ramkrishna sevasadan cancer hospital and research institute and Naandi foundation, Udaipur, to commomerate the rolling out of 2 millionth vehicle in July 2007.

In the last six decades, company achieved an annual growth of 9 percent, with the Compounded Annual Growth Rate(CAGR) in last five years stood at 22 percent.

UNI