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Mahindra & Mahindra Limited's Farm Equipment Sector announced a 2 percent growth in domestic sales for May 2020. The brand registered 24,017 units in sales during the month, as compared to the 23,539 units sold during the same period last year.
Mahindra's tractor exports however registered 324 units in sales for May 2020, as compared to the 1,165 units sold during the same period last year - translating to a decline of 72 percent.
Mr Hemant Sikka, the President of the Farm Equipment Sector at Mahindra & Mahindra Ltd. said, "The timely relaxation of the lockdown for the Agricultural sector helped ensure the speedy recovery of tractor demand during May."
The company also said that farmer sentiment is expected to remain positive because of other developments including a fantastic Rabi crop, higher procurement, good price realizations, and a weather forecast of a normal monsoon that will benefit other crops. All these conditions work well for tractor demand in the foreseeable future.
The company registers 24,341 units in total (domestic and export) sales for May 2020, as compared to the 24,704 units registered during the same period last year - translating to a decrease of one percent.
Analysts believe that the tractor segment will be a growth factor for Mahindra considering demand in the private vehicle segments will take more time to recover. Shares value of the company rose by 2.35 percent and closed at Rs 520.70 at the Bombay Stock Exchange.
Analysts also say that Mahindra & Mahindra is doing a fantastic job as far as capital allocation is concerned. The brand has begun diverting its resources to productive and efficient businesses from front, where it is diverting its focus from the dragging, non-profitable businesses to productive and efficient businesses.
The company's fourth quarter reported a loss of Rs 3,255 crore of which Rs 2,780 crore was on account of write-downs from its South Korean subsidiary SsangYong, and its electric two-wheeler business in the United States. The brand has been actively looking for investors for SsangYong and has decided to exit the EV business in the US.
Thoughts About Mahindra's Tractor Business Showing Growth
Good news for Mahindra. While the revenues may not be as much as its range of SUVs bring in, it will bring some relief. In addition, this is a fantastic sign for the Agricultural economy.