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M&M's Rs 5000 crore investment aims to strengthen market position, expand capacity, and meet emission norms, fostering sustained growth.
Mahindra & Mahindra (M&M), India's largest tractor manufacturer, announced plans to invest Rs 5000 crore in its farm business over the next three years. The company aims to strengthen its market position and improve profitability in the competitive Indian tractor market.
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M&M plans to use this investment to expand its manufacturing capacity at plants in Nagpur, Rudrapur, and Zaheerabad. The company will also enhance its product range, particularly under the Oja brand, and prepare to meet future TREM V emission standards. This aligns with their annual spending of Rs 1000 crore on product development, capacity expansion, and plant maintenance. Additionally, Rs 600 crore has been allocated specifically for meeting TREM V emission norms.
Anish Shah, Managing Director of M&M, noted the farm business has performed well, maintaining profit margins and increasing market share despite tough industry conditions. The company sold over 3.75 lakh tractors last year, capturing a market share of 41.6%, the highest in five years, even though sales volumes declined by 7.2%.
Hemant Sikka, President of M&M's farm equipment sector, expects the Indian tractor market to grow at a CAGR of over 6% in the mid-to-long term. M&M aims to leverage this growth through continued investments in the Oja and Target platforms, which are expected to drive incremental growth.
While the Rs 5000 crore investment focuses on the domestic market, M&M is also expanding internationally. The company is setting up a new plant in Brazil and has launched the Oja range in the US, Europe, and Thailand. M&M recently opened a regional office in Southeast Asia to double its international volumes in the next three years. Sikka expressed confidence in achieving this growth target.
M&M predicts a 5% growth in the domestic market for FY25, supported by an expected above-normal monsoon, which the Indian Meteorological Department has forecasted. This favorable weather outlook is likely to boost farm output and drive tractor demand. The company also anticipates increased agricultural exports and positive impacts from the shift in the Navratri festival dates in Q1 FY25 and Q4 FY25.
By investing heavily and expanding both domestically and internationally, Mahindra & Mahindra aims to solidify its leadership in the tractor market and capitalize on future growth opportunities.
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Mahindra & Mahindra's hefty investment of Rs 5000 crore underscores its unwavering commitment to fortifying its position in both domestic and international markets. With a strategic focus on expanding production capacities, diversifying product offerings, and ensuring regulatory compliance, the company is assured to capitalize on expanding growth opportunities in the agricultural machinery sector. This bold move reaffirms M&M's status as a formidable industry leader assured of sustained success.