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We hosted multiple tractor dealers from regions such as Bihar, Rajasthan and Gurgaon with respect to addressing rural demand. A bountiful harvest, better MSPs for crops and expected government spending are a few factors that could spark growth in rural  markets. Key takeaways from the conference follow.

Tractors. Tractor demand across markets was robust in FY23. The segment recorded consistent strong volumes in FY23 (~945,000 units), up 12% y/y. The segment is seeing some saturation but is expected to pick up ahead and grow in low single digits in FY24.

Recent unseasonal rains are expected to shrink crop yields ~10%. This would further dampen tractor demand sentiment, said the dealers. They believe that volumes would gradually pick up by H2 FY24 and post moderate, ~5%, growth in FY24. Tractors are used in construction and agriculture, as required. In Gurgaon, 70% of tractors are used for construction as the region has less farmable area; Rajasthan and Bihar figures are respectively ~20% and 30%.

Tipper (Hydraulic trolley) are used in construction activities. Regions like Gurgaon and Bihar/UP have high usage of tippers.

The financing situation is still good. In Gurgaon ~50% of tractors are purchased outright. In Rajasthan and Bihar ~70% are financed. NBFCs have  a better turnaround time than banks as they turn around a loan in 15-30 days vs approx. six months for banks. Subsequently, collections have picked up.

Agri-implements. Products such as rotavators, cultivators, harrows, ploughs,metc. have gained traction recently and the dealers expect this segment to grow well as mechanisation in agri is still minuscule in India compared to other developed nations.

Price hikes in tractors have been severe in FY23. Tractor off-take for Escorts was impacted while others such as M&M and TAFE did well.

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