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Growth in domestic tractor sales volume will be limited to 3-5% this fiscal, given the strong second wave of Covid-19 infections and rising cases in hinterland, apart from high-base effect of last fiscal, says CRISIL Ratings.

This is despite the forecast of a normal monsoon auguring well for farm incomes and therefore tractor demand.

Also, the operating margin of tractor makers will shrink on an average by 200 basis points (bps) due to firming up of steel prices, which is the primary raw material and accounts for bulk of the cost. Albeit, operating margins will still remain healthy, says the report.

The credit profiles of tractor makers will, continue to remain stable, supported by strong and almost debt free balance sheets, as well as robust liquidity.

CRISIL Ratings Ltd Director Gautam Shahi said, “The already high base of last fiscal and severity of the second wave preclude significant tractor volume growth this fiscal.”

He added, “Several states have imposed lockdowns recently, and crucially, rural India has been less insulated this time around. Maharashtra, Uttar Pradesh, Haryana, Karnataka, Madhya Pradesh and Rajasthan, which account for over 50% of tractor volumes, have seen a surge in infections.”


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