Mahindra & Mahindra, the global market leader in the tractor segment, may look at spinning off its farm machinery business in the hope of tapping automotive opportunities in the future.
Anish Shah, managing director and CEO of Mahindra Group, told The Hindu Business Line, “We may look at a spinoff of farm machinery business because that is one area where we see huge potential for growth, and it may require a very different mindset for driving that growth, which can actually be 10X growth in 3-5 years, potentially even more. But that is not finalized as yet. This is only for farm equipment and farm machinery. We are not looking of a demerger of the farm business right now.”
Over the years, Mumbai-based M&M has strengthened its position in the non-tractor, farm equipment and machinery business where it makes tractor implements, harvesters and rice transplanters in partnership with Japanese and European companies. M&M has bought controlling stakes in Turkish companies. It also produces and sells implements under its own brand. The Indo-Japanese joint venture of Mitsubishi-Mahindra includes its 33% stake in power tillers and mini rotors.
At present, M&M’s farm equipment business makes up 29% of the total consolidated revenue. The farm equipment segment saw 2% growth in the December 2021 quarter, compared to the same quarter last year. Its automotive segment, which houses SUVs, trucks, buses and three-wheelers, generates the highest revenues for M&M, commanding 41% of its total consolidated revenues.
In the past, analysts have suggested M&M to demerge the farm equipment business, including tractors, and make M&M a purely automotive company. However, the tractor business has helped the company in tiding over the slump in demand for passenger vehicles on several occasions.