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S. Muralidhar

Hoping to reap gains from the renewed focus on agriculture.

SHAREHOLDERS of Mahindra & Mahindra (M&M) can continue to hold on to the stock at current levels. Investors may also use price declines to add the stock to their portfolio for potential long-term gains.

M&M is likely to continue to post good growth in its two core business units — automotive and farm equipment. If the company's performance during the first quarter of this fiscal is any indication, high double-digit growth rates by both the business units should be possible.

Prospects

Automotive division: After the success of the Scorpio in the utility vehicles category and the Champion in the three-wheelers category, M&M has now drawn up plans for refreshing its line up for the domestic market in these categories, including new vehicles.

In addition, the company is in the process of expanding the horizon for its exports by including new markets either through marketing tie-ups or possible acquisition of existing manufacturing facilities.

Plans for the automotive business unit include the introduction of variants of existing vehicles, developing and introducing a family of common rail direct injected diesel engines to replace the current crop of engines, a new generation five-speed gearbox for various vehicle applications and the tantalising prospect of contract manufacturing for multinational passenger vehicle manufacturers which are not currently present in the Indian market. Of the first quarter's volume sales of M&M, about 76 per cent were utility vehicles. Of this, Scorpio sales alone constituted 26 per cent; testimony to the vehicle's continued appeal among both UV and premium car buyers.

After Scorpio's success in the domestic market, M&M now wants to replicate its performance in the export market.

M&M's efforts to go global picked up steam recently with the branding of the Scorpio as Mahindra Goa for the European market and its distribution agreement with Eurasia of Italy. In addition, the company has a tie-up in Uruguay for assembling the Bolero and other vehicles for sale in the Mercosur region.

Farm equipment division: The performance of the farm equipment business unit will continue to be affected by the vagaries of the monsoon. But, with the initial worries about the precipitation level and geographic distribution of the monsoon receding, the performance of M&M's tractor and farm equipment business during this fiscal may not be affected that badly.

Two initiatives by the company in its farm equipment business are likely to bear fruit during the current year. One is in the export front, particularly the increased penetration by M&M into the niche tractor markets of the US. The other is the plan to aggressively push for institutionalising the used tractor business in the domestic market, which is currently dominated by an unorganised broker system.

The Budget's focus on farm credit and the removal of excise duties on tractors will also have a positive impact on M&M's sales during the current fiscal.

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