Agricultural Equipment 09052008

7/23/2019 Agricultural Equipment 09052008

1/19

www.ibef.org

AG R I C U LT U R A L E Q U I P M E N TOctober 2007


2/19

The share of Agriculture in Indias GDP has been diminishing

AGRICULTURAL EQUIPMENT

October 2007

Growth rate of Agriculture sector has been erratic

2 4 6 8 10 120

2004-05

10.7%

2005-06

0.7%

2006-07

2.7%

Agriculture Growth rate (%)

and the share of the sector in overall GDP is declining

17.5 18 18.5 19.5 20.5 2117

2004-05 20.8

2005-06 19.9

2006-07 18.5

Agriculture share of GDP (%)

2019

However, it continues to be of high significance, as more than

60% of the population are involved in it

The Agricultural Equipment Industry is a key sector that

contributes to Agricultural growth and productivity


3/19

The Agricultural Equipment Industry spans all activities across the value chain

Indias agricultural equipment industry has a

diverse product portfolio catering to activities

across the value chain

Land development, Tillage,

Seed bed Preparation

Sowing and Planting Weeding, Inter cultivation,

Plant Protection

Harvesting

and Threshing

Post harvest

and Agro processing

1. Tractors

2. Levelers

3. Ploughs

4. Dozers

5. Scrapers

1 Drill

2 Seeder

3 Planter

4 Dibbler

5 Transplanter

1 Shovel/Plough

2 Harrow

3 Tiller

4 Sprayer

5 Duster

1 Harvester

2 Thresher

3 Digger

4 Reaper

5 Sheller

6 Sickle/ Dao

1 Seed Extraitor

2 Extraitor

3 Dehusker

4 Huller/ Dehuller

5 Cleaner

6 Grader

7 Mill

8 Dryer

However, the organized market largelyrevolves around tractors, tractor driven

devices and tillers.


October 2007


4/19

The Agricultural Equipment market is driven by several factors

Key Drivers for the Agricultural

Equipment Industry:

Driver Impact on agricultural equipment industry

Improved availability of credit

Emergence of Contract farming and

dedicated sourcing with corporate

partnership

Focus on Productivity to maximize ROI

from agriculture

Opportunity for employment in urban

areas pressurizing agricultural wages

Increased competition driven by

WTO Norms


October 2007


5/19

There has been an increased focus on Mechanization of Agriculture

Increased adoption of mechanization in an

attempt to ensure greater ROI and sustainability

of agriculture

0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

Use of power for agriculture

0

1971-72 0.30

1981-82 0.47

1991-92 0.76

2001-02 1.23

2005-06 1.50

Total Power, kW/Ha


October 2007


6/19

15

There has been an increased focus on Mechanization of Agriculture

Mechanisation primarily driven by increased

use of tractors, which is replacing manual and

animal labour

50 10 20 30 40 50

Source of Power-Percentage share over 4 decades

n 1991-92 n2001-02 n 2005-06z

power

Tiller

Electric

Motor

Draught

Animal

Agriculture

worker

Diesel

Engine

453525

Tractor


October 2007


7/19

The sector has grown steadily over the past 25 years

The growth in domestic volumes has been

due to an urge for productivity enhancement,

aided by imminent threat of low cost imports

aided by WTO

350000

300000

250000

200000

150000

100000

50000

0

1982-8

3

198

5-8

6

1988-8

9

199

1-9

2

1994-9

5

199

7-9

8

2000-0

1

200

3-0

4

Tractors, Sales

Tillers, Sales

Salesinnumbers


October 2007


8/19

Exports, primarily in Tractors, have been a key driver for growth

India is developing into a hub for manufacture

of Agricultural Equipment, primarily tractors

50 100 150 200 2500

2000-01

2001-02

2002-03

2004-05 235.4

149.4

98.5

2003-04 176

78

n Agri Equipment Exports, US$ Million

CARG 31%

Consistent growth in exports at CAGR of 31 percent

in value terms

Exports primarily driven by Tractors


October 2007


9/19

Overall, the sector presents significant opportunities,

tempered by increasing competition

HIGH

MEDIUM

LOW

Threat of New Entrants

Current players well established

New entrants will need to invest in Brand,

Distribution, Financing and Service Network


October 2007


10/19



Supplier Power

Well developed supplier industry

Most suppliers are small and lack of economies

Competitive Rivalry

Number of well established players, with new players

entering

Good technological capability

Increased mechanisation presents new growth

opportunities


October 2007


11/19



Customer Power

Wide variety of choice for customers

Many customers do not have access to organised

finance

Threat of Substitutes

New innovations in semi-automated mechanisation

being tried out, in place of capital intensive equipment


October 2007


12/19

There are also a few key issues that impact growth in the sector

Key Concerns / Dampeners

Sub-optimal irrigation infrastructure

Many farmers still lack access to financing and depend

on unorganised moneylenders

Increasing fragmentation of land, skewing cost

structure of agriculture against capital investment High product life, resulting in low rate of replacement

and upgradation

Increasing prices of fuel leading to greater cost

of operations


October 2007


13/19

Tractors and accessories provide the most significant

Investment Growth opportunity in the sector

n Animal Drawn Seed Cum Fertilizer Drill

n Tractor Drawn Seed Cum Fetilizer Drill

n Animal Drawn Leveller

n Tractor Operated Levellers

n Manually Operated Plant Protection Equipment

n Power Operated Plant Protection Equipment

n Drip & Sprinkler Equipment

n Horticultural Tools (Power Operated)

n Tractorsn Power Tillers

n Tractor Operated Dise Harrow

n Tractor Operated Cultivator

n Tractor Operated Rotavator

n Potato Digger

n Straw Reaper

n Forage Harvester

Tractors and related equipment have lowpenetration indicating high growth potential

100 20 30 50 60 9070 8040

12.5

2

16.7

6.6

8.9

4.3

28.5

8.3

6.2

7

36.10

84.8

Penetration,

No.s per

1000

Hectare

18.2

2.1

0.9

18.8


October 2007


14/19

105 150

Uttar Pardesh

Gujarat

Maharashtra

Haryanna

West Bengal

Tamil Nadu

Andhra Pradesh

Karnataka

Bihar

Orissa

Rajasthan

Madhya pradesh

There are several states that provide attractive investment opportunities

Several factors are considered for assessing the

attractiveness of a location for investment

Factor consolidation for manufacturer

Demand conditions

Government subsidy to farmers for purchase of

agricultural equipment Consolidation of farms

Irrigation Infrastructure

Current share of industry output

Proximity to regional markets

Subsidisation of Agricultural Equipment (US$ million)


October 2007


15/19

There are several states that provide attractive investment opportunities

Based on the above factors, Punjab andMaharashtra

emerge the most attractive destinations for investment

in this sector.

Share of Agricultural Equipment Output

n Punjab n Uttar Pradesh n Haryana

n Rajasthan n Madhya pradesh n Gujarat

n Maharashtra n Bihar n West Bengal

n Karnataka n Andhra Pradesh n Others

0.5%

21.0%

0.2%


October 2007


16/19

Profiles of Key Players in India

Mahindra & Mahindra Limited (M&M)

Distribution and sale of farm equipment and related

utility vehicles

Established market leadership in the sector over past

24 years

One of the top five tractor brands in the world,the company has its own state-of-the-art plants in

India, USA, China and Australia and has a capacity to

produce 1,50,000 tractors a year


October 2007


17/19


Tractors and Farm Equipment Limited (TAFE)

A unit company of the Amalgamations Group, one of

Indias largest Light Engineering Groups

Collaboration with AGCO Corporation, Georgia, one

of the largest manufacturers, designers & distributors

of agricultural equipment.

Has a network of more than 500 dealers, branches,

service outlets as well as its own sales offices and

depots covering the entire length and breadth of India


October 2007


18/19


John Deere

John Deere established a green field project in 1999

under a 50:50 joint venture with Larsen & Toubro

Limited (L&T)

A state of the art tractor manufacturing plant for

5000 series John Deere tractors was set up at

Sanaswadi, near Pune, in the state of Maharashtra

Tractors manufactured in Sanaswadi are also exported

to the USA, Mexico, Turkey, North and South Africa,

and South East Asia. The company has received awards

for export excellence in 2005 and 2006 from the

Engineering Export Promotion Council.


October 2007


19/19

This presentation has been prepared jointly by the India Brand

Equity Foundation (IBEF) and KPMG Advisory Services Private

Limited (Author).

All rights reserved. All copyright in this presentation and related

works is owned by IBEF and the Authors. The same may not be

reproduced, wholly or in part in any material form (including

photocopying or storing it in any medium by electronic

means and whether or not transiently or incidentally to some

other use of this presentation), modified or in any manner

communicated to any third party except with the written

approval of IBEF.

This presentation is for information purposes only. While due

care has been taken during the compilation of this presentation

to ensure that the information is accurate to the best of the

Authors and IBEFs knowledge and belief, the content is not

to be construed in any manner whatsoever as a substitute for

professional advice.

The Author and IBEF neither recommend or endorse any

specific products or services that may have been mentioned

in this presentation and nor do they assume any liability or

responsibility for the outcome of decisions taken as a result

of any reliance placed in this presentation.

Neither the Author nor IBEF shall be liable for any direct or

indirect damages that may arise due to any act or omission

on the part of the user due to any reliance placed or guidance

taken from any portion of this presentation.

DISCLAIMER

www.ibef.org


October 2007

Documents

Agricultural Equipment 09052008