A G R I C U LT U R A L E Q U I P M E N T

October 2007

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

The share of Agriculture in Indias GDP has been diminishing

Growth rate of Agriculture sector has been erratic and the share of the sector in overall GDP is declining

Agriculture Growth rate (%) Agriculture share of GDP (%)

10.7% 2004-05 20.8
2004-05
0.7% 2005-06 19.9
2005-06

2.7% 2006-07 18.5

2006-07

0 2 4 6 8 10 12 17 17.5 18 18.5 19 19.5 20 20.5 21

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

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, Sowing and Planting Weeding, Inter cultivation, Harvesting Post harvest
Seed bed Preparation Plant Protection and Threshing and Agro processing

1. Tractors 1 Drill 1 Shovel/Plough 1 Harvester 1 S eed Extraitor

2. Levelers 2 Seeder 2 Harrow 2 Thresher 2 Extraitor
3. Ploughs 3 Planter 3 Tiller 3 Digger 3 Dehusker
4. Dozers 4 Dibbler 4 Sprayer 4 Reaper 4 Huller/ Dehuller
5. Scrapers 5 Transplanter 5 Duster 5 Sheller 5 Cleaner
6 Sickle/ Dao 6 Grader
7 Mill
8 Dryer
However, the organized market largely
revolves around tractors, tractor driven
devices and tillers.
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

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

There has been an increased focus on Mechanization of Agriculture

Increased adoption of mechanization in an Use of power for agriculture

attempt to ensure greater ROI and sustainability 1971-72 0.30

of agriculture 1981-82 0.47

1991-92 0.76

2001-02 1.23

2005-06 1.50

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

Total Power, kW/Ha
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

There has been an increased focus on Mechanization of Agriculture

Mechanisation primarily driven by increased Source of Power-Percentage share over 4 decades

use of tractors, which is replacing manual and
animal labour Agriculture
worker

Draught
Animal

Tractor

power
Tiller

Diesel
Engine

Electric
Motor

0 5 10 15 20 25 30 35 40 45 50

n 1991-92 n 2001-02 n 2005-06z

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

The sector has grown steadily over the past 25 years

The growth in domestic volumes has been 350000 Tractors, Sales

300000
due to an urge for productivity enhancement,

Sales in numbers
250000 Tillers, Sales

aided by imminent threat of low cost imports 200000

150000
aided by WTO 100000
50000
0

1982-83

1988-89

1994-95

2000-01
1985-86

1997-98
1991-92

2003-04
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

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

India is developing into a hub for manufacture 2000-01 78

of Agricultural Equipment, primarily tractors 2001-02 98.5

CARG 31%
2002-03 149.4

2003-04 176

2004-05 235.4

0 50 100 150 200 250

n Agri Equipment Exports, US$ Million

Consistent growth in exports at CAGR of 31 percent

in value terms
Exports primarily driven by Tractors
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

Overall, the sector presents significant opportunities,

tempered by increasing competition

HIGH

MEDIUM

LOW

Threat of New Entrants

Current players well established
N
 ew entrants will need to invest in Brand,
Distribution, Financing and Service Network
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

Overall, the sector presents significant opportunities,

tempered by increasing competition

Supplier Power
Well developed supplier industry
Most suppliers are small and lack of economies

Competitive Rivalry
N
 umber of well established players, with new players
entering
Good technological capability
Increased mechanisation presents new growth
opportunities
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

Overall, the sector presents significant opportunities,

tempered by increasing competition

Customer Power
Wide variety of choice for customers
M
 any customers do not have access to organised
finance

Threat of Substitutes
N
 ew innovations in semi-automated mechanisation
being tried out, in place of capital intensive equipment
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

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

Key Concerns / Dampeners

Sub-optimal irrigation infrastructure
M
 any farmers still lack access to financing and depend
on unorganised moneylenders
Increasing fragmentation of land, skewing cost
structure of agriculture against capital investment
H
 igh product life, resulting in low rate of replacement
and upgradation
Increasing prices of fuel leading to greater cost
of operations
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

Tractors and accessories provide the most significant

Investment Growth opportunity in the sector
n Animal Drawn Seed Cum Fertilizer Drill
18.2
n Tractor Drawn Seed Cum Fetilizer Drill
18.8
n Animal Drawn Leveller
2.1
n Tractor Operated Levellers
0.9 n Manually Operated Plant Protection Equipment
12.5 n Power Operated Plant Protection Equipment
6.6 n Drip & Sprinkler Equipment
Penetration, 2 n Horticultural Tools (Power Operated)
No.s per 16.7 n Tractors
8.9 n Power Tillers
1000
8.3 n Tractor Operated Dise Harrow
Hectare
4.3 n Tractor Operated Cultivator
28.5 n Tractor Operated Rotavator
6.2 n Potato Digger
84.8 n Straw Reaper
n Forage Harvester
7
36.10

0 10 20 30 40 50 60 70 80 90

Tractors and related equipment have low

penetration indicating high growth potential
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

There are several states that provide attractive investment opportunities

Several factors are considered for assessing the Subsidisation of Agricultural Equipment (US$ million)
attractiveness of a location for investment Andhra Pradesh

Factor consolidation for manufacturer Karnataka

Bihar

Demand conditions Orissa

Rajasthan
G
 overnment subsidy to farmers for purchase of Madhya pradesh
agricultural equipment Uttar Pardesh

Consolidation of farms Gujarat

Maharashtra

Irrigation Infrastructure Haryanna

West Bengal
Current share of industry output Tamil Nadu

Proximity to regional markets

0 5 10 15
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

There are several states that provide attractive investment opportunities

Based on the above factors, Punjab and Maharashtra Share of Agricultural Equipment Output
emerge the most attractive destinations for investment
in this sector.
0.5%

21.0%

0.2%

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

Profiles of Key Players in India

Mahindra & Mahindra Limited (M&M)

D
 istribution and sale of farm equipment and related
utility vehicles
E stablished market leadership in the sector over past
24 years
O
 ne 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
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

Profiles of Key Players in India

Tractors and Farm Equipment Limited (TAFE)

A
 unit company of the Amalgamations Group, one of
Indias largest Light Engineering Groups
C
 ollaboration with AGCO Corporation, Georgia, one
of the largest manufacturers, designers & distributors
of agricultural equipment.
H
 as 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
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

Profiles of Key Players in India

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
T
 ractors 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.
 AG R I C U LT U R A L E Q U I P M E N T
October 2007

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