Mahindra & Mahindra cuts growth forecast for tractor market

Mahindra & Mahindra Ltd, the world's biggest tractor maker by volume, has cut its forecast for demand in its home market of India, partly due to delayed monsoon rains.

The automaker said on Friday it now expected the tractor sector in India, where it is the dominant player, to grow by 5 per cent in the financial year that started April 1, down from its previous forecast of 8 per cent.

"This is a result of delayed monsoon ... and though it has improved right now there is already a loss of sowing so we would see less agricultural output this year," said Pawan Goenka, president of Mahindra's automotive and farm equipment sectors.

India still relies on monsoon rains to irrigate more than half of its farmland and a delay would affect rural demand.

The company made its forecast after posting a smaller-than-expected fall in first-quarter profit.

Mahindra's tractor sales grew by 1 per cent in April-June. Goenka said that if the recent pick up in monsoon continues, as forecast by weather experts, the second half of the year could see better growth.

Net profit fell 6 per cent to Rs 8.82 billion ($143.67 million) in the quarter ended June from Rs 9.38 billion a year earlier, the company said. Analysts expected profit of Rs 8.36 billion, according to Thomson Reuters data.

Mahindra refrained from big discounts, contributing to better margins and helping the company beat analyst estimates.

Its overall sales rose about 2 percent to Rs 100.96 billion in the quarter compared with a year earlier, even as unit sales of its passenger vehicles fell 12 per cent.

The need to push sales comes as the company grapples with growing competition from carmakers such as Ford Motor Co and Nissan Motor Co whose passenger utility vehicles are out-selling those by Mahindra.

After two consecutive years of decline, sales of passenger cars in India are expected to grow between 5 to 10 per cent this fiscal year that started on April 1, an industry body said, as the new government works to kickstart the economy and boost consumer confidence.

Mahindra previously said it would launch three passenger vehicles and two commercial vehicles over the next 15 months in an attempt to win back sales and market share.

(1 US dollar = 61.3900 Indian rupee)