Tractor major to invest Rs.160 crore in expansion

Chennai, April 3 (IANS) In order to continue its harvest of bumper sales at a time when the industry is logging negative growth, city based tractor major Rs.8,021 crore turnover Tractor and Farm Equipment Ltd (TAFE) will set up a new 60,000 units per annum plant in Madurai, said a top official.

Chairman and CEO Mallika Srinivasan told reporters here Tuesday: "We will be investing a new plant with an annual capacity of 60,000 units in Madurai. All our plants are operating at full capacity and we expect demand for our products to outpace industry growth."

"Overall the company will be investing Rs.160 crore in expansion. The new plant in Madurai involves an outlay of Rs.100 crore. The company will also set up an agricultural implements plant at an outlay of Rs.30 crore. Another Rs.30 crore will be spent on carrying out value addition at our Turkish plant," R.C.Banka, president added.

According to him the company has a total capacity of around 180,000 units per annum (600 units per day) and fresh capacity at Madurai is needed to meet the projected increase in demand. Post expansion TAFE's total annual capacity will be 250,000 units.

Officials told IANS by production improvement measures the per day capacity will be increased to 700 units per day by the end of this year apart from the new Madurai plant.

Last fiscal TAFE world's third largest tractor manufacturer increased its capacity by some internal adjustments and sold 148,112 units (brands TAFE, Massey Fergusson (MF) and Eicher) including exports of 20,396 units.

She said the company ships out its tractors to 73 countries and its export revenue is around Rs.1,200 crore.

Looking back at the fiscal that went by, Srinivasan said: "The first half of the year the industry grew by around 19 percent and we grew at 26.9 percent. From November onwards industry showed downward trend while TAFE continued its growth rate."

"Nearly 68 percent of our sales come from products that had been launched during the last three years. We expanded Eicher range of tractors. It was known as small horse power (hp) player and now it has tractors up to 50 hp."

According to her, TAFE will be launching a new 55 hp model this month.

Srinivasan said she is cautiously optimistic about the tractor industry's fortunes, and added: "The short term outlook is caution while the medium-long term outlook is optimistic. As far as TAFE is concerned we are bullish about its prospects."

"Going ahead we will be into soil preparation, harvesting and post harvesting agricultural implements segment," she said.

Queried about harmonization of components between its three brand models - TAFE, Massey Ferguson (MF) and Eicher - to cut costs, Srinivasan said each model has its own USP and that cannot be compromised to achieve advantages of common components.

On the company's Turkish plant she said: "Last year we sold 4,000 units and this year we plan to double that number."

According to her, the company is also participating in development of Centurion family of tractors (50-125 hp) along with AGCO Corporation.

"We will make the tractors in India and ship them out during the second calendar quarter of 2013," she said.