Indian Agricultural Equipment Industry: Make Hay While the Sun Shines

Published by Sharekhan Education | August 5, 2022

Amit Pathak|Sharekhan Education 

Indian Agricultural Equipment Industry: Make Hay While the Sun Shines

As per the United Nations, there will be a need to double the world’s agricultural output by 2050 to keep up with population growth. India, being an agriculture-based economy, will always play a pivotal role in contributing to the demand for the overall agricultural output. Agricultural land and water resources are gradually shrinking with increasing urbanization. Against such a background, farm mechanization becomes extremely important. Agricultural equipment enables farmers to improve land and labour productivity in farm operations.

Farmers are adopting mechanization processes for various farming operations such as tillage, sowing, irrigation, plant protection, threshing, etc. Agricultural equipment ranging from tractors, power tillers, trailers, harvesters, irrigation and crop processing equipment, spraying equipment, and hay & forage equipment are finding increasingly high usage in farming. Given that nearly 85% of the land holding in India is less than 10 hectares, demand for smaller horsepower tractors and power tillers is steadily increasing.

India is the second-largest market for agriculture equipment in the Asia Pacific region. IMARC Group expects the Indian agricultural equipment market to grow at a CAGR of 10.6% during 2022–27. Although farm mechanization in India has become quite popular in the states of Uttar Pradesh, Haryana, and Punjab, its usage is comparatively low compared to the economies of the United States, Brazil, and China. We have a long runway of growth ahead of us.

Growth Drivers:

Some major growth drivers of the Indian agricultural equipment industry are:

1) Scarcity of farm labour, driving farmers towards farm mechanization. Large-scale migration from rural to urban areas in quest of better opportunities is causing this shortage.

2)Several banks and microfinance institutions have been set up across rural India. It has provided farmers with easy availability of credit to purchase farm machinery.

3) The government is incentivizing the purchase of agricultural machinery through subsidies and lower import duties.

About VST Tillers Tractors Ltd:

We have a positive outlook on VST Tillers Tractors Ltd. The company’s multipurpose tractor, VST SHAKTI, is the number 1 brand in India, with a 55% market share in the power tiller segment. It was ranked among the 25 most innovative Indian companies in 2021 by the Confederation of Indian Industry (CII). The company has set an ambitious target to be a Rs. 3,000 crores global brand by 2025 in farm mechanisation and solutions. To achieve this goal, over the last 2 to 3 years, the company has increased distribution reach, improved and expanded its product portfolio, focused on exports, entered into JV’s to fill gaps in the portfolio, and has gone from a promoter-run firm to a professionally run firm.

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