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India's largest manufacturer of Tractors, Mahindra & Mahindra Ltd., expects the tractor industry growth to be around 5 percent for the current financial year.

"As things look right now, even though the festival season has been good, we believe that we will end the year at about five percent," M&M's Executive Director of Auto and Farm Sectors Rajesh Jejurikar told CNBC-TV18 in an interaction. "But on the upside, it can go up to 6.5 percent," he added.

This is in contrast to rival Escorts Kubota, whose management told CNBC-TV18 last week that they expect the industry to grow in high-single digits.

Tractor sales across the industry during the 42-day festive period increased 33 percent from the year-ago period, according to the Federation of Automobile Dealers Association.

Within the farm equipment segment, M&M had a market share of 41.5 percent for the first half of the current financial year and overall the company reported its highest ever quarterly revenue in the July-September period.

Jejurikar attributes this performance to a strong demand and the company's outperformance in the SUV space, with both demand and profitability picking up.

Mahindra & Mahindra, which is currently India's second most valued automaker by market cap, has been the market leader in the SUV segment for the last three consecutive quarters in terms of revenue and market share.

In order to cater to the increased demand, the company is now planing to raise its SUV capacity from the current 29,000 units per month to 49,000 units per month by financial year 2024.

However, M&M's EBITDA or operating margin dropped 50 basis points from the same period last year as the company has not been able to fully pass on the higher input costs to consumers, according to Jejurikar. But, he said, the tractor margin has improved from the June quarter due to a cool-off in commodity prices.

With the auto industry having grappled with a shortage of semiconductors for most parts of the previous financial year, Jejurikar believes that the worst of the semiconductor shortage is over. However, it is something that will have to be closely tracked over the next few quarters.

Shares of Mahindra & Mahindra are trading 0.4 percent lower at Rs 1,281.75.

First Published:Nov 14, 2022 2:48 PM IST