Ploughing a bold furrow

The acquisition of Eicher Tractors has changed TAFE more and led to a lot of cross learning. Mallika Srinivasan, Chairman of TAFE, opens up to The Hindu in this interview

August 12, 2012 10:31 pm | Updated August 14, 2012 03:23 pm IST

She is simple. Yet, she is aggressive. She proved this by leading a conservative TAFE to acquire Eicher Tractors a few years ago. She has not looked back since then, taking TAFE to new heights. Mallika Srinivasan, Chairman of TAFE, opens up to The Hindu in this interview.


How is the monsoon playing out?

Monsoon deficit has come down. If the rains pick up by August-end, you will not be in bad shape. Our internal estimate is that we would lose, perhaps, something in terms of overall grain production. But we are comfortable on our stocks. I think the moisture will be good for the Rabi crop. Certainly things are improving. The sentiment is slightly better.

It has an impact on our industry. But monsoon is not the only factor.

The last crop was good. Support prices were good. Farmers do have the money, but the sentiment is poor.

Structurally, our country has changed. People are now used to a better quality of life. Be it rural or urban India, they don’t want to do the kind of drudgery that they were doing. Further, with labour shortage, labour rates and MGNREGA, the labour cost in rural India has changed for good. I think these trends are favouring mechanisation. There are a variety of factors. Lets us not leave out financing.

Are you in the financing space?

We are not in the financing space directly. But we have taken a different approach. What we have done is to do alliances.

We work with them on a longer-term basis. So our approach to financing is a little different. I think it has worked for us. The assessment of the case is done completely by the financiers who take the risk. We also feel that the growth is sustainable. If the financier is having a lower NPA and a good and healthy portfolio … in that lies not only their future, but ours too.

Is MGNREGA scheme drawing labour away from farms?

I think it is certainly pushing up the labour cost. Till last year we saw a fairly severe labour shortage not just in rural India but even in urban India also. With the slowing of the growth, the labour supply situation has eased a little bit.

But the scheme is certainly improving rural incomes. It is a good scheme for inclusive growth. Perhaps it could be directed a bit more into areas that will add sustainability to infrastructure in rural areas.

Do you see consolidation of farm land happening?

I am not seeing a huge trend. Yes, we have seen some informal consolidation … for some cash crops. We are certainly seeing aspirational levels of farmers going up.

Do you see off field activities for tractors?

Yes, as secondary equipment in infrastructure projects. They are used in industrial applications with loaders and attachments. The second thing we see is more specialised applications which is a reason why we brought in smaller compact tractors from Gujarat, the Captain Tractors. We see people using small equipment in low tillage and inter-cultivation in Gujarat and Maharashtra. We are seeing this in pockets, vineyards or groundnuts, sugarcane, with less tillage inter-cultivation, lighter with small machines. We are seeing more mechanisation across a variety of operations and there the challenge for us is to produce low cost, smaller in size and appropriate mechanisation. Big farm consolidation is not happening so you cannot look at western models.

We need to really innovate and come up with solutions. India traditionally has been tractor on the top, so the harvester is built and tractor is put on the top. We have come with a tractor at the bottom and the harvester is built around the tractor. It is cost effective, fuel efficient and provides good performance.

Is this an innovation to bring down costs?

Cost-wise it is significantly lower than the equivalent self propelled but a bit more expensive than the tractor on the top, but better performance than the tractor on the top.

We have got to find solutions that are relevant and unique to our farm structure. We cannot be waiting for the farm structure to change to put in western models of technology. There is also a need to look at innovation in terms of cross-fertilisation of technology. We have to understand farming needs. Innovation, therefore, is required if you want to improve productivity, levels of mechanisation and returns for the farmer.

Is the trend towards smaller tractors ?

Smaller tractors below 20 hp are opening up for less tillage, inter-cultivation. The market is still evolving and currently restricted to a few states.

Do you have the entire product portfolio?

We were not very strong in the above 50 hp segment. In April, we launched a product in the above 50 hp segment and that’s doing very well. We are now covered on all segments. The portfolio of products is right from below 20 hp to 75 hp.

Product lifecycles are getting shorter, when we say new product it may not be a completely new platform, some of them are laid platforms, some of them extension to products, some of them refreshed, some of them upgrades, but that’s got to happen, because India is a very demanding market.

What are the reasons for the good growth registered by TAFE last year?

A significant portion of our growth, 60 per cent, has been led by new products. We have done a lot of upgrades of products and new products have been added. Our products were positioned quite smartly. Products played an important role, and were supported by all round initiatives.

What made you look at Captain Tractors?

I think it is an alliance with a very entrepreneurial family. With this tractor, we will maintain their entrepreneurial and innovative spirit, which will also help us to position the products nicely, and we could bring into it our expertise with respect to manufacturing quality.

Looks like a different kind of outsourcing?

It is not contract manufacturing, it is really an alliance.

Their team handles their own areas and we support it. It is a different way of working.

We take a little different approach from a typical multi-national approach, a more innovative approach on how can we work with alliances that will harness the strengths of different groups of people.

The typical multi-national approach of acquisition reduces some of the strengths. Can we have innovation not just in products, but in business models as well? We have to play to our strength as well as to the other person’s and not go from an approach that we know it all.

How much Eicher has changed TAFE?

I think it has changed TAFE more than it has changed Eicher.

I think we had to change our way of thinking, our way of working, our job descriptions, our structures, in order to be able to assimilate the acquisition. We didn’t integrate. We kept it as two distinct business entities. What we have done at the backend is to slowly exploit some of the synergies, and I don’t think the journey is still over. It has changed the way we work, the scale and our footprint in India. On the whole, there has been lot of cross learning.

How is your Turkey operation?

Turkey did well for us last year, and we made some good inroads. This year the market is looking soft. Last year we could manage to service only Turkey, it could now become a hub for other countries.

Exports have been very strong for you? How will they be this year?

We see it being soft because some major South Asian markets have been adversely affected. Parts of South America are looking alright, some parts of Africa are looking good. Overall volume markets are a little soft.

Any plan for listing TAFE?

Why should I list? I have no debt in the balance sheet, absolutely none. I have got cash. Why should I list? There are some advantages of remaining private too because… we definitely focus not so much about quarter results. We take a little bit more longer-term view. It has helped us during crisis periods. With markets soft, it has kept us focussed on doing what is right for the business, and, I think, we have a lot of headroom.

Is it the philosophy of the group?

It is definitely a good way to grow, but it should not come in the way of our growth. At this point, we are really not looking at listing. Equity is the most expensive form of financing. There are more cost effective ways, and, I think, we should look at that.

How is the industry faring?

It has improved in the first quarter compared to second half of last year. In the first quarter, the industry grew 2.77 per cent. First quarter of last year saw 13.3 per cent growth. In the second-half, it came down. If you look at Q4, the industry growth was significantly negative. Compared to Q4, you can say it has stabilised a little bit in the first quarter of this year.

Why is the confidence level low despite a plus 5 per cent GDP growth?

For a country like ours we need more. For an economy like us with our population and per capita earnings, the current level is not enough.

How do you describe the economy?

It is concerning because of our deficit. You don’t feel that your foundation is strong for accelerated growth.

What is your market share?

We have grown smartly. In the first quarter, the industry grew by 2.77 per cent. We grew by about 9.3 per cent. The share went up by more than two percentage points. Almost 75 per cent of the increase in the first quarter came to us. The industry volume increased by 4,000 tractors. Out of this, around 3,100 went to us.

Last year in first quarter, the industry was at 1,47,983. In the first quarter of this year, the industry is 1,52,094. Our sales moved from 33551 to 36669. About 76 per cent of the market increase went to us.

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