Favourable Rabi harvest earnings and steady demand from key agricultural states underpinned the strong start to the fiscal year.
The 41–50HP segment remained the industry’s growth engine, expanding 13.5% YoY and commanding 65.2% of total volumes—up from 47.3% in FY19—reflecting an 8.4% CAGR over FY19–25.
The sub-30HP category grew 21.3% YoY, supported by horticulture adoption and demand from small farmers, while the 31–40HP range contracted 4.2% YoY, continuing its -3% CAGR decline since FY19.
This underlines a long-term structural shift toward higher HP tractors, aligned with advanced mechanization needs.
Regionally, West and North India together accounted for 72.6% of Q1 volumes. West India has emerged as the dominant market, its share climbing from 28.9% in FY19 to 38.6% in Q1FY26, aided by sustained demand growth.South India’s share, however, has dropped from 19% to 13.7% over the same period despite a 21.9% YoY rebound in the latest quarter. East India also posted a sharp 27.6% YoY recovery from a low base, reaching a 13.8% share.According to ICRA estimates, the industry is poised to grow 4–7% in FY26, supported by rising higher HP penetration, government-backed mechanization initiatives, and efficiency-focused farming practices. However, industry players remain watchful of monsoon performance and rural liquidity, alongside the pace of recovery in weaker geographies.With the 41–50HP category now dominating sales, a favourable regional mix, and improving mechanization trends, the sector is set to sustain its role as a key driver of India’s rural economy and agricultural machinery market in the medium term.
M&M: Buy| Target Rs 3,687
M&M is well-positioned for long-term growth, backed by a robust product pipeline through 2030, with key ICE SUVs, BEVs, & LCVs set to launch in CY26. Geographic strength in high-demand tractor markets and favourable rural demand recovery further support volumes.
In Q1FY26, M&M outperformed the tractor industry with 10.5% YoY volume growth and expanded its market share to 45.2%, gaining ground across all HP segments—especially in the dominant 41–50HP category (65% of industry volumes).
Regional gains in East and West India reflect deep rural penetration and effective distribution. The company targets a 7% volume CAGR over FY25–27E, supported by new launches and rural tailwinds. We estimate ~14%/13%/16% CAGR in revenue/EBITDA/PAT over FY25–27E.
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