Mahindra Farm Equipment Business Reports 15% Profit Growth in Q1, Tractor Margins Under Pressure Despite Strong Sales

Key Highlights

• Q1 FY27 farm business profit increased 15% to ₹1,520 crore.

• Farm Equipment Business revenue rose 15% to ₹12,501 crore.

• Total tractor sales reached 1.58 lakh units, with domestic sales up 18% and exports up 15%.

• Tractor EBIT margin narrowed to 19.2% due to higher steel and rubber prices, but remained above the company's guidance range.

• Mahindra maintained its FY27 tractor growth forecast of around 5%, while group net profit climbed 34% to ₹5,455 crore.

Mahindra & Mahindra (M&M) reported a strong performance in its Farm Equipment Business (FEB) during the first quarter of FY27, with profit increasing 15 percent year-on-year to ₹1,520 crore. The company also recorded double-digit growth in tractor sales and revenue, although higher raw material costs impacted profitability.

Despite margin pressure, Mahindra has retained its full-year tractor industry growth forecast of around 5 percent, supported by improving rural demand, better cash flows and a recovering monsoon.

Farm Equipment Revenue Grows 15% in Q1 FY27

Mahindra's Farm Equipment Business generated segment revenue of ₹12,501 crore, up 15 percent compared to the same quarter last year.

The strong growth was driven by higher domestic tractor demand and healthy export performance. The company sold a total of 1.58 lakh tractors, including volumes from its Gromax Agri Equipment business.

Key sales highlights include:

• Total tractor sales reached 1.58 lakh units

• Domestic tractor sales increased 18 percent

• Tractor exports grew 15 percent

• Segment revenue rose 15 percent to ₹12,501 crore

Tractor Operating Margin Declines Due to Commodity Inflation

While revenue and profit improved, Mahindra's core tractor business witnessed pressure on operating margins.

The tractor EBIT margin declined by 150 basis points to 19.2 percent, mainly because of rising prices of steel and rubber, two key raw materials used in manufacturing tractors.

According to the company, commodity inflation reduced margins by around 3 to 4 percentage points during the quarter. However, price hikes and internal cost-saving measures helped absorb part of the increase.

Speaking during a media briefing in Mumbai, Rajesh Jejurikar, Executive Director and CEO of the Auto and Farm Sector at Mahindra & Mahindra, said the business continues to operate comfortably within its long-term profitability guidance.

"Typically what we say is our tractor business will deliver margins in the 17 to 19 percent band. That's what we've been saying for the last many years."

Although the reported margin of 19.2 percent was slightly above the company's guided range, management acknowledged that commodity prices continue to remain a challenge.

Market Share Slips Slightly Despite Strong Volume Growth

Mahindra continued to lead the domestic tractor market, although its market share saw a marginal decline.

The company's market share stood at 44.9 percent, compared to 45.2 percent in the same quarter last year.

Rajesh Jejurikar described last year's 45.2 percent market share as an all-time high, indicating that the slight decline came after an exceptionally strong base.

Meanwhile, the overall Indian tractor industry recorded 18.6 percent growth during the quarter, showing broad-based demand across the sector.

Mahindra Maintains FY27 Tractor Growth Outlook

Despite the strong start to the financial year, Mahindra has maintained its full-year tractor growth forecast at around 5 percent.

Company executives said the guidance reflects caution due to:

• A very high sales base in the second half of last year after the GST rate reduction.

• Uncertainty regarding how the monsoon season will conclude.

• The need to monitor agricultural conditions during the remainder of the kharif season.

Rural Economy and Monsoon Continue to Support Tractor Demand

Mahindra remains optimistic about rural demand as several positive factors are supporting the agricultural economy.

According to the management:

• The rainfall deficit has narrowed to 15 percent, improving significantly from a much wider gap a month earlier.

• Reservoir water levels are 7 percent below the long-period average, but storage is steadily improving.

• Kharif sowing has covered 79 million hectares, although it remains lower than last year's level.

• Rabi wheat procurement increased 19 percent, improving cash flow in rural areas.

• Labour shortages, driven by workers shifting to higher-paying industrial jobs, are encouraging farmers to invest in mechanisation and tractors.

Commenting on concerns around weather conditions, Jejurikar said:

"While there are a lot of fears about what may happen with El Nino, the reality on the ground is that there are many enabling factors."

International Business Records Higher Loss

Mahindra's international farm equipment subsidiaries reported a loss before interest and tax (PBIT) of ₹341 crore, compared to a ₹241 crore loss in the corresponding quarter last year.

The higher loss was mainly due to the company's exit from Erkunt Foundry in Turkey, which resulted in an impairment charge.

Excluding this one-time impact, the international farm equipment business delivered a healthier performance, with segment PBIT increasing 12 percent, compared to the reported growth of 9 percent.

Industry Growth Expected to Moderate in FY27

While Mahindra expects steady demand, the broader industry is likely to grow at a slower pace this year.

Rating agency ICRA has projected tractor industry growth of 1 to 4 percent in FY27, significantly lower than the 23.5 percent growth recorded last year.

ICRA attributes the moderation to:

• A high base effect from the previous financial year.

• Lower kharif sowing acreage.

• The India Meteorological Department's forecast of rainfall at 90 percent of the long-period average, reflecting possible El Nino conditions.

Mahindra Group Delivers Strong Overall Financial Performance

At the group level, Mahindra & Mahindra reported robust financial results for the first quarter.

• Net profit increased 34 percent year-on-year to ₹5,455 crore.

• Revenue rose 28 percent to ₹58,188 crore.

The strong performance was supported by healthy growth across both its automotive and farm businesses, even as the company managed rising input costs and an evolving agricultural environment.

Also Read: Parikshit Ghosh Promoted to SVP & Head - Marketing & National Business Operations at Mahindra & Mahindra

CMV360 Says

Mahindra & Mahindra began FY27 on a strong note with a 15 percent rise in Farm Equipment Business profit, driven by higher tractor sales, improving rural demand and solid revenue growth. Although higher steel and rubber prices narrowed tractor margins, profitability remained above the company's long-term guidance. With improving rural cash flows, better monsoon progress and continued farm mechanisation, Mahindra remains optimistic while maintaining a cautious tractor growth outlook of around 5 percent for the full financial year.