M&M cuts FY27 tractor industry growth outlook to flat as weak monsoon hits farm demand

Mahindra & Mahindra (M&M) has cut its domestic tractor industry growth forecast for FY27 to flattish from its earlier estimate of 5%, as deficient rainfall, falling reservoir levels and pressure on farmers’ incomes weigh on demand. The revision comes even as the automaker reported a 25% increase in consolidated profit after tax (PAT) for the September quarter, supported by strong performance in its automotive business.

“We are revising our industry outlook. We have been staying with the 5% outlook until now. We are revising that to flattish. The big difference is the assumption on rainfall,” Rajesh Jejurikar, Executive Director and CEO, Auto and Farm Sectors at M&M, said.

He said rainfall conditions had deteriorated significantly, with reservoir levels turning out to be much lower than the company had anticipated.

“There has been a significant deterioration in the rainfall. The reservoir levels are much worse than what we would have thought it to be. We have also seen a deterioration in terms of trade for farmers because input inflation has been high. A couple of states – Maharashtra and Karnataka – have been badly hit by drought and Maharashtra is a large tractor market,” Jejurikar said.

M&M’s tractor volumes declined 6% year-on-year to 1.16 lakh units in Q2 FY27, against 1.23 lakh units in the year-ago quarter. Despite the decline, the company retained its leadership in the domestic tractor market, with market share rising 150 basis points to 41.5%. Its farm business reported consolidated revenue of ₹9,572 crore, down 6%, while PAT declined 9% to ₹1,053 crore.

Jejurikar said the weakness in tractor demand was also likely to reflect a postponement of purchases rather than a complete loss of demand, as delayed sowing and harvesting could push back cash flows for farmers.

“The festival season is not fully over with Dhanteras and Diwali period still to go. We will get a much better feel in 20-30 days from now. Sowing and harvesting has postponed, cash (in hand) will come later, rabi sowing is going to get a bit postponed. Which means that we are going to see a postponed buying cycle,” he said.

He added that demand remained relatively stronger in northern markets, with Uttar Pradesh continuing to be the largest market, Madhya Pradesh showing improvement and Rajasthan holding up.

Commodity inflation puts pressure on margins

Apart from the monsoon deficit, commodity inflation remained a significant challenge for M&M during the quarter. The company flagged increases in steel and base metals, rubber, precious metals, currency movements and oil prices. It has taken price increases of around 5% in its automotive business between January and July 2026 and 4% in its farm business between April and August 2026.

The company said cost actions, hedging, supplier diversification and operating leverage were helping offset some of the pressure. Its consolidated farm PBIT margin declined 130 basis points year-on-year to 14.4%, while the core tractor business margin stood at 17.6%, compared with 20.6% a year earlier. M&M expects some pressure on core tractor margins in Q3, followed by improvement in Q4 and normalisation in FY28.

The automotive business, in contrast, continued to benefit from strong demand. SUV volumes grew 26% year-on-year to 1.83 lakh units, while light commercial vehicle volumes below 3.5 tonnes rose 19% to 83,000 units. M&M held a 24.3% revenue market share in SUVs and a 52.3% volume market share in the sub-3.5-tonne LCV segment.

Jejurikar said the company remained constrained by passenger vehicle capacity, with SUV demand expected to sustain mid-to-high-teen growth. M&M plans to increase its monthly automotive capacity to 82,000 units by the end of FY27, 92,000 units by FY28 and 1.32 lakh units by FY31.

Its electric SUV portfolio also gained traction, with a 30.1% revenue market share in the segment. The XEV 9S recorded sales of 13,275 units during the quarter. M&M reported domestic EV billings of 23,345 units and said the BE 6 SporteQ launch had driven a 93% increase in bookings in the post-launch period.

Consolidated revenue rises 25% to ₹57,553 crore

M&M’s consolidated revenue increased 25% year-on-year to ₹57,553 crore in Q2 FY27, compared with ₹46,106 crore in the corresponding quarter last year. Consolidated PAT rose 25% to ₹4,588 crore from ₹3,673 crore. For the first half of FY27, revenue grew 26% to ₹1,15,741 crore and PAT increased 29% to ₹10,042 crore. Annualised return on equity stood at 21%.

The automotive business reported a 55% increase in consolidated PAT to ₹2,388 crore, while Mahindra Finance’s PAT rose 61% to ₹477 crore, with assets under management growing 15%. Tech Mahindra’s PAT increased 33% to ₹445 crore, and Growth Gems recorded a threefold increase to ₹168 crore.

Dr Anish Shah, Group CEO and Managing Director of M&M, said the quarter demonstrated the resilience of the group despite a difficult operating environment.

“Our Q2 F27 Consolidated PAT growth of 25% reflects the resilience of our group and underlines the disciplined execution across businesses. Auto continued to grow on the back of strong consumer demand, while Farm experienced a marginal decline on account of the festive season shift. Mahindra Finance maintained its growth trajectory, TechM displayed acceleration in its transformation journey, and our Growth Gems continued their momentum. Despite the uneven macroeconomic environment, the group remains focused on laying the foundation for consistent profitable growth,” Shah said.

He described the quarter as challenging, pointing to commodity prices and the broader external environment, and said the group’s results reflected contributions from businesses across its portfolio.