ENTREPRENUERIAL VENTURE- TRACTOR INDUSTRY

The t ractor indust ry in I ndia has developed over the years to become one

of the largest tractor markets in the world. From just about 50,000 units in

early eight ies the size of t ractor market in the count ry has grown up to

over 200,000 units. Today indust ry comprises of 14 players, including 3

MNCs. The opportunit ies st ill are huge considering the low farm

mechanizat ion levels in the count ry, when compared to other developed economies across
the world. After a downturn during last 3-4 years, the

indust ry is back on a growth path, which we believe would sustain in

coming years as well. Key concern for the indust ry is its dependence on

agricultural income in hands of farmers and the state of monsoon.

Case Study

Punjab Tractors Limited

Company History -

In 1965, Government of India research institute CMERI at Durgapur initiated design and
development of Swaraj Tractor based on indigenous know how. In 1970, Punjab Government
acquired the Swaraj tractor's design and established Punjab Tractors Limited (PTL). It was
India's first large-scale totally indigenous project. The Tractors of PTL are very popular. The
company exports Tractors to various countries including USA.

The Swaraj Mazda Limited was promoted in 1983 by PTL in technical collaboration with
Mazda Motor Corporation and Sumitomo Corporation, Japan for the manufacturing of Light
Commercial Vehicles (LCV). Along with Swaraj Automotive Limited (engaged in manufacturing
of automobile seats and recliners) and Swaraj Engines Limited (manufacturing of engines)
Swaraj caters to the need of heavy vehicle far a large section of the population.

The manufacturing is located at SAS Nagar in Ropar, Asron Village of Nawanshahar District
and Nabha of Patiala District. All the units are in Punjab.The company is the third-largest
manufacturer of tractors in India and the market leader in the below-20 hp and above-50 hp
tractor segments. The company launched a single-cylinder variant of the 25-hp model as well as
a double-cylinder model in the 35-hp class while it launched a 48-hp model in October, 1999,
Product-design and customization have been the 2 pillar of Punjab Tractors' success.

The company also has a strong distribution network in the northern market. PTL has introduced
tractors based on indigenous technology and they have been extremely successful in the Indian
markets. The company also has manufacturing facilities for fork-lifts, harvester combines and
tractors at Hoshiarpur, which is close to its Ropar plant.

Timeline:

 1970 - The Company was incorporated on 27th June, at Chandigarh, Haryana. The
tractors are marketed under the brand name SWARAJ. The Company was promoted
by Punjab State Industrial Development Corporation Ltd.The project is based on the
know-how and technology developed by Central Technical Engineering Resereach
Institute (CMERI), Durgapur and licensed through the National Research
Development Corporation (NRDC), New Delhi.
1983 - The Company entered into technical collaboration agreement with Komatsu
Forklift Co. Ltd., of Japan for the manufacture of diesel electric Komatsu forklifts.
 1989 - The Company embarked on an expansion programme involving an outlay ofRs
36 crores during the next 2-3 years which comprises the following:
(i) Raising tractor capacity to 22,000 nos.;
(ii) Raising capacities in the foundry and harvester combine divisions;
(iii) Setting up separate facilities for R&D and spare parts
 (iv) Reinforcing market presence in key locations in the country. This expansion was
to be financed through internal generation, additional equity capital and term loans.
 1996 - The Company entered into a joint venture agreement with Swaraj Mazda Ltd.
(SML) Mazda Motor Corporation and Sumitomo Corporation of Japan.
 1997 - The company has an installed capacity for 36,000 units. And it is currently
expanding it to 60,000 tractors (in two-shift basis) by March 1999.
 1999 - Punjab Tractors is a leading player in the tractor industry with Swaraj brand
name.
 2000 - The Company has recommended a bonus issue of two shares for every one
share held.
 2001 - PTL has posted a net profit of Rs.112.52cr as against the same period of last
year.
 2002 - Punjab Tractors Ltd, to expand its product range with six models by launching
3 more in different segments in next two years. Mahindra & Mahindra expresses its
interest to buy the stake in Punjab Tractors. Punjab Tractors Ltd has facinated
expression of Interest from 21 merchant bankers including DSP Merill Lynch, Lazard
India, Earnst and Young etc. Punjab Tractor's Board of Directors have re-inducted
the company's vice chairman and managing director, Yash mahajan for another two
years.

Punjab Tractors Limited consists of following divisions: -

1. SWARAJ TRACTORS DIVISION, SAS Nagar, Capacity of 300000 tractors p.a.

2. SWARAJ FOUNDRY DIVISION, Majri, Capacity 8000 M.T. castings

3. SWARAJ COMBINE DIVISION, Chhapar Cheri, Capacity of 300000 tractors p.a.

These plants set up at most economic outlays, also represent the most productive tractor
facilities in the country, with concept and the technology in the new plant matching global
standards. Today PTL stands as a multi product multi location unit manufacturing Tractors,
Harvester Combines, Industrial Forklifts, Agricultural Implements and Automotive castings. PTL
is actively participating in the industrial scene of Punjab through its group companies SWARAJ
MAZDA LIMITED, SWARAJ ENGINES LIMITED AND SWARAJ AUTOMOTIVES LIMITED. All these
companies are major players in their respective fields.
On the social front also, PTL has always risen to the occasion and assumed the social
responsibility by contributing to national causes like floods, Kargil War and in the matters of
community development. In the wake of Kargil conflict, the members, business associates and
employees contributed a total of Rs. 10551000 for Armed Forces Welfare Fund and a cheque of
like amount handed over to army authorities.

Competition within India:

The major competitors for PTL in India are Mahindra & Mahindra Tractors, Massey, Escorts,
Eicher and HMT. The trends of market shares for the last 30 years are shown in the figure
below. We can see that the market share of Swaraj tractors has increased from 9.1% in 1983 to
15% in 2003. Also the ranking has improved from 6th to 3rd. This is the sign of growing
organization well on track to become the largest producers of tractors in India.
PROBLEMS FACED

2003 - The disinvestment of Rs.1000cr reached the deadline for transfer of management
control post-buyout. Punjab Government winds up the offload of its controlling equity in Punjab
Tractors. The disinvestment of Punjab Tractors has hit a roadblock with Financial Institutions
refusing to accept the Punjab Government's request to amend the articles of association.