Rural

July 20, 2010
Industry: Automobiles Industry View: Overweight Company Update

“Consolidating ahead of the next big leap”
Buy
Mahindra & Mahindra Ltd
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LKP Since 1948
Ashwin Patil
ashwin_patil@lkpsec.com
+91 22 6635 1271
Stock Data
Current Market Price (Rs) 607
Target Price (Rs) 780
Potential upside (%) 29
Reuters MAHM.BO
Bloomberg MM IN
What’s Changed
12 month PriceTarget Rs.650 to Rs.780
F2011 EPS From Rs.38.8 to Rs.39.6
F2012 EPS From Rs.41.4 to Rs.46.6
Key Data
Market Cap (Rs.bn ) 35.7
52-Week Range (Rs.) 648 / 363
Avg. Daily Trading Value (Rs.mn) 178
Promoters (%) 26
FII Holding (%) 23
DII Holding (%) 25
Public & Others Holding (%) 26
Y/E March FY 09 FY 10 FY 11E FY 12E
Net sales 126,491 180,381 214,347 245,891
EBITDA (%) 8.3 15.9 15.0 15.7
PAT (%) 6.5 11.1 10.5 10.7
EPS (Rs) 15.2 35.3 39.6 46.6
EPS Growth (%) (15.8) 132.8 12.3 17.5
P/E (x) 20.0 17.2 15.3 13.0
P/BV (x) 3.1 2.2 1.8 1.5
EV/EBITDA (x) 17.6 12.1 10.9 8.8
ROCE (%) 13.1 25.2 25.2 25.7
ROE (%) 17.2 30.5 26.0 21.7
Dividend yield (%) 1.7 1.6 1.3 1.5
Relative Price Performance
Investment Argument
Our recent meeting with the management of Mahindra & Mahindra (M&M)
reaffirms our conviction on the stock. The management has projected 10-
14% growth for the Farm Equipment Sector - FES, which is better than their
earlier estimate of 10%. At the same time they have given strong estimate for
CV industry at 17-18% for FY 11, and expects themselves to excel into this
business through their latest products Gio and Maxximo and also through
their JV with Navistar in the M&HCV segment. They have also projected 10-
14% growth for the UV industry, for which they foresee demand coming from
growing rural markets and the BPO/KPO industry.
We believe that the company’s dominance in the less competitive UV (51%
MS) and FES (42% MS) industries is yielding rich dividends. Absence of product
launches from competition over the next one year coupled with new launches
from M&M provides us confidence about the company maintaining if not
increasing its market share. Government’s emphasis on the rural/agricultural
sector, rise in MSPs, PTL merger and new launches in the domestic as well
as exports markets will help M&M increase its market share in the FES
segment.
Margin growth will see some setback in FY 11 as raw material prices have
stiffened, however with steel prices stabilizing over last few months and
operating leverage through increasing utilization rates at the new Chakan
plant will in our view offset any further declines by FY 12.
Outlook and valuation
On account of the company’s sustained market leadership position in the UV
and FES segments and its venture into the M&HCV segment along with new
launches in LCV segment, we believe M&M is one of the strongest players in
the auto industry. With low leverage and improving margins the company’s
profitability is expected to remain robust. We maintain our BUY rating on the
stock with a revised target price of Rs 780 (Based on SOTP – Rs 629 from
standalone business and Rs 151 from the subsidiary valuation) from our
previous target price of Rs 650.
Risks and concerns
(%) 1 Month 3 Months 12 Months
Absolute (4) 20 68
BSE Relative (7) 18 42
One Year Indexed
Increase in taxes for diesel vehicles
Higher than expected increase in raw material prices
Tightening of interest rates
Lower demand due to less than normal monsoon
150
250
350
450
550
650
750
Jul-09 Oct-09 Jan-10 Apr-10 Jul-10
M&M BSE Sensex
Mahindra & Mahindra Ltd.
LKP Research 2
Investment Argument
Market leadership in UV segment with low competition holds the key for M&M’s
outperformance
M&M is the market leader in the Utility Vehicle segment with more than 50% market
share, the other big players in the segment being Tata Motors, Toyota and GM. The
company has a strong presence in this segment through its products such as Scorpio,
Bolero and Xylo, pick ups and soft top UVs. This segment contributes 57% of revenues
and 47% of its EBIT. M&M is a pure leader in this segment, with the second player
Toyota lagging behind with a market share close to 21%. A UV is used more in the non
urban markets (non metro and non top 10 cities), the contribution to M&M’s volumes
being 55% from these geographies. Going forward, as the rural economy improves
this segment will gain from it. Furthermore, added demand from the BPO and corporate
industry will drive the growth of the UV industry, M&M standing to gain the most from it.
Compared to M&M, its peers Toyota and Tata Motors have a narrower product range
and lesser penetration in the rural markets . The reason for lower competitive intensity
in this segment is lower industry volumes as compared to 2 wheelers and PVs, which
makes it a potentially unattractive segment for a foreign company to plough in sizeable
amount of investment in this business. The second reason is that this segment derives
demand from rural markets, thus necessitating larger service and distribution network
and knowledge of local business.
In the coming 12-24 months, we do not foresee any significant UV launch from M&M’s
competitors in the price bracket of M&M’s products thus maintaining the benign
competitive environment in the UV industry and insulating M&M’s market share. M&M
being the pioneer of the Indian tractor industry is at a massive advantage to make
inroads in the rural markets to sell their other products like UVs. Expected launch of
higher variant of Scorpio and a global SUV meant exclusively for exports in FY 12 will
provide the impetus for the volume growth in this segment. Management expects the
UV industry to grow in between 10-14% in FY 11E. We expect M&M to grow at 12.5% in
the same period.
New launches from M&M to improve UV
market share
UV Market shares
M&M, 51%
Tata Motors, 13%
Toyota , 21%
GM India, 6%
Force Motors, 2%
Others, 7%
Source: SIAM
LKP Research 3
Domestic sales FY 10 FY 09 % change
M&M
Scorpio 36973 29995 23.3%
Bolero 73824 55924 32.0%
Xylo 28907 7246 298.9%
Commander3 12679 10343 22.6%
Tata Motors
Sumo 23049 24465 -5.8%
Safari 10482 14762 -29.0%
Toyota Kirloskar
Innova 47294 38201 23.8%
GM India
Tavera 15334 13470 13.8%
Force Motors
Trax 5918 4685 26.3%
Ford India
Endeavour 2598 2780 -6.5%
Maruti Suzuki
Gypsy 3841 7219 -46.8%
Company/Model Launch date Price in Rs mn
Skoda Yeti Jul-10 1.3-1.5
Hyundai Santa Fe Late 2010 2.3-2.6
Nissan Murano Late 2010 3.5-4
BMWX1 Dec-10 2.5
Volkswagen Tiguan Early 2011 2.5
Tata Aria Late 2010 1.2
Toyota Avanza Early 2011 0.7
Gio and Maxximo to drive growth in the LCV business
LCV segment in India is booming with a 38% sales growth in FY 2010, driven by Tata
Motors product Ace launched in May 2005.Ace stole market shares from three wheelers
thus reducing M&M’s market share considerably. Now, with development of road
infrastructure, the hub and spoke model gained importance leading to strong demand
in the sub one ton trucks for intra city transport along with an equal demand for M&CV.
In order to regain its lost market share and to take on the dominance of Tata Ace, M&M
introduced two new sub one tone trucks - Gio and Maxximo.
M&M created a new category, the compact truck segment, with the launch of the ‘Gio’ in
October 2009. The product has a payload of 500kg, with maintenance and running
costs similar to that of a three-wheeler and safety and comfort of a four-wheeler. The
vehicle is also priced attractively at ~Rs170k. Further M&M launched the Maxximo, in
direct competition to the segment leader Ace in February 2010. The product has a
higher payload of 850kg and relatively better fuel economy at ~20kmpl, but at the same
price as Tata Ace. Maxximo is present in the northern, central and western markets of
the country and will be having a pan India presence in 6 months (recently launched in
south India). Both these products have got good response and we expect the
company’s
LCV segment to see growth of 30% next year, driven largely by these new products.
Source: CRISIL, LKP Research
No new competitive launches in next
one year in M&M’s price bracket to
continue M&M’s dominance
Gio & Maxximo have started denting
Tata Ace’s market share
LKP Research 4
LCV market shares
Others, 5%
M&M, 32%
Piaggio, 4%
Tata Motors, 59%
M&M-LCV Volumes & market share movement
28.7
25.6
26.5
25.3
28.2
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
2006 2007 2008 2009 2010
23
24
25
26
27
28
29
M&M domestic LCV volumes % Market share
New product launches in the M&HCV business to fuel growth prospects in
the medium term
M&M has recently started the operations of its Chakan plant which has got capacity of
producing 50,000 M&M Navistar M&HCVs. The company has recently rolled out a new
25 tonner truck and is up for launching trucks in the range of 31, 40 and 49 tonnes by
the end of FY 11. As the launches occur and demand increases for these trucks, M&M
will be able to expand its market share in the M&HCV segment by leaps and bounds.
This will enable M&M to take on the likes of Tata Motors and Ashok Leyland in the
M&HCV industry.
Tractor demand to be driven by strong rural growth and emphasis on
government initiatives
The domestic tractor industry in FY 10 has reached 4,00,203 units which was a jump of
31% on FY 09. This growth was supported by increasing financial penetration, low
growth in last few years and improved farm income supported by rising minimum
support prices, government’s higher emphasis on various rural development schemes
and higher crop output for the rabi season. Besides this, the mechanization of all the
agricultural activities in order to increase the crop yield will drive the growth of tractor
industry.
Source: SIAM
New M&HCV launches to challenge
Tata Motors’ dominance in this segment
MSP rise to elevate demand for tractors
LKP Research 5
As far as M&M is concerned, the launch of new tractor range such as the 15 hp tractor
Yuvraj, the high hp tractor Swaraj 843 and compact as well as high hp tractors in the
export markets will lead to an increase in the market share of M&M (current market
share 41.4%). Yuvraj Tractor, which has haulage capacity of 1.5tons, is specially
designed for farmers with small land holdings. Through this product, M&M is looking to
expand the tractor market at the bottom end of the pyramid. It is expected to cater to the
demand from small and marginal farmers suffering from a lack of financing options
and affordable products and looking to upgrade from power tillers and bullocks.
According to a study by the NSSO, small (2.5-5 acres of land) and marginal farmers
(<2.5 acres of land) account for 82% of the 82m farm households in India.
Large
Famers
¾20 acres
(1%)
Large
Famers
¾20 acres
(1%)
Medium Famers
5-20 acres
(17%)
Medium Famers
5-20 acres
(17%)
Small Farmers
2.5-5acres
(19%)
Small Farmers
(19%)
Marginal Famers
< 2.5 arces
(63%)
Marginal Famers
< 2.5 arces
(63%)
18%
1%
Large
Famers
¾20 acres
(1%)
Large
Famers
¾20 acres
(1%)
Medium Famers
5-20 acres
(17%)
Medium Famers
5-20 acres
(17%)
Small Farmers
2.5-5acres
(19%)
Small Farmers
(19%)
Marginal Famers
< 2.5 arces
(63%)
Marginal Famers
< 2.5 arces
(63%)
18%
1%
Tractor Penetration
Indian Farm Households
82mn farm households
Distribution of farm households based on land holdings
Source: M&M Company Presentation
M&M has significantly improved its
tractor market share in last 3 years
Yuvraj tractor to tap robust demand
among small and marginal land
holders
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
FY 03 FY 04 FY 05 FY 06 FY 07 FY 08 FY 09 FY 10
-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
Tractor industry sales % yoy growth
Tractor industry
Tractor industry market share
38.9 40.8 41.4
23.5 22.3 22.0
14.7 13.5 13.3
9.8 8.9 8.7
4.4 6.0 7.0
5.3 5.3 4.8
3.6 3.1 2.8
FY 08 FY 09 FY 10
M&M Tafe+Eicher Escorts Sonalika John Deere FNH Others
LKP Research 6
M&M is currently test marketing the Yuvraj tractor in small numbers in Gujarat and then
plans to sell it across the country in 16-18 months. We believe that this product could
lead to strong volume growth in the medium term, as overall tractor penetration in this
segment is only ~1%.
Management has projected the Farm Equipment segment growth to be between 10-
14% in FY 11E.
PTL acquisition is benefitting M&M significantly
PTL’s acquisition is proving to be quite beneficial to M&M. PTL sold its products under
the Swaraj brand, which had good a reputation in market and M&M also added products
in the 50HP+ category through this acquisition. M&M has improved its market share
position post acquisition of Punjab Tractors and currently dominates the domestic
tractors market, with ~41% market share. It commands over 50% market share in the
South and East markets and enjoys a strong position in West and North India, with
respective market shares of 42% and 36%. Further, the company also improved its
position in the largest 31-40HP category. Thus the PTL acquisition has strengthened
M&M’s position in the key North Indian market, as well as in the lower HP market,
where
it was weak. The PTL manufacturing plants and foundry facility had lower utilisation,
which should help M&M to improve its cost structure. M&M is also looking at dealer and
vendor rationalisations, which should improve overall tractor business profitability in
the medium term.
Foray into 2 wheeler business to give a tough time to competition
After acquiring Kinetic Motors, M&M has made strong inroads into the two wheeler
business in India. The company is having about 6% market share in scooters segment,
through quick launches of Rodeo and Duro along with its existing model portfolio of
Flyte and Nova. M&M’s total scooter sales for FY10 stood at over 70,000 units, more
than double of what Kinetic was able to sell in FY08 prior to acquisition. Hence, we
believe that M&M is sweetly poised to take away market share in the scooter segment
from the leaders like Honda Motors & Scooters India and TVS.
Chakan plant to cater to the capacity needs in the medium to long term
In March 2010, M&M inaugurated its new auto manufacturing plant in the industrial hub
of Chakan in Maharashtra. Set up with a phased investment of over Rs40bn, the plant
is spread across 700 acres. The plant’s initial capacity is slated at 300k vehicles p.a,
50,000 units of M&HCV, 90,000 of Maxximo and 1,60,000 for the rest of the automotive
division, and it can be scaled up further to meet future growth. Thus Mahindra Chakan
will manufacture Mahindra’s entire range of automotive products, from the 0.75-tonne
PTL acquisition widens the path for
M&M in the northern markets of India
Soaring scooter volumes to take on
scooter biggies head on
M&M monthly Scooters Volumes
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10
Scooter volumes
Source: SIAM
LKP Research 7
Maxximo to the 49-tonne Mahindra Navistar truck. The company’s new SUV and Pik-Up
range and product line for the export market will also be manufactured at this facility.
These investments should help M&M meet all their automotive capacity needs for the
next 5-6 years. Also such investments at one single location would provide flexibility to
the company to manage production of its various new products and also provide
benefits
from economies of scale.
Margins to decline further, but increase in utilization rates at the
expanded capacities to offer operating leverage
With upward movement in global commodity prices we foresee a decline in M&M’s
margin performance going forward. However, off late the steel prices seem to have
stabilized which may arrest the margin fall upto some extent. Furthermore, the company
renews raw material contracts on quarterly basis which enables the company to take
advantage of the current situation of the commodity prices. Expansion of capacities at
the company’s Chakan plant will offer operating leverage. Besides this, M&M has
pricing
power since the company is the market leader in its business. These factors will
provide a positive touch to the margins. We expect an 90 bps fall in EBITDA margins in
FY 11, which will move up in FY 12 as commodity prices softens and capacity utilization
rates improve with surge in sales demand.
EBITDA Vs EBITDA Margins
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
FY 08 FY 09 FY 10 FY 11E FY 12E
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
EBITDA (Rs mn) EBITDA margin %
PAT Vs PAT Margins
0
5000
10000
15000
20000
25000
30000
FY 08 FY 09 FY 10 FY 11E FY 12E
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
PAT (Rs mn) PAT margin
Source: Company , LKP Research
Operating leverage at Chakan plant to
support margins
LKP Research 8
Robust balance sheet, comfortable leverage despite huge capex
M&M is planning to incur huge capex to the tune of Rs 70bn over the next three years,
which also includes investments towards JVs and subsidiaries (Rs 45bn for capex
mainly at Chakan plant and Rs 25bn for investments). In spite of such a huge capex, we
are not unduly concerned as the company has been producing free cash flows to the
tune of Rs 10 – 20 bn and the company has more than Rs 17 bn in cash and liquid
investments. Also, the company’s D/E ratio is at comfortable level of 0.4:1, which the
management will not move beyond 1:1. They are comfortable of maintaining it at 0.75:1,
which indicates that for any acquisitions or further expansion, they can raise debt
comfortably, if there is a significant decline in operating cashflows.
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
FY 08 FY 09 FY 10 FY 11E FY 12E
D/E (x)
Ssangyong acquisition to bolster UV portfolio, though it remains a
challenge
Ssangyong Motors, a small player in the Korean automobile market with a market
share of 2% has become a point of attraction for M&M, as it has shown interest in
bidding for the company. Ssangyong is the maker of the UVs Kyron and Rexton in the
declining South Korean markets. Over the last two years, the South Korean market has
declined at a CAGR of 7% to 3.54 mn. The South Korean auto market is dominated by
two players – Hyundai Motors and Kia Motors. Over the last three year period, the
company has cumulatively incurred losses of Rs 40bn. The company exports to markets
in Europe, Middle East, Africa, Latin America, China and Russia.
The company being a very small player in the Korean markets is reporting erosion at
top as well as bottomline. In the declining Korean auto industry, other players are
reporting good margin and sale growth, while Ssangyong is not. The company is also
heavily leveraged with a D/E of 3.6x. The company’s gross profit margins have moved
down to 6% from 19% in a matter of 2 years.
Keeping all these factors in mind, we believe the rationale behind M&M getting
interested
in this company is the technology factor, production facilities, market reach and its
global presence.
M&M with its low leverage of 0.4x and a cash position of Rs 17bn is well placed to
acquire Ssangyong Motors, which even if it buys through complete debt raising, will
stretch its D/E upto 0.7x, which is quite manageable and comfortable for M&M.
However,
the turnaround which it will have to make will remain a challenge and a concern. In the
initial years, M&M’s profitability will be definitely get affected, however it depends on
how fast M&M can change the fortunes of Ssangyong Motors, which is in a difficult state
currently.
Robust cashflows and low leverage to
ease the Ssangyong acquisition,
however turnaround challenge
remains Mahindra
& Mahindra Ltd.
LKP Research 9
South Korean automobile industry
3,200,000
3,300,000
3,400,000
3,500,000
3,600,000
3,700,000
3,800,000
3,900,000
4,000,000
4,100,000
4,200,000
CY 05 CY 06 CY 07 CY 08 CY 09
Ssangyong P&L (Rs mn) CY 07 CY 08 CY 09
Sales 120749 96590 41296
Cost of sales 98019 84651 38829
Gross profit 22730 11939 2467
Gross profit margin % 18.8% 12.4% 6.0%
S&A expenses 21023 20741 13826
Operating income 1707 -8802 -11358
Other income 5065 9981 16016
Other expenses 6323 28651 18062
PBIT 449 -27472 -13404
Tax 1 0 0
Net income 448 -27472 -13404
Ssangyong BS (Rs mn) CY 07 CY 08 CY 09
Current assets 32317 23792 15591
Cash and cash equivalents 20908 9604 7301
Inventory 11409 14188 8291
Non current assets 61254 42219 38156
Investments 1142 1822 1992
Property, plant 54818 33591 31114
Intangible assets 3661 5229 3980
Others 1632 1577 1070
Total assets 93571 66012 53748
Current liabilities 32342 33279 12937
Non - current liabilities 23818 22751 29174
Total liabilities 56160 56030 42111
Total shareholders’ equity 37411 9982 11637
Total liabilities and shareholders’ equity 93571 66012 53748
Source: Industry, LKP Research
LKP Research 10
Outlook and valuation
We believe the market leadership of M&M in the UV and FES segments to be
maintained
if not increased. Within the UV segment, the existing products along with new product
pipeline will ensure M&M a strong growth in this segment. Within the FES segment, the
PTL merger along with new tractor launches will boost the company’s topline.
Furthermore, government’s emphasis on rural development will increase the demand
for mechanization and hence demand for tractors. Rise in MSPs will be the other main
factor impacting rural demand. Company’s full fledged entry into the M&HCV business
through the Navistar JV will steal market share from the biggies, thus leading to a
strong revenue impact. New LCV launches will also lead to M&M anchoring its hold
strongly into the LCV segment dominated till date by Tata Motors. Margin fall is
expected
to get support from operating leverage mainly at the Chakan plant which will support all
the capacity needs in the medium term. Subsidiary performance will add significant
value to the company’s valuation considering strong performances from Tech Mahindra,
Mahindra Life Spaces, Mahindra Holidays and MMFSL. We reiterate our BUY rating on
the stock with a revised target price of Rs 780 (Standalone value of Rs 629 and
subsidiary
value of Rs 151).
PE Band
0
100
200
300
400
500
600
700
800
Apr-06 Apr-07 Apr-08 Apr-09 Apr-10
16x
14x
12x
10x
8x
Source: Bloomberg , LKP Research
Particulars Basis Discount Value per share (Rs)
M&M P/E (13.5x multiple) 629
M&M Financial Services Market cap 30% 37
Tech Mahindra Market cap 30% 51
Mahindra Lifespaces Market cap 30% 14
Mahindra Ugine Market cap 30% 2
Mahindra Forging Market cap 30% 3
Mahindra Holiday & Resorts Market cap 30% 43
Swaraj Engines Market cap 30% 1
Total 780
Target price calculations
LKP Research 11
Financial Summary (Standalone)
Income statement Balance sheet
YE Mar (Rs mn) FY09 FY10 FY11E FY12E
Total Revenues 130,937 186,021 215,847 247,391
Raw Material Cost 92,419 123,329 144,833 165,505
Employee Cost 10,246 11,985 13,933 15,983
Other Exp 17,773 21,749 24,650 27,048
EBITDA 10,926 29,553 32,431 38,855
EBITDA Margin(%) 8.3 15.9 15.0 15.7
Other Income 2,703 1,994 2,200 2,000
Depreciation 2,915 3,708 3,527 4,407
EBIT 10,715 27,839 31,104 36,448
EBIT Margin(%) 8.2 15.0 14.4 14.7
Interest 453 278 395 360
PBT 10,262 27,561 30,709 36,088
PBT Margin(%) 7.8 14.8 14.2 14.6
Tax 1,997 7,590 8,291 9,744
PAT 8,368 20,878 22,417 26,344
PAT Margins (%) 6.4 11.2 10.4 10.6
Exceptional items 103 908 0 0
Adj PAT 8,265 19,971 22,417 26,344
Adj PAT Margins (%) 6.3 10.7 10.4 10.6
YE Mar (Rs mn) FY09 FY10 FY11E FY12E
SOURCES OF FUNDS
Equity Share Capital 2,726 2,830 2,830 2,830
Reserves & Surplus 49,829 75,358 91,274 109,979
Total Networth 52,621 78,268 94,104 112,808
Total debt 40,528 28,801 27,687 27,687
Net Deferred Tax Liability 0 2,403 0 0
Total Liabilities 93,149 109,507 121,791 140,495
APPLICATION OF FUNDS
Net block 25,676 27,385 26,858 28,451
Capital WIP 6,467 9,642 18,000 18,000
Investments 57,864 63,980 64,443 70,443
Net Deferred Tax Asset 364 0 0 0
Current Assets 50,629 60,424 67,903 87,036
Cash and Bank 15,744 17,432 20,071 35,404
Inventories 10,607 11,888 13,491 14,510
Sundry Debtors 10,437 12,581 15,562 16,842
Loan, Advances & others 13,842 18,523 18,778 20,280
Current Liab & Prov 47,977 51,965 60,692 68,713
Current liabilities 35,202 34,000 45,396 52,178
Provisions 12,776 17,965 15,296 16,535
Net Current Assets 2,652 8,459 7,211 18,322
Miscellaneous expenses 126 41 0 0
Total Assets 93,149 109,507 121,79 140,495
Key Ratios
YE Mar FY09 FY10 FY11E FY12E
Per Share Data (Rs)
Adj. EPS 15.2 35.3 39.6 46.6
CEPS 41.4 43.4 45.9 54.4
BVPS 193.0 276.6 332.6 398.7
DPS 10.1 9.7 7.9 9.3
Growth Ratios(%)
Total revenues 14.4 42.1 16.0 14.6
EBITDA -13.3 170.5 9.7 19.8
PAT -3.9 141.6 12.2 17.5
EPS Growth -15.8 132.8 12.3 17.5
Valuation Ratios (X)
PE 20.0 17.2 15.3 13.0
P/CEPS 14.7 14.0 13.2 11.2
P/BV 3.1 2.2 1.8 1.5
EV/Sales 1.5 2.0 1.7 1.4
EV/EBITDA 17.6 12.1 10.9 8.8
Operating Ratios
Inventory days 41.9 36.0 34.0 32.0
Recievable days 29.6 27.5 26.5 25.0
Payable days 108.4 109.0 110.0 111.0
Net Debt/Equity (x) 0.77 0.37 0.29 0.25
Profitability Ratios (%)
ROCE 13.1 25.2 25.2 25.7
ROE 17.2 30.5 26.0 21.7
Dividend payout 33.2 27.5 20.0 20.0
Dividend yield 1.7 1.6 1.3 1.5
Cash Flow
YE Mar (Rs mn) FY07 FY08 FY09 FY10P
PBT 10,262 27,561 30,709 36,088
Depreciation 3,028 3,769 3,527 4,407
Interest 1,341 1,569 395 360
Chng in working capital 5,918 (45) 1,483 4,321
Tax paid (1,003) (7,114) (8,291) (9,744)
Operating activities (3,233) (2,374) 0 0
CF from operations (a) 16,313 23,366 27,823 35,433
Capital expenditure (9,152) (9,607) (11,358) (6,000)
Chng in investments (9,229) (5,312) (5,700) (6,000)
Other investing activities (1,030) 1,465 0 0
CF from investing (b) (19,410) (13,454) (17,058) (12,000)
Free cash flow (a+b) (3,097) 9,911 10,765 23,433
Equity raised/(repaid) 0 724 0 0
Inc/dec in borrowings 11,123 (3,077) (1,115) 0
Dividend paid (incl. tax) (3,203) (3,114) (6,501) (7,640)
Other financing activities (952) (2,373) (587) (460)
CF from financing (c) 6,969 (7,839) (8,203) (8,100)
Net chng in cash (a+b+c) 3,872 2,073 2,562 15,333
Closing cash & equivlnts 15,618 17,509 20,071 35,404
Source: Company , LKP ResearchLKP
Research Team
S. Ranganathan Head of Research Pharmaceuticals , Agriculture 6635 1270
s_ranganathan@lkpsec.com
Ashwin Patil Research Analyst Automobiles & Telecom 6635 1271
ashwin_patil@lkpsec.com
Anisha Makani Research Analyst Infrastructure,Capital Goods,Engineering 6635 1273
anisha_makani@lkpsec.com
Ami Shah Research Analyst Cement & Sugar 6635 1247 ami@lkpsec.com
Chaitra Bhat Research Analyst Banking & Financial Services 6635 1211
chaitra_bhat@lkpsec.com
Institutional Equities
Pratik Doshi Director 98210 47676 - pratik_doshi@lkpsec.com
Hardik Mehta Sales & Dealing 93203 08811 6635 1246 hardik_mehta@lkpsec.com
Varsha Jhaveri Sales & Dealing 93241 47566 6635 1296 varsha_jhaveri@lkpsec.com
Hitesh Doshi Sales & Dealing 93222 45130 6635 1281 hitesh_doshi72@lkpsec.com
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dhruman_mehta@lkpsec.com
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Bharat Shah Sales & Dealing 98337 97256 6635 1261 bharat_shah@lkpsec.com
LKP Securites Ltd,10th floor, Nariman Bhavan, Nariman Point, Mumbai-400 021. Tel
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About Farm
Equipment
Manufacturer

s

Leaders in India. Poised to take on the world.

For over two decades, Mahindra Tractors is the undisputed leader of the Indian tractor market, which is
the largest tractor market in the world. A division of over US$ 6 billion conglomerate, Mahindra &
Mahindra, we began as a joint venture with International Harvester. And with that began a new era in
power, control and reliability in farm equipment manufacturing. Today, with the largest manufacturing
set up in India, Mahindra Tractors is among the top three players in the global market. And as we step
into the 27th year of excellence, we continue on our journey of cultivating golden harvests across the
globe.

Mahindra Tractors conferred with the global honour.

In the year 2003, Mahindra Tractors bagged the Deming Prize, a global honour for quality practices.
Three years later, the company was eligible to qualify for the Japan Quality Medal, the highest honour
for excellence in Total Quality Management practices. In 2007, Mahindra Tractors became one of the 20
companies worldwide to receive this rare honour. Till date, we are the only tractor company in the world
to bag this prestigious award.

Mahindra Tractors goes global.

Mahindra Tractors have reached all four corners of the world. And wherever we went, we?ve proved
ourselves nothing less than the best. That explains the great demand for Mahindra tractors across the
United States, Australia, Brazil, Turkey, South Africa & Syria etc among many more.
In the US market, Mahindra USA, a subsidiary company of Mahindra tractors, sells more than 10,000
tractors annually. A nationwide network of over 300 dealers, total product support and prompt after
sales service ensure that every tractor functions for years without any hassles.
Another big leap took us past the Great Wall of China. We acquired Jiangling Motor Co., to form
Mahindra China Tractor Company Ltd. (MCTCL). Started operation with Jiangsu Yueda Yancheng
Tractor Manufacturing Co. in the year 2008 & formed MYYTCL.The 18-35 HP tractors manufactured
here cater to domestic as well as overseas markets.
From China, we crossed the Pacific Ocean and entered the Australian farms. Assembled at Mahindra
Australia, these tractors are sold all over the Australian continent. The variety includes a range of 2WD
and 4WD compact tractors (20-30 HP range) and utility tractor models (45-85 HP range) along with
attachments like loaders and mowers. These attachments can also be put to multiple uses with utmost
reliability and ease.
Heading eastwards from Australia, we entered the European continent and launched Mahindra Tractors
at the Novi Sad fair in May 2005. Today, we have a significant presence in Turkey, Macedonia and
Serbia.
In the massive African continent we have already spread across 20 countries that include Angola,
Tchad, Democratic Republic of Congo, Mali, Morocco, Nigeria, Sudan, The Gambia, Zambia, Egypt,
Algeria, Ghana, Niger, Uganda, Tanzania, Mallawi, Mozambique, Zimbabwe, Botswana & South Africa.
Besides that we have set up assembly plants in Ghana, The Gambia, Nigeria Mali & Tchad, which were
technically guided and commissioned along with our channel partners in these countries. And it won’t be
too long before our brand of red tractors are found across the rest of the African continent.
But the journey doesn?t end here. We look forward to tapping the remotest farms of the globe and
continue to cultivate countless smiles.
On the positive side, Mahindra & Mahindra is a trusted name. It has strong brand equity
in rural markets which contribute 40 per cent to two-wheeler sales in the country. It has
a wide distribution network in place. Most important, it has done a successful transition
from tractors and commercial vehicles to cars, though these markets have nothing in
common. The Scorpio is the largest-selling sports utility vehicle in the country. So, its
ability to sell two-wheelers cannot be doubted.
Still, Mahindra & Mahindra did not want to leave anything to chance. It touched base
with 7,500 respondents across the country last year to check if the foray into two-
wheelers
made sense. Most of them said that a Mahindra two-wheeler doesn¶t sound
outrageous. That gave the company the confidence to roll out its two-wheeler plans.
First off the
block is its range of gearless scooters. (Motorcycles will have to wait till next year
perhaps because the company does not want to rush to the market with a me-too
product.)
But the scooter market is no less competitive. At one stage, it was on oxygen. Stylish
and fuel efficient motorcycles had more or less killed the market for scooters. So much
so,
market leader Bajaj Auto decided to vacate the space. But the market has bounced
back in the last few years because of two reasons: One, scooters now offer mileage that
is
not very different from motorcycles; and two, scooters require lesser maintenance
than motorcycles because they are used in large numbers by women who are
cautious
drivers. Honda leads the pack with a market share of 53 per cent, followed by TVS (21
per cent), Hero Honda (14 per cent) and Suzuki (8 per cent). Mahindra & Mahindra¶s
share is a tad above
Retail
The rural retail market is currently estimated at US$ 112 billion, or around 40 per cent of
the US$ 280 billion Indian retail market, according to a study paper, 'The Rise of Rural
India', by an industry body.
Hindustan Unilever (HUL) is planning to significantly increase its rural reach. According
to Harish Manwani, Chairman, HUL, the quality and quantity of rural coverage will go up
to the extent that "what we have done in the last 25 years we want to do it in the next
two years." Currently HUL products reach approximately 250,000 rural retail outlets and
the company intends to scale it up to nearly 750,000 outlets in two years time.
Direct selling firm Tupperware India, known for its storage containers plans to foray into
the rural markets in the next two-three years. "We have solid plans for the rural market.
We are working on bringing products for rural people as well," said Asha Gupta,
Managing Director, Tupperware India.
Castrol India is pushing its rural sales by building up a distribution infrastructure to reach
out to all villages. According to Ravi Kirpalani, Chief Operating Officer, Castrol India,
"Our distribution now reaches 5,000-7,000 towns and villages, but we are planning to
take our products to six lakh villages with a population of less of 5,000.''
ahindra & Mahindra Financial Services AGM
Speech by Mr. Anand Mahindra, Chairman - Mahindra & Mahindra Financial
Services
Mumbai, July 23, 2007
I have great pleasure in welcoming you to the 17
th
Annual General Meeting of your

Company. I take particular pride in standing before you as the Chairman of MMFSL,
because this is a business that links the Mahindra Group to rural India and it has always
been ahead of the curve. Long before others recognised the potential of rural India, your
company took a decision to serve the needs of India’s rural customers. The rural
customer has repaid us with his patronage, his faith and his trust. MMFSL is today the
largest non-banking rural finance company in India and its IPO last year was subscribed
27 times. Your company’s faith in the rural sector has paid off handsomely.
In the financial year 2006 –2007, your Company crossed a major landmark when its
disbursements crossed the Rs 5000 crore mark. Disbursements for the year registered a
growth of 22 percent at Rs. 5441 crores as compared to Rs. 4478 crores in the previous year.
This growth in disbursements can be mainly attributed to your Company’s continued
penetration into deeper rural areas with tailor made financial products. The number of
contracts entered into by your Company during 2006-07 rose from 1, 31,158 in the previous
year to 1, 73,110.
The Company’s expanded portfolio under which it now undertakes car financing, two
wheeler financing and pre-used vehicles financing also contributed to this growth. During
the year, your Company became one of the preferred financiers for financing vehicles
manufactured by Maruti Udyog Limited, India’s leading passenger car manufacturer.
In 2006-07, your company expanded its reach, and opened 98 new branches, taking its total
network to 403 branches as on 31
st
March 2007.
Your Directors are pleased to report a growth of 42 percent in your Company’s income,
which was Rs. 844.6 crores for the year, ended 31

st
March 2007 as compared to Rs. 596.4
1 crores during the previous year. Profit before tax (PBT) was 25 percent higher at Rs.202.7
crores than the PBT of Rs.162.2 crores during the previous year. Profit after tax also grew at
a healthy rate of 23 percent to Rs.132.9 crores from Rs.108.3 crores in 2005-06.
Your Directors are pleased to recommend a total Dividend of 40% (20% interim and 20%
final) for the financial year ended 31.03.2007.
In the first quarter of the current financial year, your Company disbursed Rs. 1590 crores
as against Rs.1088 crores disbursed in the corresponding period of F-07, registering a
growth of 46 per cent and maintaining its dominance.
Mahindra Insurance Brokers Limited:
During 2006-07, MIBL reached the important milestone of selling more than 100,000
policies. 134,741 retail policies were sold in both life and non-life segments. The
customized life insurance cover ‘Mahindra Loan Suraksha’ grew by 75 percent. The
number of lives covered grew from 34,171 to 59,747. The sum assured rose from 743.5
crores in 2005-06 to Rs.1, 257.8 crores in 2006-07. A substantial portion of this came
from rural markets.
In the non-life retail segment, (primarily coming from motor insurance business in the
rural markets,) MIBL achieved a growth of 167 percent, from 28,075 cases in 2005-06 to
74,994 cases in 2006-07. Profit Before Tax increased by 33.3 percent from Rs.4.5 crore
in 2005-06 to Rs. 6 crore in 2006-07, and Profit After Tax increased by 31 percent from
Rs.2.9 crore to Rs.3.8 crore during the same period.
To support the Group CSR initiatives announced on the occasion of the 60
th
Anniversary
of our holding company, Mahindra & Mahindra Ltd., the Board of your Company had
resolved to contribute up to 1 percent of estimated Profit After Tax (PAT) for CSR
initiatives that would specifically benefit economically and socially disadvantaged
sections of society. Your Company contributed Rs.102 lakhs to various charitable
2 institutions during the year under review. It is our privilege to make this contribution and
share our success.
In spite of agricultural stagnation, rural and semi-urban markets in India have witnessed
structural changes over the last decade or so. There seems to be evidence to indicate that
the benefits of growth and development are being reflected in the income and expenditure
trends. This would suggest that the rural sector and the agricultural sector are no longer
synonymous and that rural markets now offer great opportunity for marketing a wide
variety of goods and services.
There are 5 major factors that explain this attractiveness. First, the spending power of
rural India has gone up and this trend is expected to continue. Over one-third of the
middle-class population of India will be from rural areas by 2009-10.
Second, the increase in rural incomes, has led to a gradual shift in consumption from food
to non-food items. According to the Consumer Expenditure Survey of the National
Sample Survey Organisation, the percentage of expenditure on food items in rural areas
has come down from 65 percent in 1993-94 to 55 percent in 2004-05. Equally — and
perhaps more importantly — the percentage share of expenditure on non-food items such
as consumer goods and services, education, medical and durable goods has increased
disproportionately
Third, the awareness levels of people in rural areas has increased manifold in the last few
years due to the advent of better and cheaper telecommunication, travel infrastructure,
television and print media coupled with a general rise in literacy levels. This, along with
rising incomes, has brought about a substantial upgradation in the living standards and
life-styles of a section of rural consumers, bringing them very close to their urban
counterparts. This trend will further accelerate in the future.
3 Fourthly, some of the recent large-scale infrastructure development initiatives such as the
development of national highways, rural roads and infrastructure, telephones, electricity
and micro-irrigation are having an impact.
Fifthly, while agriculture continues to be a dominant source of income in rural India,
close to 50 per cent of the income generated there now comes from industry and services,
which are also growing very rapidly. This is an important development.
The convergence of these factors, along with the fact that urban markets for many goods
and services are becoming increasingly saturated, is making rural markets, with their low
penetration, an increasingly attractive proposition.
Going forward, your Company plans to expand its portfolio and leverage its large client
base by providing a wide range of financial products and services through its nationwide
distribution network. During 2006-07, it has initiated the financing of two-wheelers. It
has firmed up its plans to enter the housing loan market (in rural and semi urban markets
to begin with). A subsidiary company has been incorporated to carry out this business.
Your Company plans to develop its mutual fund distribution business over time
and is also considering entering the market for commercial vehicles and construction
equipment this year. It plans to enter the personal loan space as well. This is a large
market and will bring your company into exciting competition with traditional sources of
non-formal finance in the rural markets.

Overall, your company believes it is in the right business, in the right place, at the right
time.
I cannot close without acknowledging the support that our customers, shareholders,
vehicle manufacturers, dealers, banks, financial institutions, and mutual funds, have
extended to us throughout the year. As for our employees, it is their excellent efforts that
4 have made the company what it is. To all these stakeholders, on behalf of the Board of
Directors and myself, I extend my grateful thank
Overview

Farm Equipment Sector (FES) is a part of US $6.3 billion
Mahindra group, which is amongst the top 10 industrial
houses in India. The group has a leading presence in key
sectors of the Indian economy, including the financial
services, trade, retail and logistics, automotive components,
after-market, information technology, hospitality and real
estate. Mahindra has recently made an entry in the two-
wheeler segment.

The Mahindra group's Farm Equipment Sector (FES) is amongst the top three
tractor brands in the world. It has won the Japan Quality Medal in 2007. It also
holds the distinction of being the first tractor company globally to win the Deming
Application Prize in 2003. FES is the first tractor company worldwide to win these
honors. This shows the strong focus of FES on Quality and Customer Satisfaction.
Today, the domestic market share of FES is around 42%. (Mahindra brand: 30%
and Swaraj brand: 12%).

The motto of FES is to usher prosperity; for its customers, dealers, employees,
society and all other stakeholders.FES has 6 state-of-the-art manufacturing plants
(including 2 plants of Swaraj) in India, 2 plants in China, 3 assembly plants in USA
and 1 assembly plant in Australia. FES has a presence in around 25 countries
across six continents with more than 1000 dealers world-wide.

FES has a subsidiary agricultural tractor manufacturing company in India known
as Mahindra Gujarat Tractor Limited (MGTL).

Mahindra Group has commenced the Sustainability Reporting from 2008. Today,
M&M group is amongst the few Indian companies to have an A+ GRI certification.
As per the commitments given by the Group under GRI framework, significant
reduction in usage of electricity, water and solid waste is called for. To make FES
employees aware on the tenants of sustainability, various initiatives like easily
accessible information on sustainability, setting up of permanent sustainability
corners in all FES plants, observing of energy conservation month etc. are
undertaken.

FES has a Sustainability Committee in place to take care of the implementation of
GRI requirements.
* Legal Entity -Mahindra Shubhlabh Services Limited
Overview
Presenting India's first compact truck. A truck

that’s built to save for you. It gives an
unmatched mileage of 27 kmpl and scores
really low on maintenance. Its 0.5 ton, compact
truck box ensures maximum space is utilised in
intra city operations.
All this, and a range of other features, comes at a price for which you won’t have to
spend your life’s entire savings.
In fact, the Gio was destined to be a leader even before it was launched. After all it
boasts of an impressive lineage, since Mahindra is the biggest player in the small
commercial vehicle segment, where combined sales of its pick-ups and 3 wheelers
cross 7000 vehicles every month. And hallmarks of all these vehicles include their
rugged build, low operating costs and powerful yet fuel efficient engines.
Backed by Mahindra's unique experience, Gio comes to you as a trustworthy

partner, dedicated to your business and your progress.

Overview
The Automotive Sector is the market leader in
utility vehicles in India since inception and
currently accounts for about half of India’s
market for utility vehicles with a product portfolio
that ranges from rugged, mass-transport utility
vehicles to personal segment sports utility
vehicles like the Scorpio.
Mahindra has recently launched the Xylo, perhaps the most complete car with
luxury comforts to enter the Indian market with everything that today’s sedans offer
and much more. Available at 57 select Mahindra dealerships in January and
another 44 dealerships from February, the XYLO price range starts at Rs.
6,24,500.
While the world-class Scorpio (declared to be the ‘Car of the Year’ by CNBC
Autocar, BBC Wheels and Business Standard Motoring) is the Automotive Sector’s
current flagship, it has many more products that have made it popular with
individuals and institutions in India and the world. The Automotive Sector of the
Mahindra Group is currently present in the multi-utility vehicle, light commercial
vehicle and three-wheeler segments. Now, with its joint ventures, it will have a
presence in the passenger car and the medium and heavy commercial vehicle
segments too.
DESIGN
TECHNICAL DESCRIPTION
The heart of a tractor is a powerful internal combustion engine thatdrives
the wheels to provide forward motion. Direct ignition (diesel) and spark-driven engines
are both found on tractors, just as with cars and light trucks.Power from the engine can
be transmitted to the implement being used through apower take-off (PTO) shaft or belt
pulley. The engine also provides energy for theelectrical system, including the ignition
system and lights, etc.
In Tractor the machine is little more than an engine on wheels, witha seat
for the operator and a hitch for pulling implements centered in the rear.Later models
would feature an enclosed cab to keep the operator out of theweather; it features simple
controls and the metal seat. The drawing shows awheel-tractor, which comprised more
than 95% of machines sold for farm use.Tracked units also called crawler tractors.
MODELS
(6)
[30 – 40 HP [HORSE POWER]

HC 3221
HC 3444
35 Horse Power Category
37Horse Power Category
Powerful AVL Designed Engine
4 - Stroke, Direct Injection, Diesel Engine
More Speed
Powerful Engine, Direct Injection Engine
Mechanical Disc Brakes
Complete Water Sealing
Air Compressor
Air Compressor
Automatic Hydraulic System
New Strengthened Bonnet
(7)
[BELOW 30 HP [HORSE POWER]
HC 2521
HC 2522
•
Direct Injection Engine
Efficient Direct Injection
More Speed
More Speed
•
Hydraulic Brakes
•
Automatic Hydraulic Control System
•
Air Compressor
•
UNIQUE SELLING PROPOSITION

Superior Performing Tractors at Competitive Prices
High flexibility to farmers to perform all types of agricultural
operations in any terrain.
(8)
P’s
PRODUCT
The tractor is used for pulling or pushing agricultural machinery or
trailers, for plowing, tilling, disking, harrowing, planting, and similar tasks. In 1892,
John Froelich built the first gasoline powered tractor in Clayton County, Iowa.
The tractor is a simple open vehicle with two very large drivingwheels on
an axle below and slightly behind a single seat (the seat and steeringwheel
consequently are in the center) and the engine in front of the driver withtwo steerable
wheels below the engine compartment. This basic design hasremained unchanged for a
number of years, but enclosed cabs are fitted onalmost all modern models, for reasons
of operator safety and comfort.
Tractors used belts wrapped around pulleys to power
stationaryequipment. Modern tractors use a power take-off shaft to provide rotary power
tomachinery that may be stationary or pulled. .
PLACE
Of India’s total geographical area of 329 million-hectares (MHA), asmuch
as 166 MHA is arable (2nd highest in the world). While the net sown areastands around
140-142 MHA, with increased cropping intensity, the grosscropped area is higher at
180-189 MHA.
Tractors remain the crucial linkage in the commercialisation ofagricultural
products. For farming activities, there is no substitute to tractors.Increasing rural
prosperity and education levels plus spreading awareness of thebenefits from
mechanization would also help speed up tractorisation. It is equallytrue even when
power or transportation needs of the farm are considered.
For BAJRANG TRACTOR the place which in which the company will
start its business is
North
(Punjab, Haryana & Uttar Pradesh)
West
(Gujarat & Maharashtra)
(9)
PRICE
PRODUCT NAME
SEGMEMT
PRICE
HC 2521
25 Horse Power
4,25,000/-
HC 2522
29 Horse Power
4,40,000/-
HC 3221
35 Horse Power
7,25,000/-
HC 3444
37Horse Power
7,40,000/-
The above prices include 20% profit, which is due to incres the
sales of company, than it will be increased as per the marketing stratergy.
Promotion
As the promotion part is considered, along with the huge
advertisingcompaign that the company is carrying out I will also carry out the
basicpromotional activities necessary for boosting the sales of the product like
keepingstalls in Melas (Fairs) which will expose the companies whole range to all type
ofcustomers and promotion can also be done by providing seasonal schemes to getthe
focus of the customer in every season.
(10)
DISTRIBUTION
Initially BAJRANG TRACTORS will have the 150 dealers in
theplaces of sale than it will increase its dealer’s distribution network. If
needarise the company will also appoint some retail outlet in the villages
forpenetration in market.
(11)
BAJRANG
COMPANY
DEALERS
CUSTOMERS
Introduction
For quite some time now, the lure of rural India has been the subject of an-
imated discussion in corporate suites. And there is a good reason too. With
urban markets getting saturated for several categories of consumer goods and
with rising rural incomes, marketing executives are fanning out and discov-
ering the strengths of the large rural markets as they try to enlarge their
markets. Today, the idea has grown out of its infancy and dominates discus-
sions in any corporate boardroom strategy session. Adi Godrej, chairman of
the Godrej group that is in a range of businesses from real estate and per-
sonal care to agri-foods, has no hesitation proclaiming, It is a myth that rural
consumers are not brand and quality conscious. A survey by the National
Council for Applied Economic Research(NCAER), India's premier economic

research entity, recently con
rmed that rise in rural incomes is keeping pace
with urban incomes. From 55 to 58 per cent of the average urban income
in 1994-95, the average rural income has gone up to 63 to 64 per cent by
2001-02 and touched almost 66 per cent in 2004-05. The rural middle class is
growing at 12 per cent against the 13 per cent growth of its urban counter-
part. Even better, the upper income class those with household incomes of
over Rs one million [$22,700] per annum is projected to go up to 21 million
by 2009-10 from four million in 2001-02. It will have a 22 to 23 per cent
rural component. Higher rural incomes have meant larger markets. Already,
the rural tilt is beginning to show. A study by the Chennai-based Francis
Kanoi Marketing Planning Services says that the rural market for FMCG
is worth $14.4 billion, far ahead of the market for tractors and agri-inputs
which is estimated at $10 billion. Rural India also accounts for sales of $1.7
billion for cars, scooters and bikes and over one billion dollars of durables.
In total, that represents a market worth a whopping $27 billion. It is no
wonder that even MNCs have cottoned on to the idea of a resurgent rural
India waiting to happen. Four years ago, Coke ventured into the hinterland.
Now Coke's rural growth of 37 per cent far outstrips its urban growth of 24
per cent. Coke is not the

rst MNC to have cottoned on to the rural lure.
Its global rival Pepsico took a wider approach to the business when it was
3given permission to set up shop in India in the late 1980s and investment
in food processing and farming was a pre-condition for entry. The company
imported a state-of-the art tomato processing plant from Italy to Punjab.
In
ve years, productivity improved from 16 tonnes to 52 tonnes per hectare
and there was a tomato glut in the state. Farmers weren't complaining be-
cause even though prices fell, their incomes increased because of the huge
jump in productivity. Pepsi is now heralding a citrus plantation drive in the
state and other parts of the country for its brand of Tropicana fruit juices,
to replace imported fruit. Hindustan Lever Ltd, the $2.3 billion Indian sub-
sidiary of Unilever, the country's largest FMCG company, has also got on the
bandwagon. It's Project Shakti uses self-help groups across the country to
push Lever products deeper into the hinterland. Its four-pronged programme
creates income-generating capabilities for underprivileged rural women; im-
proves rural quality of life by spreading awareness of best practices in health
and hygiene; empowers the rural community by creating access to relevant
information through community portals and it also works with NGOs to
spread literacy. There are currently over 15,000 Shakti entrepreneurs, most
of them women, in 61,400 villages across 12 states. By the end of 2010,
Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 of India
s 640,000 villages, touching the lives of over 600 million people. With such
an emphasis on rural marketing, consumption patterns are changing and it
signals a change in the regulatory environment. Vertical integration of the
food market from farm to

rm to fork becomes the best way to achieve e
-
ciency and serve the interest of every stakeholder in the chain the farmer, the
processor, the retailer and the consumer. As Ashok Gulati of the US-based
International Food Policy Research Institute put its, The future of Indian
agriculture in general and the farmer in particular depends on the how soon
they can become globally competitive. Indian economic policy realises this.
Between the 8th (1992-97) and the 10th (2002-07) Five Year Plans, succes-
sive governments have tripled the spending on rural development from $6.82
billion to $20.2 billion.
All this potential has got India's big business houses rushing to enter
and expand rural businesses. Telecom giant Sunil Mittal, chairman of the $2
4billion mobile telephony major Bharti Tele- Ventures, is another unabashed
ag-bearer of the 'go rural' strategy. He is con

dent that the next 'explo-
sive' phase of demand for cellular connections is going to come from the
villages. In an interesting business diversi

cation, he has tied up with the
legendary Rothschilds of Europe for a $51 million food processing venture
and export of fruits and vegetables. We can replicate our pre-eminence in IT
agriculture and transform the country into a global food basket, he points
out. Mittal's initial investments include an agriculture research centre and
model farm in Punjab. If the hinterland has caught the attention of Mittal,
among the country's most recent entrants to the ranks of big business, it has
also not escaped the radar of the oldest business house, the $17 billion Tata
group, which has consolidated its rural operations. The group's two compa-
nies, Tata Chemicals and Rallis India, ran separate rural initiatives till 2003.
Tata Chemicals ran a chain called Tata Kisan Kendra, which o

ered farm-
ers a host of products and services ranging from agriinputs to

nancing to
advisory services. Rallis, on the other hand, was partnering ICICI Bank and
Hindustan Lever in o
ering deals to farmers that covered operations from the
pre-harvest to post-harvest stage. In 2004, the two operations were merged
and Tata Kisan Sansar, a network of onestop shops providing everything from
inputs to know-how to loans, was launched. Today, the Tata Kisan Sansar
has 421 franchisee-run centres in three states and reaches out to over 3.6 mil-
lion farmers. Like the Tatas, the $2.6 billion Mahindra group has successfully
established a synergy between its current businesses and the planned rural
forays. Its
agship, Mahindra & Mahindra Ltd is India's largest farm equip-
ment company. Its subsidiary, Mahindra Shubhlabh Services, has operations
in 11 states, and leverages the strong Mahindra brand, the 700,000-strong
Mahindra tractor customer base and the 400-plus dealer network, to provide
a complete range of products and services to improve farm productivity and
establish market linkages to the commodity market chain. Its retailing arm,
Mahindra Krishi Vihar, has been instrumental in increasing the groundnut
yield in Rajasthan through a new seed sourced from the state of Maharash-
tra, and it has also introduced a new variety of grapes in Maharashtra. Says
Vikram Puri, head of Mahindra Shubhlabh Services, Almost 80 per cent of
5the farmers registered with us have less than

ve acres land. We are making
farming an attractive proposition through three basic guiding steps growing
what the market requires, improving the crop yield and decreasing the cost
of crop production. The activities of Mahindra Shubhlabh Services have at-
tracted the attention of the International Finance Corporation, the

nancial
arm of the World Bank, which recently picked up a 27 per cent stake in the
company. Rural India accounts for a market worth $27 billion. No wonder
even MNCs have cottoned on to the idea of a resurgent rural India.
2 Strategies
2.1 BY COMMUNICATING AND CHANGING QUAL-
ITY PERCEPTION
Companies are coming up with new technology and they are properly commu-
nicating it to the customer. There is a trade-o

between Quality a customer
perceives and a company wants to communicate. Thus, this positioning of
technology is very crucial. The perception of the Indian about the desired
product is changing. Now they know the di

erence between the products
and the utilities derived out of it. As a rural Indian customer always wanted
value for money with the changed perception, one can notice di
erence in
current market scenario.
2.2 BY PROPER COMMUNICATION IN INDIAN
LANGUAGE
The companies have realized the importance of proper communication in
local language for promoting their products. They have started selling the
concept of quality with proper communication. Their main focus is to change
the Indian customer outlook about quality. With their promotion, rural
customer started asking for value for money.

62.3 BY TARGET CHANGING PERCEPTION
If one go to villages they will see that villagers using Toothpaste, even when
they can use Neem or Babool sticks or Gudakhu, villagers are using soaps
like Nima rose, Breeze, Cinthol etc. even when they can use locally man-
ufactured very low priced soaps. Villagers are constantly looking forward
for new branded products. What can one infer from these incidents, is the
paradigm changing and customer no longer price sensitive? Indian customer
was never price sensitive, but they want value for money. They are ready to
pay premium for the product if the product is o

ering some extra utility for
the premium.
2.4 BY UNDERSTANDING CULTURAL AND SO-
CIAL VALUES
Companies have recognized that social and cultural values have a very strong
hold on the people. Cultural values play major role in deciding what to buy.
Moreover, rural people are emotional and sensitive. Thus, to promote their
brands, they are exploiting social and cultural values.
2.5 BY PROVIDING WHAT CUSTOMER WANT
The customers want value for money. They do not see any value in frills
associated with the products. They aim for the basic functionality. However,
if the seller provide frills free of cost they are happy with that. They are
happy with such a high technology that can ful

ll their need. As "Motorola"
has launched, seven models of Cellular Phones of high technology but none
took o
. On the other hand, "Nokia" has launched a simple product, which
has captured the market.
72.6 BY PROMOTING PRODUCTS WITH INDIAN
MODELS AND ACTORS
Companies are picking up Indian models, actors for advertisements as this
helps them to show themselves as an Indian company. Diana Hyden and
Shahrukh Khan are chosen as a brand ambassador for MNC quartz clock
maker "OMEGA" even though when they have models like Cindy Crawford.
2.7 BY ASSOCIATING THEMSELVESWITH INDIA
MNCs are associating themselves with India by talking about India, by ex-
plicitly saying that they are Indian. M-TV during Independence Day and
Republic daytime make their logo with Indian tri-color. Nokia has designed
a new cellular phone 5110, with the India tri-colour and a ringing tone of
"Sare Jahan se achcha".
2.8 BY PROMOTING INDIAN SPORTS TEAM
Companies are promoting Indian sports teams so that they can associate
themselves with India. With this, they in

uence Indian mindset. LG has
launched a campaign "LG ki Dua, all the best". ITC is promoting Indian
cricket team for years, during world cup they have launched a campaign
"Jeeta hai jitega apna HindustanIndia India India". Similarly, Whirlpool
has also launched a campaign during world cup.

2.9 BY TALKING ABOUT A NORMAL INDIAN
Companies are now talking about normal India. It is a normal tendency of
an Indian to try to associate himself/herself with the product. If he/she can
visualize himself/herself with the product, he /she becomes loyal to it. That
is why companies like Daewoo based their advertisements on a normal Indian
family.
82.10 BY DEVELOPING RURAL-SPECIFIC PROD-
UCTS
Many companies are developing rural-speci

c products. Keeping into con-
sideration the requirements, a

rm develops these products. Electrolux is
working on a made-for India fridge designed to serve basic purposes: chill
drinking water, keep cooked food fresh, and to withstand long power cuts.
2.11 BY GIVING INDIAN WORDS FOR BRANDS
Companies use Indian words for brands. Like LG has used India brand name
"Sampoorna" for its newly launched TV. The word is a part of the Bengali,
Hindi, Marathi and Tamil tongue. In the past one year, LG has sold one lakh
20-inch Sampoorna TVs, all in towns with a population of around 10,000.
By the end of 1999, roughly 12Thats Rs 114 crore worth of TV sets sold in
the villages in a year.
2.12 BY ACQUIRING INDIAN BRANDS
As Indian brands are operating in India for a long time and they enjoy a
good reputation in India. MNCs have found that it is much easier for them
to operate in India if they acquire an Established Indian Brand. Electrolux
has acquired two Indian brands Kelvinator and Allwyn this has gave them
the well-established distribution channel. As well as trust of people, as people
believe these brands. Similarly Coke has acquired Thumps up, Gold Spot,
Citra and Limca so that they can kill these brands, but later on they realized
that to survive in the market and to compete with their competitor they have
to rejuvenate these brands.
2.13 BY EFFECTIVE MEDIA COMMUNICATION
Media Rural marketing is being used by companies. They can either go for
the traditional media or the modern media. The traditional media include
9melas, puppetry, folk theatre etc. while the modern media includes TV, ra-
dio, e-chaupal. LIC uses puppets to educate rural masses about its insurance
policies. Govt of India uses puppetry in its campaigns to press ahead social
issues. Brook Bond Lipton India ltd used magicians e

ectively for launch of
Kadak Chap Tea in Etawah district. In between such a show, the lights are
switched o
and a torch is
ashed in the dark(EVEREADYs tact). ITC's
e-chaupal (chaupal is the common place where villagers gather) has been the
most elaborate and extensive venture in this

eld so far. Conceived by ITC's
international business division and launched in 2000, the e-chaupal project
has since grown to around 2,700 chaupals covering a population of around
1.2 million in
ve states { Madhya Pradesh, Karnataka, Andhra Pradesh,
Uttar Pradesh and Maharashtra.
Rural marketing requires the understanding of the complexities and this
article reviews some of the key issues. Indian agricultural industry has been
growing at a tremendous pace in the last few decades. The rural areas are
consuming a large number of industrial and urban manufactured products.
The rural agricultural production and consumption process plays a predomi-
nant role in developing the Indian economy. This has designed a new way for
understanding a new process called Rural Marketing. The concept of rural
marketing has to be distinguished from Agricultural marketing. Marketing is
the process of identifying and satisfying customers needs and providing them
with adequate after sales service. Rural marketing is di

erent from agricul-
tural marketing, which signi

es marketing of rural products to the urban
consumer or institutional markets. Rural marketing basically deals with de-
livering manufactured or processed inputs or services to rural producers, the
demand for which is basically a derived outcome. Rural marketing scientists
also term it as developmental marketing, as the process of rural marketing
involves an urban to rural activity, which in turn is characterised by various
peculiarities in terms of nature of market, products and processes. Rural
marketing di
ers from agricultural or consumer products marketing in terms
of the nature of transactions, which includes participants, products, modal-
ities, norms and outcomes. The participants in case of Rural Marketing
would also be di
erent they include input manufacturers, dealers, farmers,
10opinion makers, government agencies and traders. The existing approach
to the rural markets has viewed the markets as a homogeneous one, but in
practice, there are signi

cant buyer and user di
erences across regions as well
as within that requires a di

erential treatment of the marketing problems.
These di
erences could be in terms of the type of farmers, type of crops and
other agro-climatic conditions. One has to understand the market norms
in agricultural input so as to devise good marketing strategies and to avoid
unethical practices, which distort the marketing environment. Many of the
inputs used for production process have implications for food, health and
environmental sectors. Rural marketing needs to combine concerns for pro

t
with a concern for the society, besides being titled towards pro
t. Rural
market for agricultural inputs is a case of market pull and not market push.
Most of the jobs of marketing and selling is left to the local dealers and re-
tailers. The market for input gets interlocked with other markets like output,
consumer goods, money and labour. The importance of rural marketing can
be understood from the fact that today modern inputs i.e. diesel, electric-
ity, fertilisers, pesticides, seeds account for as much as 70Green Revolution
areas. Further the percentages were higher at 81of land. Strategic aspects
Rural marketing in India is not much developed there are many hindrances
in the area of market, product design and positioning, pricing, distribution
and promotion. Companies need to understand rural marketing in a broader
manner not only to survive and grow in their business, but also a means to
the development of the rural economy. One has to have a strategic view of
the rural markets so as to know and understand the markets well. In the
context of rural marketing one has to understand the manipulation of mar-
keting mix has to be properly understood in terms of product usage. Product
usage is central to price, distribution, promotion, branding, company image
and more important farmer economics, thus any strategy in rural marketing
should be given due attention and importance by understanding the product
usage, all elements of marketing mix can be better organised and managed.
112.14 BY ADOPTING LOCALISED WAY OF DIS-
TRIBUTING
Proper distribution channels are recognized by companies. The distribution
channel could be a Big scale Super markets, they thought that a similar
system can be grown in India. However, they were wrong, soon they realized
that to succeed in India they have to reach the nook and the corner of
the country. They have to reach the "local Paan wala, Local Baniya" only
they can succeed. MNC shoe giants, Adidas, Reebok, Nike started with
exclusive stores but soon they realized that they do not enjoy much Brand
Equity in India, and to capture the market share in India they have to go the
local market shoe sellers. They have to reach to local cities with low priced
products.
2.15 BY ASSOCIATING THEMSELVES WITH IN-
DIAN CELEBRITIES
MNCs have realized that in India celebrities enjoyed a great popularity
so they now associate themselves with Indian celebrities. Recently Luxor
Writing Instruments Ltd. a JV of Gillette and Luxor has launched 500
"Gajgamini" range of Parker Sonnet Hussain special edition fountain pens,
priced at Rs. 5000. This pen is signed by Mr. Makbul Fida Hussain a
renowned painter who has created "Gajgamini" range of paintings. Com-
panies are promoting players like Bhaichung Bhutia, who is promoted by
Reebok, so that they can associate their name with players like him and get
popularity.
2.16 MELAS
Melas are places where villagers gather once in a while for shopping. Com-
panies take advantage of such events to market their products. Dabur uses
these events to sell products like JANAM GHUTI(Gripe water). NCAER
estimates that around half of items sold in these melas are FMCG products
12and consumer durables. Escorts also displays its products like tractors and
motorcycles in such melas.
2.17 PAINTINGS
A picture is worth thousand words. The message is simple and clean. Rural
people like the sight of bright colours. COKE, PEPSI and TATA traders
advertise their products through paintings.
3 Case Studies-1: AKASHGANGA
This case study is about a product and service named Akashganga sold by a
small, entrepreneurial business named Shree Kamadhenu Electronics Private
Ltd. (SKEPL). Akashganga is for diary farmers and it is intended to enable
to them to increase their e

ciency and productivity. The Indian diary in-
dustry is plagued by several problems, the major ones being low productivity
of Indian cows, the delays in processing milk, low quality caused by manual
handling, corruption and mismanagement, and, of course, endemic dilution
of milk with water. Akashganga attempts to alleviate some of these issues.
Akashganga is a computerized system. When a farmer gets milk into the
collection point, it's weighed and the amount of fat measured and imme-
diately an entry is made on the farmer's swipe card. The money can be
collected immediately. This is marked contrast to the previous system where
the
nancial calculation was done later to avoid holding up the queue of
farmers ready for milking; the calculation was done by hand and was some-
what complicated. With the new system, calculation is done automatically
which makes it possible to pay the farmer on the spot rather than having
him wait for a couple of days. Also the potential for cheating is reduced. An
entry is made electronically on the farmer's swipe card.
When SKEPL wanted to market this service, it ran up against the skepticism
of the Indian rural people against unproven technology. This is the classic
catch-22 situation as the farmer does not trust the tool till he tries it, and is
reluctant to try it till he trusts it. SKEPL got around this problem by o
er-
13ing free trials and delayed payment schemes stretching up to several months.
The company also provided responsive and e

cient after-sales service. It
established a service network covering the rural areas, and typically would
attend to a compliant within a few hours of receiving it.
It's important to note that the company's local presence whether for mar-
keting, sales or service helped tremendously, since the villagers would not be
disposed to make a journey to a town or city to learn about their products.
The company also used a name Akashganga that Indian villagers can relate
to. This helped earn the trust of the villagers.
Also, Shree Kamadhenu Electronics used local people for marketing, sales,
service, etc. This was a very important factor that helped the farmers relate
to and trust the company.
Of course, the company had a solution that was superior in terms of time,
transparency, fairness, etc, and that played a big role in their success.
As a result of these factors, SKEPL gained a threshold in this large market
and earned respect among farmers.
4 Case-Study 2: ITC e-Choupal
4.1 About ITC-IBD
ITC is one of India's foremost private sector companies with a market capi-
talisation of over US $14 billion and a turnover of US $3 billion. ITC has a
diversi
ed presence in Cigarettes, Hotels, Paperboards & Specialty Papers,
Packaging, Agri-Business, Packaged Foods & Confectionery, Branded Ap-
parel, Greeting Cards and other FMCG products. Its International Business
Division (ITC IBD) was created in 1990 as an agricultural trading company;
it now generates US $150 million in revenues annually.
Initially, the agricultural commodity trading business was small compared
to international players. By 1996, the opening up of the Indian market had
brought in international competition. Large international companies had
better margin-to-risk ratios because of wider options for risk management
14and arbitrage. For an Indian company to replicate the operating model of
such multinational corporations would have required a massive horizontal
and vertical expansion. In 1998, after competition forced ITC to explore the
options of sale, merger, and closure of IBD, ITC ultimately decided to retain
the business. The ITC-IBD taken the challenges to use information technol-
ogy to change the rules of the game and create a competitive business that
did not need a large asset base. Today, IBD is a US $150 million company
that trades in commodities such as feed ingredients, food-grains, co

ee, black
pepper, edible nuts, marine products, and processed fruits.
4.2 ITC e-Choupal and the Strategy
ITC followed a di
erent media/communication strategy which is more elabo-
rate and extensive in rural marketing so far, which bene

ts both the farmers
and the organization. The strategy is use the Information Technology and
bridge the information and service gap in rural INDIA which gives an edge to
market its products like seeds, fertilizers and pesticides and other products
like consumer goods. With this strategy it can also enhance its competetive-
ness in global market for agri exports.
A pure trading model does not require much capital investment. The e-
Choupal model, in contrast, has required that ITC make signi

cant invest-
ments to create and maintain its own IT network in rural India and to identify
and train a local farmer to manage each e-Choupal.
The company has initiated an e-Choupal e

ort that places computers with
Internet access in rural farming villages; the e-Choupals serve as both a social
gathering place for exchange of information (choupal means gathering place
in Hindi) and an e-commerce hub. The computer, typically housed in the
farmers house, is linked to the Internet via phone lines or, increasingly, by
a VSAT connection, and serves an average of 600 farmers in 10 surrounding
villages within about a

ve kilometer radius. Each e-Choupal costs between
US $3,000 and US $6,000 to set up and about US $100 per year to main-
15tain. Using the system costs farmers nothing, but the host farmer, called a
sanchalak, incurs some operating costs and is obligated by a public oath to
serve the entire community; the sanchalak bene

ts from increased prestige
and a commission paid him for all e-Choupal transactions. The farmers can
use the computer to access daily closing prices on local mandis(government-
mandated markets), as well as to track global price trends or

nd information
about new farming techniqueseither directly or, because many farmers are
illiterate, via the sanchalak (the village farmer who runs the e-Choupal and
acts as ITCs representative in the village). In addition they can also know
about weather forecast(local) and best practices in the world from e-Choupal
website. They also use the e-Choupal to order seed, fertilizer, and other
products such as consumer good from ITC or its partners, at prices lower
than those available from village traders; the sanchalak typically aggregates
the village demand for these products and transmits the order to an ITC
representative. At harvest time, ITC o

ers to buy the crop directly from
any farmer at the previous days closing price; the farmer then transports his
crop to an ITC processing center, where the crop is weighed electronically and
assessed for quality. The farmer is then paid for the crop and a transport fee.
Launched in June 2000, 'e-Choupal', has already become the largest ini-
tiative among all Internet-based interventions in rural India. 'e-Choupal'
services today reach out to more than 3.5 million farmers growing a range of
crops - soyabean, co
ee, wheat, rice, pulses, shrimp - in over 31,000 villages
through 5200 kiosks across six states (Madhya Pradesh, Karnataka, Andhra
Pradesh,Uttar Pradesh, Maharashtra and Rajasthan).
16Figure 1: Transactional costs under Mandi & e-Choupal system
4.3 Operational costs and comparision with Mandis
Fixed Cost of Equipment at e-Choupal (in Rs.)
Printer Power related VSAT PC Total

2001-02 7000 19000 90000 39000 155,000
2002-03 7000 15000 70000 30000 122,000
2003-04 7000 15000 70000 30000 122,000
2004-05 6000 14000 60000 27000 107,000
2005-06 6000 12000 50000 24000 92,000
4.4 Vision and Planning Behind the e-Choupals
Implementing and managing e-Choupals is a signi

cant departure from com-
modities trading. Through its tobacco business, ITC has worked in Indian
17agriculture for decades, from research to procurement to distribution. ITCs
translation of the tactical and strategic challenges it faced and its social
commitment into a business model demonstrates a deep understanding of
both agrarian systems and modern management. The principles followed in
implementing the e-Choupals are
Re-engineer, Not Reconstruct
Present Mandi system have some success factors in it. ITC decided to
build e-Choupal on existing system. Already ITC has trading agents in
local mandis for its tobacco business. It retained the e

cient providers
and created roles for ine

cient people. It recruites and engages mem-
bers of landscape thereby making their expertise available to ITC.With
this principle ITC can avoid the reinventing the system in areas where
it can add no value with its presence i.e., in areas where e

cient agents
are there.
Address the Whole, Not Just One Part
The farmers various activities range from procuring inputs to selling
produce. Currently, the village trader services the spectrum of farmers
needs. He is a centralized provider of cash, seed, fertilizer, pesticides,
and also the only marketing channel. As a result, the trader enjoys two
competitive bene
ts. First, his intimate knowledge of the farmer and
village dynamics allow him to accurately assess and manage risk. Sec-
ond, he reduces overall transaction costs by aggregating services. The
linked transactions reduce the farmers overall cost in the short term,
but create a cycle of exploitative dependency in the long-term.
Rural development e
orts thus far have focused only on individual
pieces rather than what the entire community needs. Cooperatives
have tried to provide agricultural inputs, rural banks have tried to pro-
vide credit, and mandis have tried to create a better marketing channel.
These e
orts cannot compete against the traders bundled o
er. Func-
tioning as a viable procurement alternative, therefore, must eventually
address a range of needs, not just the marketing channel.
18ITC e-Chopal provide services as a bundle what the entire agricultural
community needs.
An IT-Driven Solution
Delivery of real-time information independent of the transaction. In the
mandi system, delivery, pricing, and sales happen simultaneously, thus
binding the farmer to an agent. E-Choupal was seen as a medium of
delivering critical market information independent of the mandi, thus
allowing the farmer an empowered choice of where and when to sell his
crop.
Risk analysis & challenges

{ Radical shifts in computing access will break community-based
business models.
{ The sanchalaks are ITCs partners in the community, and as their
power and numbers increase, there is a threat of unionization and
rent extraction.
{ The scope of the operation: the diversity of activities required of
every operative and the speed of expansion create real threats to
e
cient management.
{ If ITC fails to ful

ll the aspirations of farmers, they will look
elsewhere for satisfaction.
4.5 Strategies to be followed
(1). Adopt the ability to determine the grades of the crop(grains) in the
eld which commands the price premium for the crop.
e.g: Wheat
(2). Build the concept of traceability into the supply chain which will allow
to address the food safety concerns.
e.g: For perishables such as shrimps, which decays quickly with in short
19period of time, it need to de

ne standards of production and product
quality.
(3). Provide the service as market-place for commodities where ITC is not
a sole buyer. It will reduce the operational cost of e-Choupal such as
IT infrastructure and transaction costs.
e.g: co
ee grains.
(4). Marketing value added products and services to rural INDIA , in ad-
dition to marketing agri inputs, through e-Choupal system.
(5). Sourcing IT-enabled services from rural INDIA. Telemedicine, eco-
tourism , traditional medicine and traditional crafts are some of the
services that can be sourced from rural INDIA.
4.6 Conclusion
ITC e-Choupal, an innovative strategy which is elaborative and extensive
in rural markets sofar. Critical factors in the apparent success of the ven-
ture are ITCs extensive knowledge of agriculture, the e

ort ITC has made
to retain many aspects of the existing production system, including retain-
ing the integral importance of local partners, the companys commitment to
transparency, and the respect and fairness with which both farmers and local
partners are treated

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July 20, 2010

Industry: Automobiles Industry View: Overweight Company Update

ahindra & Mahindra Financial Services AGM

Speech by Mr. Anand Mahindra, Chairman - Mahindra & Mahindra Financial

Mumbai, July 23, 2007

I have great pleasure in welcoming you to the 17

Annual General Meeting of your

This growth in disbursements can be mainly attributed to your Company’s continued

manufactured by Maruti Udyog Limited, India’s leading passenger car manufacturer.

network to 403 branches as on 31

which was Rs. 844.6 crores for the year, ended 31

March 2007 as compared to Rs. 596.4

a healthy rate of 23 percent to Rs.132.9 crores from Rs.108.3 crores in 2005-06.

final) for the financial year ended 31.03.2007.

as against Rs.1088 crores disbursed in the corresponding period of F-07, registering a

growth of 46 per cent and maintaining its dominance.

Mahindra Insurance Brokers Limited:

from rural markets.

Rs.2.9 crore to Rs.3.8 crore during the same period.

To support the Group CSR initiatives announced on the occasion of the 60

initiatives that would specifically benefit economically and socially disadvantaged

sections of society. Your Company contributed Rs.102 lakhs to various charitable

share our success.

variety of goods and services.

middle-class population of India will be from rural areas by 2009-10.

to non-food items. According to the Consumer Expenditure Survey of the National

counterparts. This trend will further accelerate in the future.

development of national highways, rural roads and infrastructure, telephones, electricity

and micro-irrigation are having an impact.

Fifthly, while agriculture continues to be a dominant source of income in rural India,

which are also growing very rapidly. This is an important development.

penetration, an increasingly attractive proposition.

distribution network. During 2006-07, it has initiated the financing of two-wheelers. It

non-formal finance in the rural markets.

Directors and myself, I extend my grateful thank

Presenting India's first compact truck. A truck

Backed by Mahindra's unique experience, Gio comes to you as a trustworthy

[30 – 40 HP [HORSE POWER]

UNIQUE SELLING PROPOSITION

sions in any corporate boardroom strategy session. Adi Godrej, chairman of

sonal care to agri-foods, has no hesitation proclaiming, It is a myth that rural

Council for Applied Economic Research(NCAER), India's premier economic

in 1994-95, the average rural income has gone up to 63 to 64 per cent by

over Rs one million [$22,700] per annum is projected to go up to 21 million

by 2009-10 from four million in 2001-02. It will have a 22 to 23 per cent

the rural tilt is beginning to show. A study by the Chennai-based Francis

In total, that represents a market worth a whopping $27 billion. It is no

per cent. Coke is not the

imported a state-of-the art tomato processing plant from Italy to Punjab.

jump in productivity. Pepsi is now heralding a citrus plantation drive in the

creates income-generating capabilities for underprivileged rural women; im-

proves rural quality of life by spreading awareness of best practices in health

and hygiene; empowers the rural community by creating access to relevant

information through community portals and it also works with NGOs to

of them women, in 61,400 villages across 12 states. By the end of 2010,

Shakti aims to have 100,000 Shakti entrepreneurs covering 500,000 of India

an emphasis on rural marketing, consumption patterns are changing and it

signals a change in the regulatory environment. Vertical integration of the

food market from farm to

billion to $20.2 billion.

4billion mobile telephony major Bharti Tele- Ventures, is another unabashed

ag-bearer of the 'go rural' strategy. He is con

villages. In an interesting business diversi

legendary Rothschilds of Europe for a $51 million food processing venture