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S. Muralidhar

SHAREHOLDERS of Punjab Tractors Ltd (PTL) may continue to retain the stock in their portfolio. At Rs 127, the stock has gained marginally over the last week. During the last ten months, the PTL stock's performance was largely governed by the Punjab State government's attempt at divesting its 23.5 per cent stake in the company. The disinvestment process is at an advanced stage and a number of bidders have been short-listed. The sale is expected to be finalised later this year and a change in the company's management may take place. Shareholders can stay invested until a clear picture emerges. Avoid fresh exposures.

PTL's financial performance during 2002-03 was affected by the ongoing drought. For the nine months ended December 2002, the company reported a 37.5 per cent fall in operating revenues and a 58 per cent fall in net profit. The earnings per share (not annualised) for the period was Rs 5.7 compared to Rs 13.7 a year ago.

However, though tractor manufacturers such as PTL, Mahindra and Mahindra and the others are bracing themselves for another tough year ahead, with the monsoon's precipitation level projected at a reasonable 96 per cent of the normal spread, the expectation is that in at least six states, tractor sales will gather speed in 2003-04.

There is a lot of pent up demand that is expected from a number of northern and central Indian states. The revival would have started from last year had the monsoon been normal. However, since that did not happen, the possibility of a pick up in demand is strong this year, despite the meteorological department's slightly bleak projection for this year's monsoons.

Tractor industry sales began to slide from 1998. Last year, industry-wide sales was estimated to have fallen at a rate of about 15 per cent, compared to a 12 per cent fall in 2001-02 and a nine per cent fall in 2000-01. PTL had sold over 22,300 tractors during the first 11 months of last year. The company continues to hold on to the number two slot in the tractor industry.

Apart from the debilitating effect of the drought on farm incomes and the consequent decline in tractor sales, the major tractor manufacturers have also faced a lower offtake due to the pile up of inventory with their dealers. Higher wholesale trade bookings by some companies in the previous years meant that many companies have had to contend with a substantial erosion of sales this year. Dealer-level sales was reflected in the books as sales and the process of reducing dealer inventory last fiscal year has meant that dealer dispatches for companies such as PTL was that much lower during 2002-03.

However, this could turn out to be beneficial for these companies during the current fiscal. PTL has also managed to reduce its inventory pile up and the likelihood of starting off on a clean slate makes the mild revival in sales this year look more possible.

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