Vanraj Mini-Tractors: Is Small Beautiful? - Seek Scholar |

ASIAN CASE RESEARCH JOURNAL, VOL. 12, ISSUE 2, 141–160 (2008)

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The author is a doctoral can-didate in marketing at the In-stitute of Rural Management Anand (IRMA). He would like to express his gratitude to J. H. Trivedi, J. D. Patel, and Pragnesh Patel for their unstinted support and co-operation in data collection. He would like to thank Pro-fessor Debiprasa Mishra for his guidance throughout the case writing and Professor Arvind Gupta for his helpful inputs to the teaching note. The intention of this case is to portray the dilemma faced by the decision maker and not to judge correct or incorrect handling of the situation.

Please address all correspon- dence to Pratik Modi, Doc-toral Researcher, Quarter No: C–28, IRMA Campus, In- stitute of Rural Management, Anand (IRMA), Anand – 388 001, Gujarat, India. E-mail: [email protected].

© 2008 by World Scientific Publishing Co.

Vanraj Mini-Tractors: Is Small Beautiful?

“We are almost ready for the commercial production of 10 horsepower Vanraj mini-tractors,” said Jagdip Trivedi, proudly showing the Central Motor Vehicle Rules (CMVR) compliance certification from the Central Farm Machinery Testing and Training Institute at Budhni in Madhya Pradesh. CMVR certification permits commercial sales and registration of vehicles with the Regional Transport Offices (RTOs) in India. Trivedi had sent registration circular to all district RTOs in the states of Gujarat, Madhya Pradesh, Maharashtra, and Uttar Pradesh, as he was planning to roll out this wonder machine soon. Trivedi was one of the three partners in M/s Pramal Farmatics Pvt. Ltd., which was ready to manufacture and market 10 horsepower (HP) mini-tractors under the brand name ‘Vanraj’.

“My immediate concern is to select the most appro-priate market segment for Vanraj. We are a small-scale industry and we have to be extremely productive in our marketing efforts,” said Trivedi. A study conducted by some management students under the guidance of Trivedi identified four market segments for the Vanraj tractors: small and marginal farmers, large farmers, industries, and horticulture farmers. Marginal and small farmers were large in numbers but no big player currently served this segment. The level of farm mechanization was extremely low in the segment as these farmers continued subsistence farming using bullocks for tilling and other agricultural operations. Large

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farmersa, though small in number, were a lucrative market segment. They were relatively better off and had higher level of farm mechanization. All the big players in the tractor market were focused on serving this market segment. Vanraj 10 HP mini-tractor, with a few modifications, could also be used in material handling operations in industries, airports, and municipal corporations. Area under horticulture farming was increasing, especially in Gujarat and Maharashtra (see Annex 1 for area under horticulture farming). Southern and central parts of Gujarat had a high concentration of orchard owners and horticulture farmers. Similarly, Maharashtra also had a few concentrated pockets of horticulture farming. Generally, horticulture farmers had large landholdings, and thus formed market niche within the market segment of large farmers.

On average, Gujarat, Madhya Pradesh, Maharashtra, and Uttar Pradesh accounted for annual sales of 17345, 28443, 15288, and 54392 units of big tractorsb, respectively. However, no big company in India ever tried to explore the potential of less than 20 HP mini-tractors that many experts opined were ideal for marginal and small farmersc. Trivedi was convinced that Vanraj mini-tractor was the product that small and marginal farmers in India needed. “It will prove to be a boon for small farmers as Vanraj addresses most of their problems, which no other big tractor does,” said Trivedi. Statistics favored his arguments. The level of farm mechanization in India was quite low, especially the large number of small and marginal farmers that accounted for 82% of the total landholdings did not own tractors (see Annex 2 for state-wise number of operational holdings by major-size groups).

aFarmers with more than 4 hectares of landholding are referred to as large farmers throughout this case.bMore than 30-horsepower tractors are referred to as big tractors and less than 20-horsepower tractors are referred to as mini-tractors throughout this case.cFarmers are classified based on their landholding. Marginal farmers owned less than 1 hectare of land. Small farmers owned between 1 to 2 hectares of land. Semi-medium farmers owned 2 to 4 hectares of land. Medium and large farmers owned more than 4 hectares of land.

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VANRAJ MINI-TRACTORS 143

DEVELOPMENT OF VANRAJ MINI-TRACTOR

Vanraj 10 HP Mini-Tractor was an innovation from a small farmer, Bhanjibhai Nanjibhai Mathukia of Kalawad village in Junagath district of Gujarat. Bhanjibhai and his three brothers had been sharing a tractor, which was not enough to meet their individual farming requirements. He could not use bullocks for long working hours as the village had hilly terrain. Moreover, there was a constant fear of lions or leopards from nearby Gir forest attacking his bullocks. He got inspiration from the design of ‘Chhakdo’, a motorcycle converted into a three-wheeler taxi for local transport in and around Rajkotd town in Gujarat, and decided to make a three-wheeler tractor himself. He bought a junk jeep and mounted a 10 HP engine made in a local factory in Rajkot town. The iterative process of innovation went on for a few months during which he tried out many ideas and incorporated many benefits in the design of the tractor.

Later, this innovation was spotted and taken up for commercialization by the Grassroots Innovations Augmentation Network (GIAN) and the Society for Research and Initiatives for Sustainable Technologies and Institutions (SRISTI). GIAN and SRISTI are part of the Honey Bee Network set up by Professor Anil Gupta of the Indian Institute of Management, Ahmedabad (IIMA) with an objective to pro- mote traditional knowledge and grassroots innovations. The Student Organization for Managerial Assistance (SOMA), which is a students-run group of IIMA for providing con-sultancy services to NGOs and small businesses, conducted the feasibility study for commercialization of the tractor. The study factored in considerations such as soil tape and small landholding size in the four states, and found the mini-tractor commercially viable. GIAN brought funding for the project from ‘Technopreneur Promotion Program’ (TePP) scheme of the Department of Scientific and Industrial Research. They hired a reputed technical consultant to improve the technology and National Institute of Design, Ahmedabad to provide design inputs for improving the aesthetics without changing its basic value propositions.

dRajkot is a town in Saurashtra region (south-west) of Gujarat.

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TECHNOLOGY PURCHASE AND REFINEMENT

Three technopreneurs: Jagdip Trivedi, Jayantibhai Patel, and Pragnesh Patel, acquired the technology in October 2004 under the technology transfer agreement that gave them exclusive rights to manufacture and market 10 HP tractors in Gujarat, Madhya Pradesh, Maharashtra, and Uttar Pradesh under the brand name ‘Vanraj’e. They had long years of technical and professional work experience before floating a small-scale company, M/s Pramal Farmatics (P) Ltd, with a paid-up capital of 1.25 million rupees to manufacture and market the Vanraj brand of mini-tractors. The company’s facilities were set up in the industrial estate of Vittal Udyognagarf, near Anand town in central Gujarat region. The deal was valued at 10 million rupees. It incorporated an upfront transfer fees of 0.3 million rupees, 2.25% sales linked royalty for 5 years or on the first 2500 tractors, whichever was earlier, and exclusive dealership to the innovator for two districts in Gujarat.

M/s Pramal Farmatics, with the help of a technical consultant, further refined the technology to make it suitable for commercial production and to comply with regulatory requirements. Three prototypes were prepared which underwent one and a half years of extensive field trials in farms. Feedback from the field trials were used to plug-in the lacunae in the technology until satisfactory results were achieved. Finally, the tractor was ready for not only agricultural but also transportation purposes. The tractor had a hauling capacity of 2 tonnes of trailer load.

Vanraj 10 HP tractor was a versatile technology. It required some modifications before it could be used in the material handling applications in industries, warehouses, construction work, and airports. Municipal corporations

eVanraj refers to the lion and translates as ‘The King of the Forest’.fUnder the Industrial Development Policy, specialized agencies of the sState governments set up industrial estates with myriad basic facilities. The Gujarat Industrial Development Corporation (GIDC) was the agency in the State of Gujarat. The Vittal Udyognagar Industrial Estate was one such estate set up by the GIDC.

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could also use it on narrow streets of cities and towns for waste collection and disposal services. However, this segment required changes in the overall strategy of M/s Pramal Farmatics as the material-handling industry had completely different industry structure and competitive environment than that of the tractor industry. For example, the material handling equipment required business-to-business selling, whereas tractors were sold directly to farmers.

ADVANTAGES OF VANRAJ

Advantage over Big Tractors

The biggest advantage of Vanraj was its affordable price even for small farmers. Vanraj and other big tractors had equal lifespan of 8 to 9 years, but Vanraj could perform almost all the functions of a big tractor at lower costs (see Annex 3 for farming operations and fuel consumption figures). On average, Vanraj consumed only 1.5 litres of dieselg per hour, whereas the big tractors consumed around 4 litres of diesel per hour. A small farmer taking two crops a year would use this tractor, approximately, for at least 180 days a year. At the rate of 5 hours of work in a day, this tractor would be utilized for about 900 to 1000 hours per year, which could result in huge savings on diesel cost for the farmers. Tractors between 30 and 50 HP capacity were priced anywhere between 0.24 million to 0.4 million rupees depending on the size, features, and brand of the tractor. An average 35 HP tractor would cost around 0.25 million rupees and an average 50 HP tractor would cost 0.35 million rupees. Their lifetime service, repairs, and maintenance costs would vary from 10% to 15% of the selling price.

Vanraj was a “single piece casting” tractor with simple design that helped in easy repairs and maintenance (see Annex 4 for technical specification). Even a local mechanic could repair and service the tractor. Its lifetime service,

gDiesel costs around 40 rupees a litre in India.

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repairs, and maintenance costs were estimated anywhere between 10% and 15% of its selling price. Smaller wheelbase and turning radius offered better maneuverability and control in farming operations. Vanraj could reach small corners of land inaccessible to big tractors, which made it ideal for small farmers. Vanraj also had an adjustable wheelbase that suited interculture operation in various crops. Interculture operations are carried out to remove weeds and create soil mulch that would conserve soil moisture. When done manually, about 300 to 500 man-hours are required to cover 1 hectare of land. Vanraj was the first tractor with “three-wheel convertible feature” for which M/s Pramal Farmatics had applied for patent in the US. Three-wheel convertibility is a useful option for farmers, especially in interculture operation in cash crops such as cotton, groundnut, sugarcane, banana, and other horticulture crops. Vanraj could also be used for spraying pesticides, fertilizers, and line marking in orchards. All the farming implements, albeit of smaller size, could be used with Vanraj. M/s Pramal Farmatics intended to manufacture and market such small size farm implements as well. They had already developed one such farming implement called “rotavator” for mini-tractors, which was not available so far. Vanraj was the first mini-tractor with tested Power Take-Off (PTO) point, which was an extremely useful feature in a tractor. Power take-off point enables an alternate use of a tractor’s engine as a power generator. Farmers could take-off power from the tractor to run rotavator, thresher, water pump for irrigation, floor mill, etc., from the PTO point.

Advantage over Other Mini-tractors

There were three other Gujarat based brands of 10 HP mini-tractors: Field Marshal, Trishul, and Captain. These were assembled tractors with chassis mounted engine, priced at about 0.17 million rupees. By the very nature of its work, a tractor bears a lot of vibrations and shocks in farms, which might create problems such as loosening of fasteners, misalignment of components, higher maintenance cost, and

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greater chances of failure in assembled tractors. Vanraj was costlier than these brands of mini-tractors, but it offered better features. Vanraj was the first mini-tractor with a tested PTO point that had variable power take-off speed with gear selection. It also had a three-wheel convertible feature.

A few companies used to import components of mini-tractors from China. They would assemble and sold them at about 0.1 million rupees in India. China had a very large domestic market for small and mini-tractors. These Chinese make mini-tractors worked well in cooler Chinese environment; however, they would often break down due to problems such as overheating, belt failure, clutch failure, etc., in hostile Indian conditions. Vanraj was a geared tractor that had worked well in trying conditions during the field tests.

Advantage over Bullocks

Vanraj could prove to be a viable option against bullocks. A pair of bullocks, on average, costs around 25,000 to 30,000 rupees. However, bullocks require tending by a person for their fodder, cleaning, and shed maintenance work throughout the year, even during seasons when bullocks were not in use. A pair of bullocks consumes fodder worth 15,000 to 20,000 rupees annually. Bullocks can be used for agricultural activities after they reach 3 years of age. They have useful life span of around 8 to 10 years after which they are sold off to slaughterhouses, or remain with owner farmers as liabilities. Over and above its functional superiority and versatility of a tractor, it also offers a lot more convenience to farmers.

TRACTORIZATION IN INDIA

India had the third largest gross cropped area after the US and Russia, but unlike in the latter two countries, agricultural landholdings were highly fragmented in India. Manual labor, subsistence farming, and consequent low

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productivity characterized Indian agriculture. Nevertheless, Indian farmers were quick to realize the importance of tractorization as India reached the mark of 1 million tractors in the year 1989, and 2.5 million tractors in the year 2000. Farm mechanization played an important role in raising the total agricultural production, productivity, and profitability. India reached foodgrains production figure of 212 million tonnes in the year 2001–02 from being a food deficit nation in the 1960s. By 2020, the requirement for foodgrains is expected to be around 325 million tonnes from the ever decreasing per capita of arable land. Greater agricultural productivity and farm mechanization are necessary to reach that level of production.

Farm mechanization had a positive impact on farmers as it improved their economic conditions and re-duced drudgery. Researchh showed that tractorization did not create unemployment in India because the tractors replaced the bullock power and not human labor. It was believed that land fragmentation and consequently smaller farm size would render tractors uneconomical for the Indian farmers, but the same research also concluded that the size of landholding did not inhibit the use of tractors. Instead, the non-use of tractors was on account of the inavailability of the right kind of tractors that matched farmers’ needs. Average land holding in Indian agriculture had declined from 2.30 hectares in 1971–71 to 1.57 hectares in 1990–91, but the horsepower in tractors continued to increase. Big tractors were not viable for small and marginal farmers with average landholding size of 0.4 hectare and 1.4 hectares, respectively.

Farm mechanization was faster in northern India than in any other parts of the country. Historically, Punjab, Uttar Pradesh, and Haryana accounted for a dominant share of the total tractor sales in India. The soil type in these states was alluvial, and thus required lower horsepower tractor for tilling and other farming activities. Southern and western Indian states, including Gujarat, Maharashtra, and Madhya

hMaggu, A. (1982), “Tractorization in India: Dispelling some myths,” Vikalpa 7(1): 45–52.

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Pradesh, had harder soil types — laterite and black soil — which required higher horsepower tractors. Tractor densities in western and southern India were gradually increasing, and future sales volumes were expected to come from these states.

INDUSTRY OVERVIEW

Tractor manufacturing in India started in 1961 with aggregate annual licensed capacity to manufacture 11,000 tractors. Tractor industry had since grown to 0.25 million units in the years 2004–05. It registered a blistering growth of nearly 30% over the previous years, 2003–04. India emerged as the world’s largest market for tractors, and the Indian tractor industry emerged as the second largest manufacturer of tractors in the world. Currently, the size of the Indian tractor industry was estimated at 6.5 billion rupees. India contributed about 30%, the largest in the world, to the global tractor production which was estimated at 0.8 million units per annum. The growth potential was still immense as India had only eight tractors per thousand hectares of land, whereas the world average was 19 tractors per thousand hectares of land. Industry experts believed that with the increase in the total irrigated area, demand for tractors would shoot up dramatically. India was also emerging as a major destination for components outsourcing and an export hub for Indian and multinational tractor companies.

The tractor industry was one of the most com-petitive industries in India. It comprised 12 major national players, 4 major multinationals, a few major assemblers of Chinese-made tractors, and numerous small-scale firms who manufactured or assembled the small tractors to suit local requirements. None of the big players, national or multinational, revealed their interest in mini-tractor segment. The top five players — M&M, TAFE, Punjab Tractors, Sonalika, and Escorts — together accounted for 85% of the total market. Recently, Tractor And Farm Equipment (TAFE) acquired Eicher to get a better footing in the 20 to 30 HP

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segment. TAFE was strong in south India, whereas Eicher had strong presence in north India. As a result, TAFE became the second largest player in the market displacing Punjab Tractors. Mahindra & Mahindra was the market leader with 26.5% market share and strong presence in western India. It had earned the distinction of being the fourth largest tractor company in the world, and enjoyed 4% market share in the US. Despite the robust industry growth in recent years, many big players suffered from low capacity utilization at about 50%. It had created downward pressure on their margins leading to an increased rivalry in the market. Raw material cost of steel, which was a key component, had gone up in recent times but manufacturers could not increase the prices of tractors in the buyer’s market. Many companies had introduced promotional schemes such as exchange of old tractors, longer credit period, credit sales etc., to clear up inventories.

MARKET SEGMENTS

Traditionally, tractor companies had used engine horsepower as basis for segmenting the market and designing their product portfolio. Horsepower was central to the new product development process. Broadly, the tractor market had five segments. Less than 20 horsepower was considered mini-tractor segment, which contributed less than 1% to the total tractor sales in India. Only recently, HMT, one of the large tractor manufacturers in India, had expressed its desire to enter mini-tractor segment with 18–20 HP tractor priced at around 0.18 to 0.2 million rupees. Tractors between 21 and 30 HP represented the small tractor segment, which contributed 26% to the total tractor sales. Less than 30 HP tractors received government subsidy of 30,000 rupees per tractor under the program to modernize agriculture. Eicher was the biggest beneficiary of the scheme, as a dominant portion of its total sales came from this segment. The market segment for medium sized tractors between 31 and 40 HP was the largest. It contributed 55% to the total tractor sales in India. Large tractors between 41 and 50 HP

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accounted for 15% share in the total sales. Big farmers of Punjab and Haryana were the main buyers in this segment. Punjab Tractors and HMT dominated the high-end market segment (more than 50 HP tractors), which accounted for just 4.5% of the total tractor sales in India. Multinationals such as New Holland, John Deere, and Renault focused mainly on this high-end market segment, which was also the fastest growing (see Annex 5 for segment-wise growth rate and distribution of sales). On average, tractors in the US and in European countries had more than 100 HP capacity.

DRIVERS OF TRACTOR DEMAND

Commercialization of agriculture required a higher level of farm mechanization. The fortune of the tractor industry was heavily dependent on agriculture. Thus, tractor sales were affected by all the factors that had a bearing on agriculture. The Indian agriculture was largely dependent on good monsoon, and the tractor sales would take a severe beating during a drought period. The level of agricultural production and Minimum Support Price (MSP) declared by the Government influenced rural prosperity, and con-sequently, tractor sales.

Horsepower was one of the most important con-siderations in tractor purchase. A farmer considered other factors such as, price, fuel efficiency, availability of spares, easy maintenance, and tractor’s compatibility with various farming implements when purchasing a tractor. However, it would be wrong to assume that farmers used tractors only for agricultural purposes. Tractors were used for rural transportation and hauling of agricultural produce to the markets. Tractors were a symbol of power, masculinity, prosperity, and a sign of having arrived for the Indian farmers.

The ease in availing the tractor finance was the most important factor for the spurt in tractor sales in recent years. A small farmer with as little as 3 acres of land could avail tractor finance from banks, which led to not only increased tractor demand but also a higher default rate on such loans.

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The retail financing of tractors was a lucrative business opportunity for many banks, and they were forthcoming in financing tractor sales. The Government considered such loans as part of the banks’ obligation to provide credit to the priority sector, and refinanced them at cheaper rates. Nearly 90% of the tractors were sold on credit. Many studies had reported gross underutilization of tractors in India, even below their break-even points, leading to a higher default rate. Higher horsepower tractors required more hours of usage per year than lower horsepower tractors to achieve break-even. A studyi reported that tractors were grossly underutilized in India, but their utilization seemed to increase with the farm size. Farmers were renting out their tractors for farm and non-farm activities to increase capacity utilization and earn extra income. The tractor hiring charges varied from 200 rupees to 300 rupees per hour but the cost of diesel was borne by the owner of the tractor. Such custom work accounted for more than half of the total utilization of the tractor. Earning potential in custom hiring of tractors was also driving farmers to purchase higher horsepower tractors.

THE DILEMMA

Trivedi believed that small and marginal farmers were the most appropriate target market for Vanraj, where it could present an alternative to bullocks. However, the other two partners were not fully convinced. They wanted Trivedi to give an elaborate thought to the issue before targeting any particular market segment. M/s Pramal Farmatics planned to sell Vanraj at 0.19 million rupees or less, almost half the price of a big tractor, provided they outsource certain components in bulk and derived economies of scale. Given the market potential, as portrayed by Trivedi, it seemed that the company had kept conservative estimates of sales and revenue growth (see Annex 6 for the cost of production and Annex 7 for the projected profit and loss account).

iBalishter and N. P. Singh (1997), “Economics of tractor use in agriculture,” Productivity 38 (3).

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Trivedi was confident, “There are at least two million small and marginal farmers in Gujarat, let alone the other three states where I can sell. I am offering the farmers a product that is affordable, fuel efficient, and meets all their needs. Vanraj’s competition is with bullocks, and farmers will find Vanraj cheaper than using bullocks.” He chuckled, and with a twinkle in his eyes said, “You must have heard that saying, ‘small is beautiful’. Isn’t it?” His last sentence echoed the perennial conundrum between “small is beautiful” and “the bigger the better”.

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Annex 2. State-wise Number of Operational Holdings by Major-size Groups (figures in ‘000)

States Marginal Farmers Small Farmers Large Farmers

Gujarat 1034 1058 1692

Madhya Pradesh 3878 2312 3413

Maharashtra 4266 3176 3211

Uttar Pradesh 16237 3135 2156

Source: Agricultural Census Division, Ministry of Agriculture, New Delhi.

Annex 1. Area under Horticulture Farming

States Area (in ‘000 ha) under Fruits Area (in ‘000 ha) under Vegetables

1991–92 2001–02 1991–92 2001–02

Maharashtra 256.1 582.8 241.1 402.4

Gujarat 84.5 149.0 114.6 232.2

Uttar Pradesh 303.2 288.3 576.7 777.9

Madhya Pradesh 64.7 46.6 176.4 136.4

Source: H. P. Singh, Prem Nath, O. P. Dutta, and M. Sudha (2004), Horticulture Development, State of the Indian Farmer: A millennium study, vol. 11.

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Annex 3. Agricultural Operations and Fuel Consumption

Operation Average Coverage Average Diesel Consumption

Deep plough (with one big blade)

7 hrs for one acre 2 litres/hr

Opening furrow in the field (plough with three blades)

2 hrs for one acre 1.5 litres/hr

Interculturing (cultivator with 7 tine)

1 hr for one acre 1 litre/hr

Harrowing (with heavy blade) 2 hrs for one acre 1 litre/hr

Harrowing (with light blade) 1 hr for one acre 0.75 litre/hr

Sowing operation (with automatic seed cum fertilizer drill — 5 pieces)

1 hr for one acre 0.75 litre/hr

Transportation (with 2 tonnes load on road)

0.5 litre/hr

Rotavator 5 hrs for one acre 2 litres/hrs

Water centrifugal pump (2.5 × 2.5)

Thrasher

Generator set (5 KVA)

Source: Information provided by M/s Pramal Farmatics Pvt. Ltd.

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Annex 4. Technical Specifications of Vanraj

Weight of Tractor

• Without Standard Ballast: 1000 kg • With Standard Ballast: 1240 kg

Tractor Dimensions

• Length: 2350 mm • Width: 975 mm • Height: 1805 mm • Ground Clearance: 200 mm • Wheel Base: 1625 mm

Engine

• Maker: FieldMarshal • Type: Four stroke direct injection • Horse Power: 9.5 HP • Bore/Stroke: 85/110 mm • No. of Cylinders: One • Capacity: 625 CC • Cooling System: Air cooled • Air Cleaner: Oil bath type with pre-cleaner • Fuel Equipment: Plunger type fuel pump • Fuel Consumption: approximately 1.5 litres per hour

Hydraulic System

• Method to Drive Hydraulic Pump: Drive through gears • Output of Hydraulic Pump: 14 cc/rev (14 LPM @ 1000 rpm) • Method to Operate 3 Point Linkage: Internal cylinder with arm operation

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Transmission

• Clutch: Single dry friction plate • Gear Box: 6 Forward–2 Reverse • Foot Brakes: Dry disc type mechanical brake • Parking Brake: Mechanical pawl arrangement • Steering: Gear rocker shaft • Minimum Turning Radius with Brake: 2700 mm • Minimum Turning Radius without Brake: 3500 mm

Road Speed (in kmph)

Gear High Low 1st 11.4 3.95 2nd 23.6 8.20 3rd 36 12.46 Reverse 9.6 3.32

Power Take Off (P.T.O.)

• Hi Selection RPM @ 2600 RPM: 994 RPM • Lo Selection RPM @ 2600 RPM: 347 RPM • PTO Power @ 2600 RPM: 7 HP (5.3 KW)

Tyres

• Front Tyres: 5.20 × 14–6 ply • Rear Tyres: 8.00 × 18–4 ply

Electricals

• Battery: 12 V–75 AH • Starter Motor: 12 V Solenoid operated • Alternator: 12 V Inbuilt voltage regulator • Lights: 12 V

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Oil Capacities

• Diesel Tank: 20 litres • Engine Sump: 1.8 litres • Main Gear Box and Differential: 30 litres • Steering Box: 500 ml • Air Cleaner: 150 ml

Trailer

• Pay Load: 1 ton (can carry up to 2 tonnes on road) • Single Axle Trailer Size: 8 ft x 5 ft x 1 ft • Tyre Size: 6.00 x 16–6 ply


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Annex 5. Segment-wise Growth Rate and Distribution of Sales (figures for growth in 1999–2000 over 1998–99)

Category Segment Growth Rate

(in %)

Segment-wiseSales Distribution

(in %)

< 20 HP −0.37 0.5

21–30 HP 15.22 25

31–40 HP −2.90 55

41–50 HP −5.88 15

> 50 HP 17.88 4.5

Source: Business Today, September 21, 2000, page 42.

Annex 6. Cost of Production (Rs. in Lakhs)

Sr.No. Description 1st

Year2nd Year

3rd Year

4th Year

5th Year

6th Year

7th Year

1 Installed Capacity 600 600 600 600 600 600 600

2 Capacity Utilization 50% 55% 60% 65% 70% 75% 80%

3 Actual Production 300 330 360 390 420 450 480

4 Raw Material Cost Per Tractor @ Rs.155,000/- 465.00 511.50 558.00 604.50 651.00 697.50 744.00

5 Salary and Wages 5.04 6.00 7.20 7.92 8.76 9.60 10.80

6 Electricity 1.20 1.44 1.80 2.04 2.40 2.64 3.00

7 Consumables 0.60 0.60 0.60 0.72 0.72 0.84 0.96

Total 471.84 519.54 567.60 615.18 662.88 710.58 758.76


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Annex 7. Projected Profitability Statement (Rs. in Lakhs)

Sr.No. Item 1st

Year2nd Year

3rd Year

4th Year

5th Year

6th Year

7th Year

1 Sales Realization 570.00 627.00 684.00 741.00 798.00 855.00 912.00

2 Less Sales Commission @ 25000/- 75.00 82.50 90.00 97.50 105.00 112.50 120.00

3 Net Sales Realization 495.00 544.50 594.00 643.50 693.00 742.50 792.00

4 Cost of Production 471.84 519.54 567.60 615.18 662.88 710.58 758.76

5 Gross Margin 23.16 24.96 26.40 28.32 30.12 31.92 33.24

6 Overhead Expenses 3.96 4.32 4.80 5.28 5.76 6.36 7.20

7 Sales Expense (e.g. training etc.) 1.44 1.80 2.16 2.40 2.64 3.00 3.30

8 Pre Operative and Conti. Expn. 1.40 1.40 1.40 1.40 1.40 0.00 0.00

9 Contribution 16.36 17.44 18.04 19.24 20.32 22.56 22.74

10 Depreciation 1.43 1.36 1.31 1.26 1.22 1.19 1.16

11 Profit before In. and Tax 14.93 16.08 16.73 17.98 19.10 21.37 21.58

12 Interest 4.80 4.56 4.32 4.08 3.84 3.60 3.48

13 Profit before Tax 10.13 11.52 12.41 13.90 15.26 17.77 18.10

14 Income Tax @ 33% 3.34 3.80 4.10 4.59 5.04 5.86 5.97

15 Profit after Tax 6.79 7.72 8.31 9.31 10.22 11.91 12.13

16 Dividend 2.50 2.50 2.50 3.12 3.12 3.75 3.75

17 Profit after Dividend 4.29 5.22 5.81 6.19 7.10 8.16 8.38

18 Add: Depreciation 1.43 1.36 1.31 1.26 1.22 1.19 1.16

19 Pre Operative and Conti. Expn. Written Off 1.40 1.40 1.40 1.40 1.40

20 Net Cash Accrual 7.12 7.98 8.52 8.85 9.72 9.35 9.54


00103.indd 160 2/17/2009 10:47:44 AM

Vanraj Mini-Tractors: Is Small Beautiful? - Seek Scholar |

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