Mahindra & Mahindra Ltd launched a tractor rental services business on Monday, as two consecutive droughts in India damped farm equipment sales.
India's biggest tractor maker said it will initially invest Rs 10 crore in the new venture, named Trringo, which will have an app for farmers to hire equipment.
Trringo will be launched in five states â€“ Maharashtra, Karnataka, Gujarat, Madhya Pradesh and Rajasthan â€“ this year. "The plan is to go in one state by June and then ramp up to four more by August," said Rajesh Jejurikar, president and chief executive of farm equipment and two wheelers at M&M.
Mahindra's tractor sales have been under pressure for the past many months as poor rainfall over the past two years hurt farmers' incomes. The company sold 1,98,909 tractors in the 11 months through February, down 10 per cent from a year earlier. This came after a 13 per cent drop in sales to 2,34,023 units in the fiscal year through March 2015, according to data available on its website.
The company said that Trringo will initially function on a franchise model where it will provide new tractors and equipment that will rented out by its partners. The company will set up 80 franchises and 160 hubs for operations.
This will be supplemented by an aggregator model where large farmers who own high-end equipment can rent out their assets. Trringo would connect the asset owner to the user through the app. Jejurikar said Trringo will receive a fixed fee and a variable margin for the services.
The company will control the rental rates through the app. The rates may vary. "It all depends on the soil conditions. When there is hard soil then the requirement is different. For different engagements there are different rental rates," said Arvind Kumar, who will be the business head for Trringo.
The franchisees can deploy non-Mahindra tractors as well. "It's a brand-agnostic model," said Jejurikar.