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In the fiscal year 2025, agricultural pump manufacturers are poised for substantial revenue growth between 7-9%, buoyed by steadfast domestic demand for traditional pumps and an upswing in the adoption of solar pumps, predominantly driven by the PM Kusum Scheme. This positive trajectory follows an anticipated revenue increase of 8-10% in the current fiscal period.
CRISIL Ratings indicates that operating margins are expected to maintain robust figures at 12-13% for both the ongoing fiscal year and the subsequent one. This optimistic outlook is attributed to improving operating leverage and the stability of prices for essential raw materials. The credit risk profiles of the sector are further bolstered by a consistent working capital cycle and moderate capital expenditure.
An analysis of major agri pump makers, constituting nearly 55% of the sector’s estimated revenue of approximately Rs 6,000 crore for fiscal 2024, reveals the dominance of conventional pumps, holding a substantial 90% share, with the remaining portion consisting of solar pumps.
Despite the sector being predominantly driven by conventional pumps, the demand for agri pumps exhibits resilience. A ‘good’ monsoon propels farm incomes and pump purchases, while a ‘deficient’ monsoon necessitates increased pump usage for rabi crops irrigation. The revenue growth in the current fiscal is characterized as volume-driven, spurred by heightened sales of conventional pumps amid erratic monsoons linked to El-Nino conditions.
Anuj Sethi, Senior Director at CRISIL Ratings, anticipates that in fiscal 2025, revenue growth will primarily hinge on volume, with stable growth of 6-8% for conventional pumps and a robust 20% year-on-year growth for solar pumps, driven by expected reductions in pump prices.
The expected affordability of solar pumps in fiscal 2025, as manufacturers pass on reduced prices of solar modules (constituting 65-70% of solar pump costs), coupled with increasing order flows under the closing PM KUSUM scheme in March 2026, is predicted to fuel double-digit volume growth in the coming fiscal year.
Aditya Jhaver, Director at CRISIL Ratings, notes that the steady growth in conventional pump volumes, coupled with stable prices of key raw materials (pig iron, steel, and copper), is likely to maintain operating profitability at a healthy 12-13% in both the current fiscal year and the subsequent one.
Moreover, debt metrics are expected to remain robust, with interest coverage and gearing projected at 18-20 times and less than 0.10 times, respectively, for this fiscal year and the next—a slightly improved outlook compared to fiscal 2023.
However, the report underlines the need for vigilance regarding rainfall patterns, weather conditions, and geopolitical risks affecting key raw material prices. Overall, the creditworthiness and stability of the agri pump industry appear well-supported by current market trends and financial indicators, as highlighted by CRISIL Ratings. |
