Agricultural pump makers to post 7-9% revenue growth in fiscal 2025 on resilient domestic demand

Agricultural pump makers to post 7-9% revenue growth in fiscal 2025 on resilient domestic demand

Agricultural (agri) pump makers will see healthy revenue growth of 7-9 per cent in fiscal 2025, said a report by CRISIL Ratings. This, it added, will be supported by resilient domestic demand for conventional pumps and a surge in offtake of solar pumps, largely under the PM Kusum Scheme. This will follow a likely revenue growth of 8-10 per cent in the current fiscal.

Operating margin, too, will remain healthy, at 12-13 per cent this fiscal and the next, riding on improving operating leverage and with prices of key raw materials remaining steady. This, along with a steady working capital cycle and moderate capital expenditure (capex), will support credit risk profiles.

Demand for agri pumps is largely resilient — a ‘good’ monsoon drives up farm incomes and pump purchases, buoyed by healthy kharif crops, while a ‘deficient’ monsoon necessitates the usage of pumps to irrigate rabi crops. This was also visible in the current fiscal wherein revenue growth has been volume-driven, triggered by higher sales of conventional pumps amidst uneven monsoons caused by the El-Nino conditions.

“Factoring normal monsoons in fiscal 2025, revenue growth for the industry will largely be volume driven. While conventional pumps may see stable growth at 6-8 per cent, solar pump volumes will grow at a faster clip of ~20 per cent on-year, supported by expected reduction in pump prices,” said Anuj Sethi, Senior Director, CRISIL Ratings.

The report further stated that solar pumps are expected to become cheaper in fiscal 2025, as manufacturers pass on lower prices of solar modules, a key raw material forming ~65-70 per cent of solar pump cost. This, combined with rising order flows under the PM KUSUM scheme which is set to close in March 2026; will drive the double-digit volume growth expectations for next fiscal.

Steady growth in volumes of conventional pumps coupled with price of its key raw materials — pig iron, steel and copper (forming ~70-75 per cent of total cost) remaining range bound will keep operating profitability healthy at 12-13 per cent this fiscal and the next (~12 per cent in fiscal 2023), CRISIL Ratings said.

“Conventional pump makers are operating at 65-70 per cent of capacity, and solar pump makers at ~40 per cent, obviating the need for any large capex. This, along with healthy cash flow and stable working capital cycle, driven by timely receivables and moderate inventory, will keep credit profiles in the industry stable,” said Aditya Jhaver, Director, CRISIL Ratings.

Debt metrics will remain robust, with interest coverage and gearing expected at 18-20 times and less than 0.10 times, respectively, this fiscal and the next, slightly better than in fiscal 2023. With this in view, rainfall and weather patterns, and geopolitical risks affecting key raw material prices will bear watching.