Agricultural pump makers to see 7-9% revenue growth next fiscal: Crisil

Agricultural pump makers are expected to see a healthy revenue growth of 7-9 per cent in the fiscal year 2024-25, supported by resilient domestic demand for conventional pumps and a surge in demand for solar pumps under the PM Kusum Scheme, according to Crisil Ratings.

In the current financial year 2023-24, they are likely to clock a revenue growth of 8-10 per cent.

According to the rating agency, the operating margin of agricultural pump makers, too, will remain healthy, at 12-13 per cent this fiscal year and the next, attributable to steady key raw materials.

"This, along with steady working capital cycle and moderate capital expenditure (capex), will support credit risk profiles," the rating agency said in a report on Wednesday.

The agricultural pump sector is dominated by conventional pumps (grid-connected and diesel pumps) which have a 90 per cent share, with the remaining comprising solar pumps.

On the demand side, it said it 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 particularly 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 weather 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.

Further, the rating agency noted solar pumps are expected to become cheaper in 2024-25 as manufacturers pass on lower prices of solar modules, a key raw material forming 65-70 per cent of solar pump cost.

Besides, rising order flows under the PM Kusum scheme, which is set to close in March 2026, will drive double-digit volume growth expectations for the next fiscal.

The PM Kusum scheme has three components, targeted to achieve a solar power capacity addition of 30.8 gigawatts by March 2026 with total central financial support of Rs 34,422 crore.

The main objectives of the Pradhan Mantri Kisan Urja Suraksha evam Utthaan Mahabhiyan (PM-KUSUM) include de-dieselisation of the farm sector, providing water and energy security to farmers, increasing the income of farmers and curbing environmental pollution.