Exciting times for Tractors India as coal sector reforms play out: Sumit Mazumder, CMD

NEW DELHI: Stocks of Tractors India (TIL) surged as much as 15 per cent in trade today after the company said that it expects growth to pick up in mid-FY16 and FY17.

Here's what the Chairman & Managing Director of the company, Sumit Mazumder, said on the coal sector as a whole. Edited excerpts:

ET Now: What we are trying to do right now is find out derivative plays of this whole coal sector reform that we are seeing and the growth that we can see from there and what would it mean for companies such as TIL. How do you see FY16 as a year or probably even FY17 as a year of growth for your company?

Sumit Mazumder: I would really look at FY17 because the allocation of the blocks just about took place and before mining can start, a lot of work has to be done like overburden removal, etc. So a lot of preparatory work will happen in FY15 and part of 16 and the real growth will be seen from mid-16 and 17 onwards. Now Coal India produces upto 95% to 97% of coal in India and very little private mining was happening and it was restricted to the iron and steel sector. So, when you look at Coal India's purchases, they were all on tender basis and we represent Carabella and it has never been a price player. We believe in owning and operating cost. We believe in life cycle costing and when you look at life cycle costing, operating arm machines are actually more efficient and cost effective but the tender process is extremely difficult for us to play in. We are excited that the private mines are going to come into play. They are not only interested in lowest price purchase but are also in productivity. Hence, we believe that these are going to be exciting times for us. We will have more of playing ground that we can play in, fairly. So, I expect things to get really good in the years to come.

ET Now: One brokerage firm believes that a company such as yours and a few others will benefit immensely. You mentioned in your opening comment that you only see benefits coming in from FY17 onwards. Do you then see sustained growth post that period?

Sumit Mazumder: I absolutely believe that and the reason is very simple. The demand for coal is increasing almost between 7.7% and 8% CAGR, whereas the current production is only half of that. So, coal production has to go up and for it to go up, you are going to get efficient as the other gentleman spoke. He talked about the strip ratio and he talked about how private mines do a far higher production. So, the machines that we offer, we say that the lowest cost per tonne is by using our machines and we supported with service agreement which guarantees availability of the machine. So we believe that private companies and even Coal India to an extent are now realising and they are trying to change the norms so that they can take cost per tonne into their calculation, so this will really give a boost.

If you look at some figures, today, Coal India produces about 500 odd million tonnes and the private sector about 30-35 million tonnes. We are talking about a billion tonnes of Coal India production by 2020, another 500 million tonnes by the private sector and that is a big number and that is going to require huge amount of equipment and we are in the business of supplying equipment both to the coal industry and to the construction industry.