The two leading tractor makers proved buoyant on the bourses today after the first spell of monsoon broke over the country last week.

The optimism that the monsoon will prove adequate this year sent Punjab Tractors (PTL) up 1.7% to Rs 158 on BSE in early trades on volumes of 37,000 shares. The country's largest tractor maker Mahindra & Mahindra (M&M) gained 1.1% to Rs 131.70.

Both PTL and M&M have witnessed a firm trend over the past few months. PTL, for one, gained 34% from Rs 117.55 on 31 March 2003 to the current Rs 158. On the other hand, M&M advanced 32.6% from Rs 99.25 on 1 April 2003 to the current Rs 131.70.

The tractor industry has been witnessing sluggish demand over most of last year, hurt by the drought-like  conditions that prevailed over many parts of the country. To compound the woes of the industry, there are currently very high inventories of tractors.

Some relief comes from the fact that though the monsoon has been delayed slightly, the weather department has forecast a near-normal monsoon this year. The monsoon has already hit Kerala and it is expected to progress into other parts of the country gradually.

The domestic tractor market is the largest in the  world. According to a study, the tractor industry is  poised  to record a CAGR of 4% over the next six-year  period.  The tractor sector  witnessed  a 22% decline in growth last  year. Another favourable development for the tractor industry has been low interest rates as most tractors are purchased on finance.

Meanwhile, a major development in the industry is the ongoing divestment of stake by the Punjab State government in PTL. The state government, which has a 23.5% stake, has put that on the block. A host of Indian and foreign companies have bid for acquiring stake in PTL including Mahindra & Mahindra,  Escorts,  Sonalika, New Holland, Tafe in league with Agco, SAME, etc. PTL is the second biggest tractor maker in the country and the largest in northern India. Therefore, a number of players are eyeing PTL.