UPDATE 2-India's Mahindra cuts growth forecast for tractor market

Fri Aug 8, 2014 10:29am EDT

* Q1 profit falls 6 pct to 8.82 bln rupees

* Expects better growth in H2 if monsoon improves

* Plans to launch 5 new vehicles in 15 months (Adds company comments, forecasts, auto industry context)

By Aman Shah and Aditi Shah

MUMBAI/NEW DELHI, Aug 8 (Reuters) - Mahindra & Mahindra Ltd , the world's biggest tractor maker by volume, has cut its forecast for demand in its home market of India, partly due to delayed monsoon rains.

The automaker said on Friday it now expected the tractor sector in India, where it is the dominant player, to grow by 5 percent in the financial year that started April 1, down from its previous forecast of 8 percent.

"This is a result of delayed monsoon ... and though it has improved right now there is already a loss of sowing so we would see less agricultural output this year," said Pawan Goenka, president of Mahindra's automotive and farm equipment sectors.

India still relies on monsoon rains to irrigate more than half of its farmland and a delay would affect rural demand.

The company made its forecast after posting a smaller-than-expected fall in first-quarter profit.

Mahindra's tractor sales grew by 1 percent in April-June. Goenka said that if the recent pick up in monsoon continues, as forecast by weather experts, the second half of the year could see better growth.

Net profit fell 6 percent to 8.82 billion rupees ($143.67 million) in the quarter ended June from 9.38 billion rupees a year earlier, the company said. Analysts expected profit of 8.36 billion rupees, according to Thomson Reuters data.

Mahindra refrained from big discounts, contributing to better margins and helping the company beat analyst estimates.

Its overall sales rose about 2 percent to 100.96 billion rupees in the quarter compared with a year earlier, even as unit sales of its passenger vehicles fell 12 percent.

The need to push sales comes as the company grapples with growing competition from carmakers such as Ford Motor Co and Nissan Motor Co whose passenger utility vehicles are out-selling those by Mahindra.

After two consecutive years of decline, sales of passenger cars in India are expected to grow between 5 to 10 percent this fiscal year that started on April 1, an industry body said, as the new government works to kickstart the economy and boost consumer confidence.

Mahindra previously said it would launch three passenger vehicles and two commercial vehicles over the next 15 months in an attempt to win back sales and market share.

(1 US dollar = 61.3900 Indian rupee) (Writing by Aditi Shah; Editing by Ryan Woo and Mark Potter)

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