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Jain Irrigation Promoted NBFC SAFL to Finance Lemkens farm Equipments

Jain Irrigation System promoted non–banking finance corporation (NBFC) Sustainable Agro–commercial Finance Ltd (SAFL) has signed a memorandum of understanding (MoU) with German pre–harvest farm equipment manufacturer Lemken to finance their farm equipments.

As a handful of the farm mechanisation MNCs explore investment opportunities in the growing farm mechanisation market of India, Lemken was one of the first to set up its manufacturing plant outside Europe. More than two hundred year old Lemken specialises in pre–harvest farm equipments. It achieved global sale of $ 363 million in 2013.

The company has invested Rs 60 crore in the first phase. Itimports the special steel required for its implements. After inaugurating its Nagpur facility, the first outside Europe, Lemken manufactured hydraulic reversible plough in the first phase and has sold its 450 units, against a target of 500 units. The plant has a capacity to manufacture 3000 units in a year at full capacity. In the second phase, it plans to launch some more implements like, cultivators, power harrows, disc harrows etc.

Lemken equipments manufactured in Germany are designed for attachment with high power tractors, where as Indian farmers use tractors of lower horse power capacity. Hence, the company had organised a symposium and farm demonstration of its four new equipments in Pune to get opinion of Indian agriculture specialists.

Anthony van der Ley, chief executive officer and speaker of the Management board, Lemken said, ""We will have to invest about 0.5 millin Euros in 2014 for re–engineering to launch the new equipments.""

Price and availability of finance are the biggest challenges for the company in India. ""The biggest bottleneck for us in India is the price of our equipments,"" said Anthony. Lemken equipments manufactured in India are 40% cheaper than those manufactured in Germany. However, they are three times more expensive than comparable equipments of their competitors in the country.

SAFL , which has partnership of International Finance Corporation (IFC), will give 85% funding to Lemken equipments against collateral of tractor or land at an interest rate of 11.5%. Indian banks do not finance stand alone farm equipments. Bank finance is available to tractors and equipments attached with the tractor. """We had approached 14 banks for financing our equipments,"" said Arvind Kumar, managing director and chief executive officer, Lemken India Agro Ltd.