Does the Kubota deal mean the end of the road for the Nanda family at Escorts?
Japanese agriculture and heavy equipment company Kubota Corporation is said to be in talks with promoters of Indian tractor manufacturer Escorts to increase its stake and ultimately become the majority shareholder.
Kubota currently owns a 9.1% stake in Escorts which it acquired last year through a preferential grant. Kubota’s interest in Escorts also came after their joint venture began production of tractors last year.
The Japanese company is looking to double in the world’s largest tractor market just as demand begins to rise after the lockdowns induced by Covid-19.
The escorts generated a profit of Rs 872 crore in FY21 on a turnover of just over Rs 7,000 crore. It operates nine factories to manufacture equipment in three sectors and has more than 11,000 employees.
At the end of June, the family of Chairman and CEO Nikhil Nanda held nearly 37% of Escorts. This stake is currently valued at Rs 7,500 crore.
Reports suggest that Kubota may first acquire a 15% stake in the Nanda family before buying them out entirely. Escorts described these reports as speculative in the market.
Interestingly, Escorts was the target of a failed hostile takeover bid in the 1980s when London-based Swraj Paul attempted to acquire it. Escorts, at the time, was the maker of the Rajdoot motorcycle brand.
Based in Haryana, Escorts is the fourth largest tractor manufacturer in India. In fiscal year 21, it held an 11.3% market share, behind Sonalika, TAFE and the Mahindra group. Escorts also manufactures construction equipment and railway equipment.
If the Kubota deal comes to fruition, it would spell the end of a 77-year association between the Nanda family and Escorts.
The Nanda family has been associated with Escorts since its founding in 1944 by Nikhil Nanda’s grandfather, Har Prasad Nanda. Throughout the history of the company, Escorts has collaborated with Ford, Yamaha, JCB, Tadano and finally Kubota.
Can Kubota establish itself as a major force in the booming Indian tractor market? We have to see how his deal with the Nanda family unfolds.