nanda: the Nanda family and Kubota will jointly lead the escorts
CHENNAI: The Nanda family, promoters of major tractor and component escorts, will continue to jointly run the business even after Japanese partner Kubota Corporation acquires majority control. According to auto industry sources, a “unique agreement” has been reached between the partners to allow Kubota and the Nanda family to manage the company’s operations “on the basis of a joint partnership”.
The Nanda family will hold, after a second capital reduction and an open offer, 14%, while Kubota will hold more than 50% of the capital of Escorts. Following the closing of the open offering in April-May, the two manufacturing and sales and marketing joint ventures that Escorts has with Kubota will be merged into the parent company and the combined entity will be renamed Escorts Kubota.
Last Friday, the Escorts Board of Directors approved the preferential allotment of over 93 lakh fully paid shares with a par value of Rs 10 each to Kubota at a price of Rs 2,000 (including a premium of Rs 1,990) totaling up to Rs 1,873 crore. The board also approved a series of capital reductions by ‘cancelling and extinguishing’ over 2.1 crore shares of Rs 10 each, which are currently held by Escorts Benefit and Welfare Trust ‘without payment of no consideration to EBWT”. Kubota’s open offer will be for an additional 26% stake. The Nanda family will not dilute its stake beyond 14%. Sources said that Kubota would spend a total of Rs 9,400 crore (including around Rs 7,500 crore in the open offer) to increase its stake in Escorts beyond 50%.
Escorts and Kubota are already working on a mid-term business plan, which will be ready by June-July, which will determine where the capital raised will be spent in terms of products, capacity, R&D, etc. Escorts MD and Nanda family scion Nikhil Nanda will continue in his executive role. According to the stock market notification, Nikhil Nanda “has entered into an executive service agreement with Kubota Corporation with the designation of General Manager of Kubota Corporation, General Manager of ValueInnovative Farm and Industrial Machinery Strategy and Operations of Kubota Corporation, and Director of one of group companies of Kubota Corporation, Kubota Holdings Europe BV, The Netherlands”, in accordance with the agreement signed by the two companies. He will not receive any compensation for these roles
In March 2020, Kubota Corp acquired a 10% stake in Escorts for Rs 1042 crore. Escorts has for its part acquired a 40% stake in Kubota’s Indian arm, Kubota Agri Machinery India, for Rs 900 crore. Following this, in November 2021, the two partners announced the three-tier preferential allocation, capital reduction and open offer agreement between Kubota and Escorts.
The Nanda family will hold, after a second capital reduction and an open offer, 14%, while Kubota will hold more than 50% of the capital of Escorts. Following the closing of the open offering in April-May, the two manufacturing and sales and marketing joint ventures that Escorts has with Kubota will be merged into the parent company and the combined entity will be renamed Escorts Kubota.
Last Friday, the Escorts Board of Directors approved the preferential allotment of over 93 lakh fully paid shares with a par value of Rs 10 each to Kubota at a price of Rs 2,000 (including a premium of Rs 1,990) totaling up to Rs 1,873 crore. The board also approved a series of capital reductions by ‘cancelling and extinguishing’ over 2.1 crore shares of Rs 10 each, which are currently held by Escorts Benefit and Welfare Trust ‘without payment of no consideration to EBWT”. Kubota’s open offer will be for an additional 26% stake. The Nanda family will not dilute its stake beyond 14%. Sources said that Kubota would spend a total of Rs 9,400 crore (including around Rs 7,500 crore in the open offer) to increase its stake in Escorts beyond 50%.
Escorts and Kubota are already working on a mid-term business plan, which will be ready by June-July, which will determine where the capital raised will be spent in terms of products, capacity, R&D, etc. Escorts MD and Nanda family scion Nikhil Nanda will continue in his executive role. According to the stock market notification, Nikhil Nanda “has entered into an executive service agreement with Kubota Corporation with the designation of General Manager of Kubota Corporation, General Manager of ValueInnovative Farm and Industrial Machinery Strategy and Operations of Kubota Corporation, and Director of one of group companies of Kubota Corporation, Kubota Holdings Europe BV, The Netherlands”, in accordance with the agreement signed by the two companies. He will not receive any compensation for these roles
In March 2020, Kubota Corp acquired a 10% stake in Escorts for Rs 1042 crore. Escorts has for its part acquired a 40% stake in Kubota’s Indian arm, Kubota Agri Machinery India, for Rs 900 crore. Following this, in November 2021, the two partners announced the three-tier preferential allocation, capital reduction and open offer agreement between Kubota and Escorts.