The Hindu Business Line : International Tractors looking at offloading 5% stake to PE firm

New Delhi May 28 International Tractors Ltd (ITL), manufacturer of the Sonalika brand of tractors, is looking at offloading five per cent stake to a private equity firm. The company is also planning to tap the market with an initial public offering (IPO) by the fourth quarter of the current financial year.

According to Mr L.D. Mittal, Chairman, Sonalika Group, "We will be filing for getting all the necessary regulatory clearances by the end of the year or early next year and we expect to tap the markets by the last quarter of the fiscal. But more importantly we are in talks to offload five per cent stake. We expect to raise around Rs 175 crore and the whole process is expected to be completed by the end of next month."

The company plans to utilise the funds to double the existing capacity at its plant in Hoshiarpur (Punjab) where it manufactures 40,000 units per year. "Last year (fiscal ended March 31, 2007) out of the 40,000 vehicles manufactured we sold 36,000 vehicles. That is why, looking at the increase in demand we are going in for the current expansion. Once the expansion is completed we will be able to manufacture around 80,000 vehicles per year." The company expects the expansion to be completed within the next six months.

Strategic investors

ITL already has strategic investments by four firms, which collectively hold 37 per cent. This includes a 10-per cent stake each by Citigroup and 3i, Japanese tractor maker Yanmar has about 12 per cent stake, while Morgan Stanley has a five per cent stake.

Speaking about the proposed IPO, Mr Mittal said, "We are looking at raising around Rs 800 crore from the IPO. The proceeds of which would be utilised for two new plants that we intend to build."

According to him one plant would come up in Bihar, where the company has already acquired the land, and the other facility in the southern part of the country. "We want to be strategically located across India and that is why we are looking at the new plants. While we have acquired land in Bihar, we have written to state governments of the four southern states and are awaiting replies," Mr Mittal said.

Mr Mittal added that both the facilities would have capacity to manufacture 40,000 vehicles per year and that the first facility is expected to be operational in about two years time and the second one in three years time.

The company is also looking at exporting its tractors to the US from the current financial year through its partner Yanmar. "Yanmar already has a presence in the US and we are looking at leveraging their presence. Last year the total exports were at 2,000 units but this year we expect it touch close to 4,000 units and by the end of the 2008-09 fiscal it could be close to 10,000 units," Mr Mittal said.

ITL currently exports its tractors to France, South Africa, Australia, Zimbabwe, Sri Lanka, Canada, Nepal, and Bangladesh.

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