The Hindu Business Line : Escorts Auto acquired by 8 employees

IN a rare move in the corporate world, Escorts Auto Components Ltd (EACL), a subsidiary of Escorts Ltd, has been acquired by eight employees. The CEO of EACL along with seven other employees have acquired Escorts Ltd's 78 per cent stake in the company. The balance 22 per cent of the public limited company is owned by about 2,800 shareholders.

As per the agreement, about 80 per cent of the EACL's workforce will be absorbed by Escorts Ltd. This would help the company save on employee-related costs that were believed to be sizeable. Post-acquisition, there would be 250 employees (including 100 permanent employees) on EACL's rolls.

According to Mr Bharat Caprihan, CEO, EACL, another major problem at EACL was of liquidity. However, that too seems to be on resolve mode with both banks and major clients agreeing to the restructuring at the company. The banks have apparently reduced the interest rate on debt by three per cent, while at the same time extending the pay-back period. EACL's major customers too have agreed to revise payment terms to support the restructuring. "With these steps the break-even for EACL has come down drastically. We are now working on developing new products in order to give a push to volumes," Mr Caprihan said.

EACL manufactures carburettors, oil pumps and clutches for two-wheeler companies.

The company's client list consists of majors such as Kinetic, Bajaj Auto and TVS.

The company has an annual turnover of about Rs 25 crore and paid-up equity capital of about Rs 4.7 crore.

Escorts had been looking to sell off the company for a year as part of its strategy to exit from non-core businesses.

"We were looking to exit from the business as it did not make strategic sense for us after we sold our stake in Escorts Yamaha. The company was initially started as a captive unit for Yamaha," an Escorts official said.

Earlier, Ucal Fuel had evinced interest in acquiring EACL.

However, sources point out that the deal did not materialise as one of the conditions stated by Ucal was that the company would not take any of the employees of EACL.

Prior to becoming CEO of EACL, Mr Caprihan was the Director of Escorts Yamaha Ltd.

More Stories on : Mergers & Acquisitions | Automobile Components

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