• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Stocks

• Quotes
• SE Diary
• Scoreboard
• Open-End Mutual Fund

Port Info

• Ships in Ports
  
  

Archives

• Yesterday
• Datewise
• Resources

Group Sites

• The Hindu
• Business Line
• The Sportstar
• Frontline
• The Hindu eBooks
• The Hindu Images

Our Bureaus

Delhi/Chennai , Feb. 25

TRACTORS and Farm Equipment Ltd, a part of the Chennai-based Amalgamations group, is set to become the second largest tractor manufacturer in the country if its proposal to take over Eicher Motor Ltd's tractor business goes through.

"This will give us a strong number two position in the industry," Ms Mallika Srinivasan, Director, TAFE, told Business Line.

Industry analysts point out that the acquisition of the tractors business would give TAFE a market share of about 20-21 per cent. According to the industry data for April-December 2004, TAFE garnered sales of 24,191 units, while Eicher sold 13,670 tractors.

Apart from providing TAFE a stronghold in the market, the acquisition would also give TAFE an entry into the lower horsepower category, as well as a presence in States where Eicher has a sizeable share.

To a question on whether TAFE would continue to use the Eicher brand name once the acquisition was completed, Ms Srinivasan said, "they have a fairly strong brand identity," and that TAFE would like to retain that brand name. However, this was not something that had been finalised.

Analysts, however, add that there could also be problems related to synergies for TAFE as both the tractor manufacturers utilise different technologies and also complications related to marketing/distribution as it would be difficult to focus on two brands.

The release quoted Mr A. Sivasailam, Chairman and Managing Director, TAFE, as saying that the proposed acquisition had the advantages of being both a strategic and a cultural fit for both companies. It also offered TAFE a manufacturing base in the North.

"Most importantly, it gives us the opportunity to be a strong number two player in the Indian tractor industry with the attendant benefits to all the stakeholders," he said.

For Eicher, the transaction would provide it the financial strength to aggressively grow its commercial vehicles business. With strong sales in the segment in the first three quarters of the fiscal, analysts have upped their growth estimates for Eicher's CV business to 39 per cent for the current fiscal as against the industry's average of 18-19 per cent.

With this proposed acquisition, TAFE, which has a strong presence in the 35 HP and above segments, hopes to augment its domestic market with a combined demand of approximately 50,000 tractors a year, according to a company press release.

The TAFE release said that the combination with Eicher, which is a strong player with a 55 per cent market share in the below 25 HP segments, would push the combined sales volume to close to 55,000 tractors and the combined market share to 22 per cent of the domestic volumes. Eicher had its own established brand identity and distribution network. This move also offered TAFE a more uniform geographic spread across India, the release said.

The proposed acquisition would give TAFE the opportunity to access air-cooled engines and augment its gear manufacturing capacities. TAFE's parent company, Simpson & Co Ltd, supplies water-cooled diesel engines above 35 HP for Eicher tractors.

Asked about the likely cost of acquisition, Ms Srinivasan said the price would be known in a few weeks once the due diligence process was completed. The acquisition, if it went through, might take some months to be completed.

This acquisition is considered a fairly big step for TAFE, which had made a bid for the Punjab Government's stake in Punjab Tractors Ltd, and an equally important structural change in the industry. The consolidation was expected to change the dynamics in the industry.

Shortly after Eicher sent a communication to the stock exchanges of the proposal, Ms Srinivasan addressed TAFE's senior employees of the proposed acquisition. "We are really excited about it," was her reaction when asked how the employees reacted to the announcement.

TAFE is likely to end this year with sales of about 35,000 tractors, which will be a 40 per cent growth over last year. TAFE also has interests in engineering plastics, gears and batteries and has a turnover close to Rs 1,100 crore. It may be recalled that AGCO Corporation of the US, TAFE's collaborator, recently said it planned to increase its sourcing of components through TAFE over the years.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Asahi plans to invest Rs 62 crore more in Chennai facility

Copyright © 2005, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line