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Japanese tractor and machinery manufacturer Kubota Corporation has entered into an agreement to acquire 10 per cent stake, on a post-capital reduction basis, in Indian engineering conglomerate Escorts Ltd, for ₹1,042 crore.
Kubota’s investment will constitute 9.1 per cent stake on a pre-capital reduction or 10 per cent on a post-capital reduction basis. Escorts will allot 1.23 crore shares through a preferential issue to Kubota at ₹850 per share, Escorts said in a regulatory filing.
The price represents a 48.21 per cent premium over the last traded price on March 19. JM Financial was the financial and transaction advisor to Escorts Ltd.
Following the completion, Escorts and Kubota will partner to become a leading player in the Indian market and a hub of product development, manufacturing and sourcing for global markets.
“At Escorts, we believe in strategic global partnership with an objective to address global farm mechanisation needs,” Nikhil Nanda, Chairman and Managing Director at Escorts, said.
Leverage R&D strengths
“This collaboration aims at leveraging R&D strengths of Kubota to offer cutting-edge products for domestic and export markets, serving customers in new markets and new product lines. With our manufacturing expertise and strong domestic distribution combined with collaboration with Kubota, we aim to reach our objective of becoming the market leader in farm mechanisation, and address the food security challenge,” he added.
Escorts also received board approval to reduce 12,257,688 of its shares held by Escorts Benefit and Welfare Trust, upon completion of the preferential allotment to Kubota. This is to ensure that the total equity share capital of Escorts remains unchanged.
Simultaneously, Escorts will acquire 40 per cent stake in Kubota Agricultural Machinery India Pvt Ltd, the marketing and sales company of Kubota in India.
Yuichi Kitao, President and Representative Director, Kubota, Japan, said: "Escorts has a strong technology legacy and diversified portfolio in agriculture equipment solutions market and Kubota has proven global technology capabilities. Through this collaboration, we believe that we will cater to India and other growing economies which require high-end technology and new age tractors to address growing demands of highly mechanised farming”.
“Kubota and Escorts, together, with their leadership in respective geographies will consolidate strengths and technology innovation excellence to emerge as a global leader," he added.
The existing 60:40 joint venture between Kubota and Escorts — Escorts Kubota India Pvt Ltd — will continue to operate as it is, the statement added.
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