Kubota Corp is increasing its stake in Escorts Ltd - Your browser does not support the audio element.
The Nanda family have been looking to monetize their stake in Escorts Ltd for some time, and the first step may have been taken. The buyer, Japan's Kubota Corp, could seek to increase its stake from 9.9% to 15% in the first phase and then seek a majority stake within the company. It begins with the acquisition of the participation of the organizers (Nanda Group) in Escorts Ltd.
Escorts Ltd is one of the fastest growing tractor and farm equipment manufacturers in India. In the last 2 months, the shares have risen by 33% from Rs 1,137 to Rs 1,523. Between the end of 2015 and 2021, Escorts was a 10 bagger earning from Rs 159 to Rs 1523. Kubota is a leading Japanese agricultural and heavy equipment company with a market capitalization of billion and almost 10 times the size of Escorts.
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The Nikhil Nanda Group owns a total of 36.59% of Escorts. In March 2020, Japan's Kubota acquired a 9.9% stake in Escorts through preferential offers. Of the Nanda family holdings, almost 25% are held in the name of the Escorts Benefit and Welfare Trust. By buying out the promoter's stake in Escorts, Kubota would gain a significant stake and they would eventually seek to take a majority stake in the company.
For Kubota Corp, Escorts offers the perfect match. Kubota has aggressive plans in the Indian agricultural sector and Escorts fits the bill. After all, Escorts is the fourth largest tractor manufacturer in India with a market share of 11.3%. Interestingly, Kubota's purchase of Escorts shares last year was priced at Rs 850 through the right of first refusal, so the shares have almost doubled from there.
India's agricultural sector has grown by 3.5-4% in the last two years and has also been resilient during the pandemic. As Indian farms become more mechanized, Kubota sees an important alternative in the Indian agricultural sector. The acquisition of Escorts fits well with that, although Kubota has yet to verify its intentions with a press release.
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