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Kubota increases Escorts Limited shareholding

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Kubota increases Escorts Limited shareholding: Kubota has reached an agreement with Escorts Limited under which Kubota will increase its shareholding in the Indian tractor manufacturer.

Escorts Limited is a major tractor manufacturer in the Indian market, reportedly the world’s largest tractor market in terms of unit sales. The company also manufactures and distributes construction machinery as well as other products.

Kubota increases Escorts Limited shareholding

Kubota increases Escorts Limited shareholding

The practice in India of utilising tractors year-round for carrying loads, in addition to usual agricultural work, means that the machines are designed to be highly durable with a basic specification and at reasonable prices.

With the aim of addressing market needs in India, Kubota strengthened its partnership with Escorts Limited, specialised in developing and manufacturing such tractors – referred to as ‘basic tractors’ – by establishing a joint venture manufacturing company in 2019 and through a direct equity investment in 2020.

Kubota has decided to increase its shareholding in Escorts Limited, based on expectations for the basic tractor market to expand in emerging countries including India. The move will also utilise combined resources in an effective manner and further strengthen the partnership between the two companies.

As a result of this, the collaboration will produce quality and affordable basic tractors utilising Escorts Limited’s knowhow in the sector and Kubota’s accumulated product development knowledge and capabilities. Kubota will also utilise both companies’ distribution networks by offering a wide range of product offerings, ranging from high-performance to basic tractors.

By positioning Escorts Limited as an important foundation for basic tractors in the future, Kubota will consider developing and manufacturing of basic combine harvesters and construction machineries targeting India and other emerging markets.

The first tractors from the collaboration to be marketed in Europe will be available at the end of 2022.

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Kubota Invests in Escorts Limited

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Kubota Invests in Escorts Limited: Kubota Corporation (Headquarters: Naniwa-ku, Osaka, Japan; President and Representative Director: Yuichi Kitao; hereinafter, “Kubota”) announced today that it will invest in an Indian leading tractor manufacturer, Escorts Limited (Headquarters: India, Chairman and Managing Director: Nikhil Nanda; hereinafter, “EL”).

Through this investment, Kubota intends to increase its presence in India – the world’s largest tractor market – as well as its commitment to the competitive tractor market, which has massive growth potential, thus further expanding its business.

Kubota Invests in Escorts Limited

Kubota Invests in Escorts Limited

Tractor produced by EL started distributing through Kubota’s sales network in worldwide.

Background and aims

  • The tractor market in India is one of the world’s largest in terms of unit sales and expects to expand further. In 2008, Kubota established Kubota Agricultural Machinery India Pvt. Ltd. (hereinafter, “KAI”) as a foothold in the Indian market.
  • At present, local manufacturers are playing key roles there, and they are all enhancing partnerships with foreign-affiliated manufacturers. In February 2019, Kubota established a joint-venture tractor manufacturing company with EL and mass production is due to start this July.
  • Through this capital tie, the two companies intend to deepen their cooperative relationship further and, by leveraging each other’s strengths, create synergy across a broad range of their business, including development, production, sales, distribution, and parts procurement, in a bid to extend their reach in the Indian market.
  • Meanwhile, the competitive tractors which currently form the core of the Indian tractor market, are gaining popularity in other markets around the world. Kubota hopes to expand its global reach in those model market by tapping into EL’s parts procurement networks and capability to reduce cost.

Investment scheme

  • EL will issue new equity shares to Kubota on a preferential allotment basis (subject to shareholders’ and necessary regulatory approvals) pursuant to which Kubota will hold 9.1% of EL’s paid up share capital.
  • The total amount of investment will be approximately 16 billion yen.
  • Subsequent to the preferential allotment to Kubota, EL will undertake a reduction of its share capital from the shares held by the Escorts Benefit and Welfare Trust (subject to receipt of necessary approvals) of such number of equity shares as are being issued to Kubota under the preferential allotment. Post the capital reduction, Kubota’s stake in EL will increase to 10%.
  • About the investee
Company name Escorts Limited
Representative Nikhil Nanda, Chairman and Managing Director
Location Faridabad City, Haryana State, India
Year of establishment 1944
Business Manufacture and sales of agricultural equipment, construction equipment, and railways-related equipment
Sales Approx. 100.0 billion yen (approx. 62.0 billion rupee; for the year ended March 2019)
Number of employees 11,000 (including non-regular employees, current as of December 2019)
  • Future developments

 

  • After going through the necessary procedures and subject to receipt of requisite approvals, the investment is likely to be completed by June 2020.
  • To further facilitate and strengthen the collaboration with EL, Kubota will sell 40% of stake in KAI to EL, in addition to this investment.
  • Going forward, Kubota aims to establish a joint research and development center with EL to develop products that are optimized for the local market and shorten the development period.

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