Kubota to acquire Escorts

Kubota Corporation from Japan is reportedly in talks with the promoters of Indian tractor manufacturer Escorts to increase its holding and ultimately become the controlling shareholder, according to Business Standard in India.

Kubota currently holds a 9.1% stake in Escorts which it acquired last year through a preferential allotment. Kubota’s interest in Escorts also comes after their joint venture started production of tractors last year.

The Japanese company is looking to double down on the world’s largest tractor market just as demand is starting to pick up after Covid-19-induced lockdowns.

Escorts generated a profit of Rs 872 crore (USD 120 million) in FY21 on a revenue of just over Rs 7,000 crore (USD 950 million). It operates nine factories to manufacture equipment across three sectors and boasts an employee base of more than 11,000.

The family of chairman and managing director Nikhil Nanda owned almost 37% of Escorts at the end of June. This stake is currently valued at Rs 7,500 crore (USD 1 billion).

Reports suggest that Kubota may initially acquire a 15% stake from the Nanda family before buying them out entirely. Escorts has termed these reports market speculation.

Interestingly, Escorts was the target of a failed hostile takeover attempt in the 1980s, when London-based Swaraj Paul tried to acquire it. Escorts, at the time, was the manufacturer of the Rajdoot brand of motorcycles.

Haryana-based Escorts is India’s fourth-largest tractor manufacturer. In FY21, it had a market share of 11.3% — behind Sonalika, TAFE and the Mahindra Group. Escorts also manufactures construction equipment and railway equipment.

If the Kubota deal goes ahead, it would mean the end of a 77-year association between the Nanda family and Escorts.

The Nanda family has been associated with Escorts since its founding in 1944 by Nikhil Nanda’s grandfather Har Prasad Nanda. Over the course of the company’s history, Escorts has collaborated with Ford, Yamaha, JCB, Tadano and finally Kubota.