Japan’s global tractor and agri-machinery manufacturer, Kubota will purchase a one-tenth equity stake in Escorts because the two companies aim to understand global leadership by partnering in development, manufacturing, and sourcing, Escorts said during notification to the exchanges.
Escorts will allow over 12 million equity shares through a preferential issue to Kubota at Rs 850 apiece for Rs 1,042 crore, according to its exchange filing. Escorts will reduce an equal number of shares held by Escorts Benefit and Welfare Trust to remain the whole equity capital of the company unchanged.
Following the deal between these companies, Kubota will have the proper to nominate two non-executive board members on the board of Escorts.
Simultaneously, Escorts will acquire a 40 percent stake in Kubota Agricultural Machinery India, the marketing and sales company of Kubota tractor in India. Kubota and Escorts have a 60:40 venture called Escorts Kubota India. it'll still function in its current form.
Nikhil Nanda, chairman, and managing director, Escorts, said the partnership will help Escorts offer innovative solutions and maximize productivity for profitable growth. This collaboration has focused on leveraging the research and development strengths of Kubota to provide cutting-edge products for domestic and export markets. manufacturing expertise and powerful domestic distribution combined with collaboration with Kubota, we aim to achieve our aim of becoming the market leader in farm mechanization, and address the food security challenge,” said Nanda.
Yuichi Kitao, president and representative director of Kubota, said, through the collaboration, the companies will cater to India and other growing economies that require high-end technology and new-age tractors to affect growing demands of highly mechanized farming.
Kubota tractor and Escorts, together, with their leadership in respective regions, will consolidate strengths and technology innovation excellence to emerge as a worldwide leader,” said Kitao.
One of the leading tractor manufacturers, Escorts’ machinery segment saw year-on-year growth of 19 percent in February to 8,601 tractors. Of this, domestic sales reported a growth of 16.3 percent to 8,049 over the same period a year ago.