Escorts Ltd, one of India’s oldest motor and equipment makers, said Japan-based Kubota Corporation, one of the top tractor makers in the world, will take a 10% stake in the Indian company for Rs 1,042 cr.
The partnership, which will go beyond equity participation, will “integrate and deepen their relationship towards achieving their mutual ambition of global leadership,” the Indian company said.
“Upon completion of this transaction, 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.”
Shares will allotted to Kubota at a price of Rs 850, which is considerably higher than today’s opening price of Rs 584 on the NSE.
Shares of Escorts, which is also one of India’s top tractor makers, rose 18.55% at Rs 680 on a day when stock markets rebounded from record declines in the last couple of days.
Escorts will acquire 40% stake in Kubota Agricultural Machinery India Pvt. Ltd (“KAI’), the marketing and sales company of Kubota in India.
“This will be a win-win collaboration and benefit – Escorts from product innovation through indigenization of global R&D, production systems excellence, global supply chain, sales and distribution and act as a global sourcing hub for Kubota; and Kubota with assured supply of cost-effective products in and for India, joint product development for emerging and global markets, and expansion of product range through respective distribution networks,” the companies said.
They said the partnership will be able to tap new avenues of growth in construction equipment and agriculture implements, leveraging strengths of both the parties.
The collaboration will focus on products including earth moving equipment & smart agriculture implements, the two companies said.
The deal will create one of the largest lndo-Japan agriculture collaborations, they added, providing latest farm mechanization solutions across the globe.
Nikhil Nanda, Chairman and Managing Director of Escorts, said the collaboration will look at both domestic and export geographies.
“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 mechanization, and address the food security challenge.”
Kubota Corporation is based in Osaka, Japan and was established in 1890.
The company produces many products including tractors and agricultural equipment, engines, construction equipment, vending machines, pipe, valves, cast metal, pumps and equipment for water purification, sewage treatment and air conditioning.