ESCORTS STAKE SALE | Kubota to raise stake in Escorts at ₹2,000/sh via pref issuance & open offer. Also, Kubota will acquire control over the company to become a joint promoter pic.twitter.com/4o9rTxNyEI— CNBC-TV18 (@CNBCTV18Live) November 18, 2021
Escorts Ltd shares soared over 8 percent on Thursday after Japanese tractor major Kubota announced that it will increase its shareholding in the Nikhil Nanda-led company. Kubota is set to raise its stake via a fresh issue and make an open offer for Escorts at Rs 2000 per share.
Kubota will acquire 93.63 lakh additional shares in Escorts at Rs 2000 per share. The company's open offer at Rs 2000 per share will be for a maximum 26 percent stake i.e. 3.75 crore shares.
Escorts Group CFO Bharat Madan told CNBC-TV18 that the promoters of the company will continue to be there, and they are not selling a single share in the company. So, Nikhil Nanda will continue to be the Chairman and Managing Director (CMD).
“There has to be a single exclusive vehicle for the company in India for both partners in India. So, Escorts will remain an exclusive vehicle for both the partners. The existing JVs, which we have right now with Kubota, both Escorts Kubota India, as well as the sales JV Kubota Agri Machinery India, both will eventually get merged into Escorts. So, it will be a single entity subject to certain conditions,” he explained.
Kubota will acquire control over the company to become a joint promoter. Madan said that according to the agreement, there are no call options or drag rights against the promoters. So, they will be in joint control, but this is a very unique and friendly deal, which will not really change control, he said.
Kubota currently holds about 9 percent and the Nanda family holds a little over 36 percent as of September 2021. Escorts will look at the feasibility of cancelling balance shares in the trust, Madan said.
Speaking about the relationship between Escorts and Kubota over the past five years, Madan said, both parties have been very comfortable in dealing. It started with the negotiation and a manufacturing joint venture and last year it led to Kubota buying 10 percent Escorts and his company buying a 40 percent stake in the sales JV.
“Now after working together, we feel there is a good relationship that has been built and the trust which has been built between both the partners and both are willing to take the next step. So, this is the intent of the deal. Both partners will continue to be there and they will jointly control this company,” he said.
Meanwhile, Escorts stock price quoted at Rs 1,763.20, higher by 8.11 percent on NSE. The stock opened at Rs 1,640 and hit the day's high at Rs 1,793.90.
Nifty50 traded at 17,703, down over a percent.