- 16 Sep 2022
- ICICIdirect Research
Escorts Kubota amalgamates all residual JVs with Kubota into listed entityESCORTS - 1888 Change: -10.65 (-0.56 %)
The company in a regulatory exchange filing informed about a board meeting approving merger of Escorts Kubota India Pvt Ltd (EKI, JV btw Escorts & Kubota in 40:60 ratio, tractor manufacturing entity) & Kubota Agriculture Machinery Pvt Ltd (KAI, JV btw Escorts & Kubota in 40:60 ratio, includes all farm machinery presence of Kubota in India) into Escorts Kubota Ltd for a swap ratio of 5:129 & 5:220, respectively. Post this arrangement and extinguishing of existing treasury shares, total holding for Kubota will be revised to 54.07% vs. 44.8% currently with resultant total promoter pegged at 68%. Furthermore, it also informed about purchase of RT crane business and selling of residual stake in its JV in the crane domain i.e. Tadano Escorts India Pvt Ltd to the JV partner at a fair value (equity investment pegged at Rs 72 crore, reported loss of Rs 21 crore in FY22).
This comes in line with the earlier announcement made at time of Kubota acquiring further stake in the company and joining as co-promoter. It is aimed at simplifying the group structure with listed entity now includes Kubota’s complete presence in India. EKI & KAI had revenue of Rs 689 crore & Rs 1820 crore, respectively. The swap ratio and consequently value assigned to the residual stake is fair in our opinion thereby protecting the interest of minority shareholders. The stakes are being acquired at 1.2x P/B and