scorecardresearch
What Kubota-Escorts deal means for the Indian tractor market

What Kubota-Escorts deal means for the Indian tractor market

From 9.09 per cent stake last year, the Osaka-based company is now increasing it to 53.50 per cent with a fresh investment of Rs 9,370 crore.

The global tractor market is projected to produce over 2.8 thousand units by 2023, growing at a CAGR of around 5% during 2017-2023 The global tractor market is projected to produce over 2.8 thousand units by 2023, growing at a CAGR of around 5% during 2017-2023

Japanese tractor and heavy equipment maker Kubota plans to increase its shareholding in Faridabad-based Escorts.

This could help the company become a key player in India, the world's largest tractor market. From a 9.09 per cent stake till last year, the Osaka-based company is now increasing it to 53.50 per cent with a fresh investment of Rs 9,370 crore.

The additional shares of Escorts will be acquired through a third-party allotment and open offer bids by March 2022, Kubota said. Escorts Kubota Limited will be the new name of the company.
 
Currently, market leader Mahindra and Mahindra's share is about 40% while Escorts is the country's fourth-largest player with a 12% market share.

With this move, Kubota aims to acquire a 24 per cent market share in India by 2030. "The combined entity and the larger collaboration will provide advanced farm mechanization solutions to address global food security & enhanced farm productivity," Yuichi Kitao, President and Representative Director, Kubota, Japan, said.
 
Nikhil Nanda, however, will continue to be the Chairman and Managing Director and lead the next phase of growth of Escorts, with the current set of Key Managerial Persons (KMPs), Escorts said in a BSE filing.

Kubota, with a market capitalisation of $24 billion in the global tractor and machinery industry said that this partnership with Kubota will Escorts have access to global best practices and state of the art research & development facilities which will complement Escort's proven strengths in engineering and execution to deliver high quality, cost-efficient solutions, in India and across the world.

This partnership will create one of the largest India-Japan agriculture collaborations to attain global leadership in the Farm Equipment Sector, the statement said.

In addition to that, Escorts will be the exclusive vehicle for manufacture and sale of certain products in India and for sourcing from India (existing and products to be jointly developed in future), and this will seamlessly integrate Kubota's global reach and Escorts' proven capabilities in frugal engineering and manufacturing, the statement added.

"This will enable both companies to enhance the value they have created by leveraging each other's strengths - be it in technology, market access, manufacturing processes or engineering excellence. With this Escorts is positioned to become an institution that will serve Indian and global farmers for decades and centuries," Nikhil Nanda, CMD, Escorts Limited, said.   

"While Escorts is known for its stronger India presence with proven strengths in frugal engineering and manufacturing, Kubota brings world-class processes and global reach and expertise," he added.

The global tractor market is projected to produce over 2.8 thousand units by 2023, growing at a CAGR of around 5% during 2017-2023.
 
Kubota's revenue last year stood ¥1,920.0 billion while overseas revenue was ¥1,294.7 billion. In the last nine years, the company's overseas revenue ratio has grown from 46.1 per cent in 2010 to 67.4 per cent in 2019. It sees itself as a global company with a footprint in 120 countries. Kubota is known for its characteristic high-efficiency, energy- and labour-saving products.
 
India could also benefit from the company's EV expeditions. Kubota has unveiled prototypes of electric tractors and mini excavators.

The company is already looking at investing in the research and development of electrically-powered equipment like motors, inverters and battery packs.

Last year, Kubota showcased its driverless tractor, the X tractor, designed as a part of the company's Agrirobo automated technology program. X tractor comes with advanced artificial intelligence technology and is a fully-autonomous and electric smart tractor. And who knows? Tomorrow India could also see Kubota's smart tractors revving up on her roads.

Also Read: Farm laws scrapped: India's food processing sector may get hit badly

Also Read: Scrapping of farm laws may dwarf India's food export plans under PLI