The Indian tractor industry is the largest in the world. Despite pandemic, the domestic tractor sales for the FY (Financial Year) 2021 were the best in the history of the tractor industry. With sea changes, along with tractors, farm equipment market is also pegged for supernatural growth in the coming period.
To reap most of the future opportunity, Japanese Company Kubota Corporation, recently announced the deal with Escorts Limited, being the fourth largest tractor company in India. The deal will pave the way for Kubota to become the largest shareholder in Escorts Limited along with control/joint control. The deal was well-planned and its origination can be traced to 2018.
Escorts Ltd. (Escort) began its journey in 1948 as an Agri-machinery company and has grown to be one of India’s leading engineering conglomerates with over seven decades of experience. Today, Escorts is the fourth largest tractor manufacturer in India with ~11.6% market share and has a strong brand name offering more than 45 models ranging from 25HP to 80HP. Over the years, the company diversified into other products to emerge as a multi-business entity, with interests in Agri-machinery, railway equipment, industrial and construction equipment.
Kubota Corporation (Kubota) was Established in 1890. Kubota is a global manufacturing company, specialising in agriculture, water and living environment products with a worldwide network in over 100 countries. Kubota’s 2/3rd revenue are from outside Japan markets, and it is having Technology & Volume leadership in <120 HP Tractors. Kubota market share in the Indian domestic tractor industry is 1.9%.
The Proposed Transaction:
In a move to expand its presence in the world’s largest tractor market, Kubota announced that it will take the driver seat in Escort while the existing promoters, the Nanda family will continue to be part of top management.
Step by Step strategy opted by Kubota to expand its presence in the world’s largest tractor market. It started with a joint venture which later deepen by strategic minority investment in Escort. finally, Kubota is taking the driver seat by becoming the largest shareholder & promoter in Escort.
The preparation for this marriage was going on over the past couple of years. In 2018, Escorts and Kubota entered a Joint Venture for technology collaboration and joint manufacturing of high-end, value-oriented utility tractor range. Both entities decided to form a Joint Venture (JV) to establish a new common manufacturing facility with an initial capacity of 50,000. Further, as part of the collaboration, it was agreed that Kubota will export Escorts tractors through Kubota global distribution network in specific markets as mutually agreed.