What Kubota-Escorts deal means for the Indian tractor market

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…