MUMBAI, 4 April 2020: In order to create one of the largest Indo-Japan agriculture collaboration aligned to make In India, Kubota Corporation will acquire 10% equity stake for INR 1042 crore (USD $ 140 million), on a post capital reduction basis, in Escorts Group, India's second largest tractor manufacturer.
Escorts will allot 1.23 crore shares through a preferential issue to Kubota at INR 850 per share, Escorts said in a regulatory filing.
Simultaneously, Escorts will acquire 40 per cent stake in Kubota Agricultural Machinery India, the marketing and sales company of Kubota in India.
The existing 60:40 joint venture between Kubota and Escorts — Escorts Kubota India — will continue to operate as it is, the statement added.
Upon completion of this transaction, both the companies will partner to become a leading player in the Indian market and a hub of product development, manufacturing and sourcing for global markets.
Speaking on this development, Nikhil Nanda, Chairman and Managing Director, Escorts said, at Escorts, we believe in strategic global partnership with an objective to address global farm mechanisation needs. Partner with Kubota will help us offer farmers with innovative solutions and thereby maximise productivity for profitable growth in domestic and export geographies.
“This collaboration aims at leveraging R&D strengths of Kubota to offer cutting-edge products for domestic and export markets, serving customers in new markets and new product lines.
"With our manufacturing expertise and strong domestic distribution combined with collaboration with Kubota, we aim to reach our objective of becoming the market leader in farm mechanisation, and address the food security challenge,” Nanda added.
Yuichi Kitao, President and Representative Director, Kubota, Japan, said, “Escorts has a strong technology legacy and diversified portfolio in agriculture equipment solutions market and Kubota has proven global technology capabilities."
"Through this collaboration, we believe that we will cater to India and other growing economies which require high-end technology and new age tractors to address growing demands of highly mechanized farming. Kubota and Escorts, together, with their leadership in respective geographies will consolidate strengths and technology innovation excellence to emerge as a global leader,” Kitao added.
Strategic Rationale
1] Escorts from product innovation through indigenisation of global R&D, production systems excellence, global supply chain, sales and distribution and act as a global sourcing hub for Kubota; and
2] Kubota with assured supply of cost-effective products in and for India, joint product development for emerging and global markets, and expansion of product range through respective distribution networks.
3] New avenues of growth in construction equipment and agriculture implements, leveraging strengths of both the parties, with focus on products including earth moving equipment & smart agriculture implements.
4] Create one of the largest Indo-Japan agriculture collaboration aligned to Indian government’s Make In India vision, by integrating technological excellence and frugal innovation to provide latest farm mechanization solutions across the globe.