Escorts emerged higher on Wednesday on reports that the company had reached an agreement with Hutchison Essar for sale of its Punjab cellular licence to the latter.
By 9:58 IST, the scrip of the diversified company leaped up 2.74% to Rs 46.85. It registered volumes of 700 shares on BSE by then. Escorts has risen 8.6% to the current level from Rs 43.15 on 3 February 2003.
The scrip has been spurred on by reports that the company has reached an agreement with Hutchison Essar to sell its licence for Punjab circle. Escotel, a group company of Escorts, had paid Rs 151 crore (Rs 1.51 billion) to obtain the license for the Punjab circle. Reports now suggest that the deal has been struck at above that price at least.
Escorts is undertaking a restructuring exercise, and as part of that, it is offloading stake in Escorts Telecom. It was earlier reported that the company is likely to tie-up multiple strategic and financial investors for offloading about 40% stake in subsidiary Escorts Telecom by February-end or in the first week of March 2003. However, the company declined to divulge the name of the companies that it was in talks with.
Escorts Telecom had received licences for four new circles - Punjab, Rajasthan, Himachal Pradesh and Uttar Pradesh (East) - and was expected to start operations by October 2003.
Last week, Escorts' board of directors considered the issue of selling the company's 27.21% holding in Goetze India.
In November 2002, the company announced that the UK-based JC Bamford Excavators was buying out the entire stake in Escorts JCB, a leading manufacturer of excavator loaders. After the acquisition, the shareholding of JCB in Escorts JCB will rise from 60% to 100%. The sell-off will be done partially by buy-back of equity and partially by direct purchase from Escorts, subject to approval of the Foreign Investment Promotion Board and Reserve Bank of India.
Last year, Escorts decided to dispose its stake in three joint venture companies (including Escorts JCB). The other two companies were Escorts Claas (to Germany's Claas GmbH) and Escorts Mahle (50% stake). The company will garner about Rs 235 crore from the sale of its holdings in these three companies.
In August 2002, Escorts sold its 60% stake in Escorts Claas to Germany's Claas for Rs 62.5 crore. The remaining 40% stake in the joint venture is held by Claas. The joint venture was set up in 1992 to manufacture harvester combines.
The company stated that the sale of stake in the above three ventures is in keeping with its decision to focus on the core businesses of agri-machinery, healthcare and telecom and its decision to exit non-core businesses. The company said it is speeding up the pace of sale of stake to fund investments in other businesses and to improve cash flows following a downswing in its tractor business as well as to repay maturing loans. The company expects to receive around Rs 235 crore (Rs 2.35 billion) from the stake sales.
Promoted by H P Nanda, Escorts was incorporated as a private limited company in October 1944 at Lahore under the name Escorts (Agents) Pvt Ltd and got converted into a public limited company in December 1959. The name was changed to Escorts in January 1960. The company is presently into the business of farm equipment, automobile components, railway ancillaries and telecom.
For the third quarter ended 31 December 2002, the third largest tractor manufacturer in India recorded a net profit of Rs 26.14 crore compared to a net loss of Rs 21.06 crore in the corresponding period last year. Total income increased 49.7% to Rs 305.26 crore (Rs 3.05 billion) from Rs 203.96 crore (Rs 2.03 billion) in DQ 2001.
As on 31 December 2002, the promoters' holding in Escorts was 35%, while the public and institutions held 26.35% and 25.83%, respectively.
BSE Code: 500495
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