Rajan Nanda: The man who fast-tracked Escorts' tractor business

Rajan Nanda, chairman and managing director of tractor and construction equipment maker Escorts, passed away on Sunday at the age of 76. Nanda had joined Escorts in 1965 when he was twenty-three and became the chairman in 1994 after his father H P Nanda, who had founded the company, stepped down.

Nanda’s death comes at a time when the tractor maker is firing on all cylinders, thanks to three consecutive years of normal rainfall. The company more than doubled its profit in FY18 to Rs 3.44 billion. In May, Escorts’ stock price rose to a record high of Rs 1,018. Nanda’s son Nikhil, currently the managing director, is actively involved in the business.

Nanda died at the Medanta Hospital in Gurgaon, at the outskirts of Delhi. Incidentally, Medanta was founded by renowned cardiac surgeon Naresh Trehan who once used to run the Escorts Heart Institute & Research Centre owned by Rajan. Nandas sold the Delhi hospital to Fortis for Rs 5.85 billion in 2005. The money was used to bring down the debt at Escorts, the flagship company.

But healthcare was not the only business that Nanda exited. Nanda used to run cellular services in west Uttar Pradesh, Haryana and Kerala under the Escotel brand, a 51:49 per cent joint venture between Escorts and First Pacific Company of Hong Kong. Escotel happened to be one of the first cellular networks to achieve financial closure in August 1997. 

However, the telecom business demanded regular infusion of funds to continue expansion and coverage. Nanda had no problem in pumping more money till the tractor business was doing well. But he faced challenges at the turn of the century as three back to back rainfall deficit years hit the tractor demand. The competitive environment in the tractor market was also changing with the entry of new players, including multinationals.

The viability of expensive GSM (global system for mobile technology) mobile business came under question when the government allowed a mobile telephony based on CDMA (code division multiple access) technologies. Operators got CDMA license free with the basic telephony license. Nanda had no choice but to sell the telecom business to Idea Cellular in 2004, at a loss and a debt. At one point of time, the group’s total debt had swelled to Rs 10 billion.

It had also once defaulted on its payments to ICICI Bank. A decision to sell the healthcare business followed. Besides Delhi, Escorts’ healthcare division had a hospital each in Faridabad and Amritsar and one under construction in Jaipur.

Escorts had two joint venture partners: JCB and Ford. JCB, the partner in construction equipment manufacturing, walked out to set its own shop once it managed to get permission. The joint venture with Ford was to make Ford tractors in India. But Ford sold the business to New Holland which decided to set out on its own in India. Escorts had also exited the two-wheeler joint venture with Yamaha under which it used to make the famous Rajdoot motorcycle in the late eighties.

One of the testing times in Nanda’s life was when Swraj Paul attempted a hostile takeover of the company in 1983. Paul picked up shares from the open market and once had a stake bigger to the promoters’ share of just 7.5 per cent. Nanda, then president of the company, negotiated the issue with Paul’s brother, Jit, over multiple meetings and worked out a resolution. The crisis had lasted for three years.

It is interesting that Nanda tried his hands over multiple businesses but in his lifetime realised the need to focus on the core, which is, tractor beside construction and railway equipment. As recently as 2016, the company exited its auto component business by selling it to a Pune-based company.