Sonalika in talks for buyouts in Europe

The Delhi-based Sonalika group, with interests in tractors, agricultural equipment and engines, is in advanced talks with some European tractor-making companies, for a full acquisition of one of these businesses.

The acquisition, expected to be completed in the next two months, is to be routed through the group’s flagship company, International Tractors (ITL). It is India’s fourth-largest tractor manufacturer, with a share of nearly 10 per cent, after Mahindra & Mahindra, TAFE and Escorts.

L D Mittal, chairman of ITL, said, “There are several tractor-making companies that are priced attractively in Europe. A presence in Europe will provide us with a major advantage. Our negotiations are on and we hope to make an announcement before December.”

On Monday, the group also announced the sale of a 12.5 per cent stake in ITL for $100 million (Rs 520 crore) to the US-based The Blackstone Group, a private equity giant. The transaction has, thus, valued the unlisted Indian company at $800 mn (Rs 4,160 crore).

The company intends to use these funds for expansion in India and abroad, including India-based export to the US. From 68 countries presently, the company wants to have a presence in 100 countries by the end of this year.

“Many small-sized tractor companies in Europe are facing losses due to a slump in sales. We are looking at a deal size of around Rs 100 crore. We are already in advanced stages of negotiations with some of them,” added Mittal.

The company is also hoping to start exports of its high-powered tractor range to the US by the next quarter. Officials are already engaged in dialogue with a few US-based importers and say they hope to finalise a deal in the next few weeks. M&M is already present in the US and assembles its range locally.

ITL will start direct exports to the US from India to begin with and could later look at local assembly if sales gather momentum. The company has developed a new 125-Hp tractor, also the most powerful in its range, specially for the US market.

“We have got EPA (the US Environmental Protection Agency) approval for our engines. We wish to be present in each of the states of the US. The US will be a big market for us, with sales of around 4,000-5,000 units per annum, about one-fourth of our total exports,” said Mittal.

ITL’s exports grew by 31 per cent to 6,000 units last year, as compared to the year before. This year, it hopes to export 9,000 units of the tractors. In the domestic market, ITL saw sales of 48,000 units last year, a growth of 20 per cent. The target this year is 60,000 units.

“The domestic tractor market is not growing much but, fortunately, demand for Sonalika’s tractors are beating the trend. We opened new markets in the south this year, where we were not present, so this has brought additional volumes. We are increasing our dealer count to 800 in the next one year from 600 dealers now,” added Mittal.