Amid market speculation of rival groups looking to buy into Escorts Ltd, the promoters on Thursday bought 4.2 million shares in the company from Reliance Asset Management. Escorts Group promoters, the Nanda family, raised stake in Escorts Ltd to 31.67 per cent from 27.67 per cent.
Notably, Escorts was among the first Indian companies to face the threat of a hostile takeover bid by Lord Swaraj Paul in 1983, much before the economy was liberalised. However, that bid was thwarted by the Nanda family, citing rules governing non-resident Indians. Merger and acquisition specialists believe the case became the starting point of the evolution of the Takeover Code. The company, started by H P Nanda and Yudi Nanda in Lahore in 1944, is headed by Rajan Nanda, the group chairman and Nikhil Nanda, the joint managing director.
Just before Thursday’s close, the market was abuzz with news that Mahindra & Mahindra was in the race to acquire a stake in the company. When asked, a Mahindra & Mahindra spokesperson said, “The company does not comment on market speculation.”
By that time, it was apparent the four per cent stake in Escorts had been bought by the promoter family itself. By that time the stock had jumped 5.54 per cent to Rs 81.
The Nandas acquired four per cent stake for Rs 32 crore from Reliance Asset Management, which held eight per cent. The transaction was done through investment company Har Parshad & Co, controlled by the Nandas.
Commenting on the development, an Escorts spokesperson said, “The promoter group has bought what was available in the market. The fact that the mutual fund continues to hold the remaining four per cent should convey the faith that investors have in the company.”
Escorts feels not much should be read into the deal, a routine purchase of shares, and the company is threatened only as much as any other in the listed space with below 51 per cent promoter holding.
Nikhil Nanda, joint MD, Escorts, said, "There is no truth in these rumours. All kinds of names are being thrown up now and I don't know why speculators are coming out with these completely baseless rumours. As a group, we have been making creeping acquisitions for the past six years. We have already acquired 10 per cent and this is an additional four per cent. We believe in creating long-term value and we're here to stay."
The Escorts Group is among the country's leading engineering conglomerates operating in the high-growth sectors of agri-machinery, construction & material-handling equipment, railway equipment and auto components. For the year ended 2010-2011, the company's sales stood at Rs 3,210 crore, reflecting a 16 per cent growth over the previous year. However, its net profit contracted 13 per cent to Rs 120 crore compared to Rs 138 crore in the previous year.
