L&T, it may be recalled, had already spun off its equipment business in Bangalore as a 50:50 tieup with Komatsu of Japan and was proposing to do the same with Case Corp for its Pithampur plant. This was part of a restructuring effort by the engineering major for some of its activities.

New Holland, which recently acquired Case Corp, was also believed to be a contender for the Pithampur plant and now will step in as an automatic alternative to Case. Though L&T officials were not available for comment on the issue, industry sources confirmed that the deal was ``very much on'' and would be finalised in the months to come.

New Holland, which is 69 per cent owned by Fiat SpA of Italy, has outlined its own tractor business plans for India. It has a greenfield facility in Noidanear Delhi and will manufacture tractors in the higher horsepower range. The company, sources say, is as keen on the construction equipment business and the joint venture route with L&T makes tremendous business sense as far as synergies go.

This, in turn, explains why New Holland would not be too concerned about L&T's own tractor plans with Deere of the US, the world's largest maker of farm equipment. ``There is no basis for competition as the construction equipment business is not even remotely connected to tractors,'' sources say. Hence, the Deere alliance with L&T will go as scheduled and the first tractor is expected to roll out of the Ranjangaon plant near Pune by 2001.

L&T's decision to bring in foreign collaborators for the construction equipment business stems from the realisation that it is time to bring in state-of-the art products to India. ``Eventually, it boils down to surviving in a competitive market and there is really no other alternative," experts say.

The leader in the segmentcurrently is Escorts-JCB where the British partner recently increased its stake in the joint venture from 40 per cent to 60 per cent. The alliance, which manufactures different types of backhoe loaders, kicked off operations in Faridabad nearly two decades ago. It began as a 60:40 alliance between Escorts and JCB but the Indian partner has now decided to cede control and settle for a 40 per cent stake.

M&M to scout for new partner

Mahindra & Mahindra, which had planned a joint venture with Case Corporation for tractors, may now have to scout for alternative partners or go on its own. This is because New Holland, which acquired Case, already has its tractor operations going in India and will not get into a ``competing business with itself.'' There has been no official confirmation yet from M&M on the fallout of this acquisition.