New Delhi, Sept 7: Escorts Yamaha Motor is in talks with foreign institutional investors for private placement of 25 per cent equity stake at Rs 80-90 per share.
Chairman and managing director Rajan Nanda told reporters that the company would make a preferential allotment to FIIs which will expand its equity base from Rs 27 crore to Rs 36 crore. The shareholding of Escorts and Yamaha in the motorcycle manufacturing company would be subsequently reduced to 37.5 per cent each.
Talking about the financial performance of flagship company Escorts, Nanda said net profit in the current fiscal was expected to grow 72 per cent to Rs 144 crore from Rs 84 crore in 1998-99. Turnover is expected to go up by 30 per cent to Rs 1,708 crore from Rs 1,319 crore.
Net profit in the first half ending September 1999 is expected to rise 68 per cent to Rs 93 crore against Rs 55 crore in the corresponding period of previous year. The annualised earnings per share would go up to Rs 20 from Rs 15.40 last year.
Nanda saidEscorts also plans to retire term debt of Rs 200 crore of the total Rs 500-crore debt during the current year. The debt would be retired by reducing working capital by Rs 175 crore. He said external commercial borrowing of $29 million would also be repaid in the next one or two years.
The company has improved its market share for tractors to 20.60 per cent from 17.70 per cent last year. In the first five months till August, Escorts tractor sales grew 16 per cent to 21,357 units which is much higher than the industry volume growth of 5 per cent.
Nanda said though the Escorts' share price has trebled to over Rs 200, there was scope for improvement as benchmarked to competition. "We look at Escorts very differently now. Escorts is worth much more than what the market capitalisation shows," he said.
"The market quotation, its appears, takes into consideration only operational results. Perhaps there is lack of adequate understanding about the significance of our investments in the capital of othercompanies," Nanda said.
Escorts also plans to divest 25 per cent equity stake each in Escorts Construction Equipment and Escorts Hospital and Research Centre. The share will be divested at a premium as both the companies are making reasonable profits, Nanda said. Escorts proposes to make a private placement of shares in Escorts Construction while it is looking for a strategic partner in Escorts Hospital.
Nanda said Escorts Communications would be wound up since it has not performed well. "I do not anticipate this to impact profitability of Escorts since contingency reserve have been earmarked for this purpose," he said.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.