Tafe has made an offer in this regard and EML has approved the offer. EML has expressed its intention to concentrate on its CV Business by exiting from the tractor business.
The offer is subject to definitive agreements, due diligence of the businesses and necessary approvals. Tafe director Mallika Srinivasan, however, told FE that both sides have not finalised the value of the deal so far.
If the deal sails through, Tafe would be the second largest tractor manufacturer in the country.
With the proposed acquisition, Tafe which has a strong presence in the 35 HP and above segments, hopes to augment its presence in the sub-30 HP segments as well - which constitutes a major chunk of the domestic market with a demand of approximately 50,000 tractors per annum.
The combination with Eicher, which is a strong player with a 55% market share in the below 25 HP segments, would push the combined sales volume to close to 55,000 units and the combined market share to 22% of the domestic volumes. This move also offers Tafe a more uniform geographic spread across India, according to a company statement issued here.
This would give Tafe the opportunity to access air-cooled engines and augment its gear manufacturing capacities. Tafes parent company Simpson & Co Ltd already supplies water-cooled diesel engines of above 35 HP for Eicher Tractors.
A Sivasailam, Chairman and Managing Director of Tafe said: This proposal to acquire the tractors, engines and gears divisions of Eicher Motors Ltd has the advantages of being both a strategic and a cultural fit to both the companies. It also offers Tafe a manufacturing base in the North. Most importantly, it gives us the opportunity to be a strong number two player in the Indian tractor industry with its attendant benefits to all the stakeholders.
Tafe has been scouting for a toehold in north India for some time and in 2003 it had bid for the 23.5% state government stake in Punjab Tractors but withdrew from the race later. Incorporated in 1960, Tafe belongs to the Amalgamations Group, one of the oldest, family-run conglomerates in the South. Tafe is a major player in the 18 HP to 75 HP and rolls out its machines under two brand names, Massey Ferguson and Tafe. The company has three manufacturing set-ups, one each at Sembium, near Chennai, Madurai and another one at Doddaballapur, near Bangalore. It is one of the largest unlisted companies in India. Tafe, the Rs 1,100-crore Chennai-based tractor company with additional interests in engineering plastics, gears and batteries has shown impressive growth in the first ten months of the current fiscal with close to 40% growth in sales volumes over the corresponding period of the previous year.