Rakesh Jhunjhunwala-owned Escorts’ shares trade in red; Kubota takeover in process

Rakesh Jhunjhunwala’s stake in Escorts is valued at roughly Rs 1,202 crore with 64 lakh equity shares.

Rakesh Jhunjhunwala, TARC
At the end of the September 2021 quarter, Rakesh Jhunjhunwala held 46.95 lakh shares or 1.6 per cent stake

Rakesh Jhunjhunwala-owned Escorts Ltd was trading flat with a negative bias on Thursday morning, amid bearish market momentum. The stock currently trades at Rs 1,879 per share, after having surged 48.2% during 2021. Escorts, earlier last quarter, said that Japanese agricultural machinery manufacturer — Kubota, will take over as the co-promoter of the company, subject to a preferential issue of equity shares and an open offer. Big Bull Rakesh Jhunjhunwala currently holds a 5.22% stake in the company.

Kubota takeover in process

According to Escorts’ latest shareholding data, Kubota currently owns a 10% stake in the company with 1.22 crore equity shares. However, with a preferential issue of 93.63 lakh equity shares, the shareholding of Kubota will increase to 14.99%. Further, Kubota has also made an open offer to Escorts shareholders. Investors can start tending their shares from January 11 or Tuesday next week at an offer price of Rs 2,000 per share, a 6.4% premium to the current market price of the stock.

According to Edelweiss Alternative Research, Kubota will acquire 26% from the open offer. “Post completion of the open offer and issue becoming effective, Kubota will become a joint promoter of the company along with the existing promoters,” Edelweiss said. Current promoters of Escorts, will not participate in the open offer. Edelweiss added that the minimum acceptance ratio for the open offer to succeed is 51% while estimating that the final acceptance could be around 70-75%.

During the current quarter, shareholding data shows, Escorts’ total fully paid-up equity shares of Escorts stand at 12.25 crore. This is down from 13.48 crore fully paid up equity shares at the end of the July-September quarter. The drop in total equity shares comes after Escorts cancelled 1.23 crore equity shares. The company will further cancel 2.14 equity shares before Kubota becomes a co-promoter of the firm. The cancellation of treasury shares and Kubota takeover, and merger of Kubota entities can lead to equity dilution of 5-10%, analysts at Emkay Global had said earlier.

Sales drop heavily

Escorts had earlier in the month informed the bourses that the company sold 4,695 tractors as against 7,733 tractors sold in December 2020, a drop of 39.3% on-year basis. “Rural cash flows started to improve, but industry wholesales were impacted during the month of December 2021 due to a high base last year,” the company said in a business update. So far this fiscal year, the company has sold 72,333 tractors, 2.5% less than what it sold during the same period last year. While exports of the company are better than what they were in the previous financial year, domestic sales have been less. 

Rakesh Jhunjhunwala’s stake in Escorts

Rakesh Jhunjhunwala’s stake in Escorts is valued at roughly Rs 1,202 crore with 64 lakh equity shares. The big bull has owned a stake in the company since at least 2015. Rakesh Jhunjhunwala had trimmed his holding in Escorts in the January-March quarter of 2020 to 7.4% from 7.7% earlier. He then trimmed his stake to 5.6% in the July-September quarter of 2020 and further to 4.8% in the October December quarter of 2021. Emkay Global has a ‘Buy’ rating on Escorts with a target price of Rs 2,140 apiece. Kotak Securities has an ‘Add’ rating with a fair value of Rs 1,900 per share.

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