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Business Standard

Yesterday once more?

Once the premier engineering company in the country, Escorts is now a shadow of its former self. But its chairman Rajan Nanda will do all he can to protect his turf

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Recently, 4.2 million shares of (it makes tractors and other farm equipment, construction equipment, automobile components and railway equipment) were purchased by a company called Har Parshad & Co from for Rs 32 crore. The acquirer was a private company of the Nanda family that runs Escorts. The purchase raised the family’s stake in the company from 27.67 per cent to 31.67 per cent. The stock market was abuzz that Escorts could be targeted for a takeover by a rival tractor maker, and the Nandas were all out to protect their flagship company. Expecting a bidding war, investors bought Escorts shares; the stock jumped over 5.5 per cent in a single day. Joint Managing Director discounted all talks of a looming takeover crisis, and said: “We have been making creeping acquisitions in the last 10 years. We have already acquired 10 per cent and this is another 4 per cent.”

Mahindra & Mahindra, which was rumoured to be the raider, too says it has no interest in Escorts. It subsequently transpired that the Nandas had also set in motion plans to merge three group companies into Escorts, which would ultimately improve their stake further.

For a moment, it was yesterday once more. In 1983, Escorts, along with , had been raided by non-resident Indian Swraj Paul. It was the first attempt at a hostile takeover of an Indian blue chip company by an overseas businessman. Har Prasad Nanda, current Chairman ’s father, was running Escorts with a stake of just 7.5 per cent. Hectic lobbying followed. It has now emerged that it was only when Vivek Bharatram of DCM requested Rajiv Gandhi to intercede (the two had studied together at the Doon School in Dehra Dun) that Paul let go of Escorts and DCM. But it was never clear what triggered Paul’s raid. Nanda was not available for comment. During an interaction with Business Standard in mid-2008, he had said that Paul was backed by two powerful politicians, one of whom was a serving minister.

Murad Ali Baig, author and automotive expert, who worked with Escorts for 18 years and was in the thick of the battle with Paul, says that DCM’s attraction lay in the valuable real estate it owned and Escorts was the of the country at that time. “Nobody even came close to it.” He recollects that Escorts had engaged Ricardo of England to suggest improvements to its Rajdoot motorcycle. “At the end, Ricardo said ‘this is such a beautiful piece of engineering; please don’t change it’,” he says. The Rajdoot GTS, a variant, was made famous by Rishi Kapoor in the Raj Kapoor-produced and -directed Bobby (1973) — perhaps one of the first instances of in-film brand placement. Nanda, for the record, is married to Ritu, Raj Kapoor’s daughter. And his son, Nikhil, is married to Shweta, Amitabh Bachchan’s daughter.

* * *

In the last 20 years or so, Escorts has become a shadow of its former self. It has ended joint ventures with Yamaha of Japan to make motorcycles and JCB of England to make construction equipment, sold its telecom venture (it operated in the West Uttar Pradesh, Haryana and Kerala circles under the Escotel brand) to Kumarmangalam Birla’s Idea Cellular, and offloaded the iconic Escorts Heart Institute in New Delhi to Fortis Healthcare. In between there was a foray into consumer durables under the Niky Tasha brand (it was named after Nanda’s children, Nikhil and Natasha). But it ended soon. Much before others, the family had got into organised retail with its Nanz chain of stores, but that too had to fold up.

Escorts’ fate was no different from many other Delhi-based families that suffered from 1991’s economic liberalisation. So long as there were restrictions on foreign ownership of Indian businesses, these families were courted heavily by multinational corporations. The moment the restrictions were removed, the same local partners became liabilities and were dropped from joint ventures almost overnight. They had nothing to offer to the multinational corporations any longer — neither money, nor marketing muscle. This is when Nanda sold the motorcycles business to Yamaha and exited the joint venture with JCB. Another blow came when its partner in tractors, Ford, sold its farm equipment business to New Holland. And New Holland had its own plans for India. Escorts had diligently built the Ford brand in India; till somebody else came and walked away with the business. Nanda, in the interview mentioned earlier, had claimed that Ford had first offered to sell the tractor business to Escorts, but the severe restrictions on foreign investments, thanks to the precarious forex position, made it a tough proposition. “You can’t fight destiny,” Nanda had said without rancour when asked about the business partners he had lost.

Some vestiges of the pre-liberalisation importance of local families could still be seen in 2008 in Nanda’s office in Faridabad in the outskirts of Delhi. A full floor housed his office. The waiting area outside was as big as a tennis court. A huge portrait of his father and Escorts founder, Har Prasad Nanda, hanged on the wall. His own room was no smaller. Nanda sat behind a big U-shaped wood table. There were paintings from various artistes in the room, along with books, family photographs and two televisions.

Rajan Nanda has also been dogged by controversies, not once but twice. The first happened when he converted the Escorts Heart Institute from a charitable trust to a company, obviously with the aim of selling it off. The red flag was raised by none other than his younger brother, Anil, who said not only was the act illegal, it was also done surreptitiously behind his back. Nanda, on his part, said the conversion to a company was done to unlock the value of the investments in the hospital and everything was above board, everybody was kept informed. Soon thereafter, the two brothers parted ways. Anil exited from Escorts but took with him the very profitable automobile component maker, Goetze. “You are supposed to live together. But if you are not happy, it is best to separate and go your own way,” Nanda had said in 2008.

The Escorts group may have shrunk in size but it is still significant. It is the third largest tractor maker in the country after Mahindra & Mahindra (it also owns Punjab Tractors) and TAFE. In 2010-11, it reported a net profit of Rs 120 crore on a turnover of Rs 3,210 crore. And Nanda will do all he can to protect his turf, if anybody attempts to take it over. Har Prasad Nanda had lost it all in Partition. He had come too Delhi from Lahore with only Rs 5,000 in his pocket and two cars. Instead of staying with relatives, he booked a suite of rooms in The Imperial, Delhi’s most expensive hotel, so that he could revive his business contacts. The trick worked. He was back in business soon. Har Prasad Nanda built the Escorts group at Faridabad (the industrial township was set up to help migrants like Nanda from Pakistan). Is Nanda chip off the old block?

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