International Tractors Rejects Renault Buyout Offer

Tractor maker International Tractors Ltd has rejected French auto maker Renault's offer to buy out its shares for Rs 2,000 a piece.

The decision was taken by the promoters of the company -- the Rs 900 crore Sonalika group based in Delhi -- at a time when some of the biggest names in the corporate world have failed to lure foreign investment.

International Tractors chairman L D Mittal said the French offer was far below the hidden price of the shares of the company.

The company's aim was to become the numero uno player in the country and a formidable force in the overseas markets as well in near future.

Mittal declined to comment on what should be the right price for the company's share.

He, however, shared some numbers. For instance, the company's turnover at the end of the current year would be around Rs 500 crore against last year's Rs 350 crore. It hoped to post a net profit of Rs 50 crore this year compared with Rs 5 crore in the last year. On top of this, the company was debt-free and has a small equity base of 50 lakh shares.

He added that the French company's inclination to pay the price for a share was five times of its previous acquisition cost.

For starters, Renault Agriculture, a subsidiary of Renault, has acquired a 20 per cent stake in International Tractors for Rs 400 a share in July 2000. On a total equity of 50 lakh shares, the acquisition cost of Rs 40 crore was injected to part finance the Rs 300 crore tractor manufacturing project at Hosiarpur, Punjab.

The balance was financed by internal accruals by the promoters who command a 80 per cent stake in the company.

The company has managed to record a 33 per cent growth this year against a 17 per cent decline in the overall industry growth. It would end up this year with a total sale of 18,000 units against the previous year's 13,496.

"The company, which has a 9 per cent share of the Indian market, will be the largest player if the rate is maintained," he added. Currently, International Tractors is the fifth largest player in the company.

In addition to penetrating more in the domestic market, the company plans to earn a larger portion of its revenue through exports to South Africa, Bangladesh, Nepal, Sri Lanka and France. The company's products are marketed by its French partner Renault under the brand name 'Solis'. In the country, its brand is 'Sonalika'.