My fiduciary obligation to ensure Escorts is fully institutionalised: CMD

In a Q&A, Nikhil Nanda dwells at length on the deal with Japanese agri-machinery major Kubota and the value it will create for the stakeholder of his company

The deal with Kubota, the Japanese agri-machinery major will create a powerful entity in the farm solutions space in India and globally, Nikhil Nanda, chairman and managing director, Escorts Ltd, tells Shally Seth Mohile. It will create immense value for the stakeholder of Escorts and is a step towards fully institutionalising the firm. Edited excerpts:

What’s the fundamental idea behind the deal? Will the Nanda family at some point look at selling its stake?

We have to put institutions before self. Today’s move is to ensure that the company is fully supported with all the ingredients for it to become a world class company.  It’s my fiduciary responsibility to ensure that Escorts is totally institutionalised.

I feel it’s a historic moment for the country, the company and my personal family.  Upon completion of the deal that we have announced today, the Board will deliberate on merging the two entities basis. It would create a very powerful wheel of farm solutions products for the Indian market.  The new entity will also be able to harness the export potential a lot better.  I feel fortunate that I am able to witness this. It’s a blessing.  

The Nanda family has sold zero shares and we have no intention of selling any shares.  The deal would create a joint partnerships of the two promoters coming together—Nanda family and Kubota and we has joint promoters will manage the company.

What will be the proceeds of the preferential allotment be deployed for?

We are in the process of creating a medium term business plan and we will share the idea and the strategic intent sometime in May or June 2022. There are some powerful and important plans we have in terms of what we will do in terms of up gradation of plants, putting new products and setting up a world class R&D center, etc.  

What was the rationale behind ceding the majority control when you could have continued to be in majority?

Today’s announcement is about building values, aligning on goalposts. If I had just thought of it in terms of the majority or minority stake, it would have constricted the scope of things.  It never came to my mind. I want to build value and create synergy between India and Japan. I want Escorts to serve the farming community and create a very powerful platform that allows us to do many things.

The whole process began in 2018, when we started the JV with Kubota. That’s when the synergy, the trust and alignment happened very naturally and solidified and deepened over the years.