Escorts To Set Up Firm Overseas In New Thrust

Escorts Ltd has proposed to establish one or more companies abroad with an initial investment up to $15 million while the company's domestic ventures will entail an investment up to Rs 500 crore. The company will seek the shareholders' approval for these investments at its forthcoming annual general meeting.

Escorts' investments in group, associate and other companies in the last fiscal stood at Rs 350 crore. However, the company will require to make substantial investments in other companies from time to time to support the expansion, modernisation and diversification programmes. The company's overseas investment plan is in view to explore the possibility of establishing, manufacturing, trading, joint ventures and other business operation overseas.

 

The board of directors of the company had earlier secured the shareholders' approval to borrow up to Rs 1500 crore.

Escorts has signed a MoU in February this year with Long Manufacturing (NC) Inc, North Carolina, USA for a joint venture company, Long Agribusiness LLC, for manufacture, assembly and sale of tractors. Escorts will have 49 per cent equity participation in the company. The current tractor operations of Long will be transferred to the new company.

However, approval of the shareholders will be sought to make investment in the share capital of the joint venture company in one or more tranches up to $ 9 m.

The company is already exporting tractors to Long under a five-year distributorship agreement. During 1997-98, it distributed over 500 tractors. Escorts expects to expand its exports and establish a long term presence in the international markets though a part equity ownership and management participation.

Escorts will also secure shareholders' approval to make investment up to $5 million in the share capital of the joint venture company proposed to be set up in Turkey with Traksan. The company has entered into exclusive distributorship agreement with Traksan for sale of the company's Farmtrac-60 tractors in Turkey.

The restructuring of Escorts' businesses four years ago by spinning off the motorcycles, communications and construction equipment divisions had resulted in independently capitalised companies with independent fund raising capabilities.

While the businesses were spun off, the post restructuring equity capital almost doubled on account of the merger of Escorts Tractors Ltd with the company and the conversion of NCDs & SPNs. The equity capital of the company, which was Rs 33.9 crore till 1994-95, has now increased to Rs 72.23 crore.