Shares of this leading engineering conglomerate in the automobile sector dropped nearly 10 percent after board approval to divest its railway equipment division for a lump sum of Rs. 1,600 crores.
Share price variations:
With a market capitalization of Rs. 39,392.16 crores, Escorts Kubota Ltd. fell to an intraday low of Rs. 3,346.00 representing a 9.6 percent decrease from its previous closing price of Rs. 3,701.20 per share.
Reason for the Fall:
According to exchange filings, Escorts Kubota Ltd.’s board has approved the sale of its division involved in manufacturing, assembly, sales, servicing, and R&D of railway equipment and related parts, as a going concern on a slump sale basis, for a cash consideration of Rs. 1,600 crore to Sona BLW Precision Forgings Limited. This divestment is aimed at sharpening the company’s strategic focus on its core Agri Machinery and Construction Equipment sectors.
As per the FY24 financials, the Railway Equipment Division contributed 10.83 percent to Escorts Kubota’s revenue, amounting to Rs. 950.41 crores. The division’s net worth stands at Rs. 342.63 crores, representing 3.76 percent of the company’s total net worth.
Financial Performance:
For Q1FY25 the company reported a net profit increase of 1.11 percent to Rs. 293.13 crores compared to Rs. 289.89 crores in Q1FY24, while revenue from operations marked a decrease of 1.92 percent to Rs. 2,309.95 crores from Rs. 2,355.17 crores in comparison to the same period.
The Railway Equipment Division contributed 11 percent to revenue in Q1 FY25, amounting to Rs. 244.7 crore, reflecting a 17.8 percent decrease compared to Q1 FY24. Meanwhile, agribusiness products accounted for 73 percent of revenue, and construction equipment contributed 15 percent.
Recent Updates:
Escorts Kubota Ltd is planning a Rs. 4,500 crore investment to set up additional tractor and engine manufacturing capacity and balance for meeting its future growth requirements. The project will be implemented in phases starting in year 2028.
Business Divisions:
Escorts Kubota Ltd operates through three key business divisions: the Agri Machinery Division, which manufactures tractors, provides agricultural solutions, spare parts, services, and manages the engine business; the Construction Equipment Division, responsible for material handling, road compaction, and earthmoving equipment; and the Railway Equipment Division, which produces brake systems, couplers, suspension systems, and friction & rubber products, which the company plans to transfer.
About the company:
Escorts Kubota Ltd. is one of India’s leading engineering conglomerates engaged in the manufacturing of Agri-machinery, Construction & Material Handling Equipment, and Railway Equipment. The has six manufacturing facilities located in Faridabad, Haryana.
As of September Rakesh Jhunjhunwala and associates hold a 1.53 percent stake in the company amounting to 17.08 lakhs equity shares valuing Rs. 632.31 crores.
Written By: Joseph Pv
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