Escorts Limited - Playing for Margin Expansion

Stock Opportunities
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CCI has approved Kubota stake high, Next step open offer will open very soon.

PR63-2021-22 (1).pdf (261.6 KB)

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Rakesh Jhunjhunwala stake in Escorts increases vs Dec 2021 quarter

As per recent filing👇
-Current holding 75 lkh shares
-Dec 2021 quarter 64 lkh shares

Absolute increase 11 lkh shares

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As per my note open offer started from 14/3 to 28/3?
What action do shareholders need to take?
Thanks

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76th AGM was held on 14th July 12 noon.

  1. Video - 76th AGM of Escorts Kubota Limited - YouTube,
  2. 76th AGM PPT Presentation

Medium Term Business Plan to be published sometime in Sept.

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Escorts Amalgamation announcement with Kubota JVs

Summary:

  • Rev jumps 1800Cr,
  • Tractor capacity goes up to 1.7L from 1.2L p.a.
  • Equity dilution of just 1.2% equity.
    PAT would notch higher with efficiencies and leaner mgmt, consolidated strategy going ahead.

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Really bad numbers by Escorts. Big dent in margins & hence net profits. Another big downside candidate for Monday.

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The company has shared the Escorts Kubota Mid Term Business Plan Presentation.

Some highlights:

  • Aspiration-2028 to setup 1 more factory to increase tractor/engine capacity to 3L/annum.
  • Global hub for affordable manufacturing
  • “Currently Kubota group is sourcing certain parts from India and growing.
    Even 5% shift of total buying of components sourcing globally to India would mean about USD 500 million worth of potential exports. Our aspiration for FY28 captures a part of this potential.”
  • Target items - In-house fabricated assembly items (Transmission, gear assemblies, etc.), Castings, gears and functional parts.
  • Evolve from Track-type leader to the most Dominant Harvester Manufacturer in India.
  • Channel Expansion & Synergy with Kubota, EKL targets 4 key high TIV markets with KBT presence - USA, EU, Thailand and Brazil
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Some unconfirmed news on the counter. I suspected this might be one of the next steps, since the Mid Term Business Plan details in the Auuunal Report were very generic for the Railway business, whereas for Agri they had mentioned definitely plans on capex. Construction Equipment business also am not sure, if they want to retain if Kubota is not having similar products.

We have to wait to see how this benefits minority investors or not. I would have preferred if they demerged this business, distributed shares to minority investors, listed it seperately and then sold the promoter stake to buyer. If its a slump sale, then the cash hoard just increases.

India’s Escorts Kubota mulls sale of railway equipment unit -CNBC-TV18 | Reuters

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Now they are opening a NBFC to finance the Company’'s Products and Consumers. Interesting Escorts Finance revoked its NBFC license earlier and has changed that AoA and Memorandum to change the line of business, Alos it was renamed to “Invigorated Business Consulting Limited”

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this is not a good development overall. usually, Manufacturing firms in AUTO and CD with finance companies end up pushing sales for their parent at the cost of poor loans at NBFC. off course it helps in short term, but eventually, the parent has to capitalize their NBFC from losses in agri. MMFL /L & T FINANCE BFL _2 W bajaj AUTO PORTFOLIO is a classic case

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According to a recent article on Construction Times, the Indian mobile crane industry is poised for growth. Here are the key points:

  1. Current Market Scenario:

    • The Indian government’s ambitious “Vision 2030” initiative aims to transform India into a $5 trillion economy by 2025 and a $10 trillion economy by 2030.
    • Infrastructure development projects, including roads, railways, seaports, airports, urban transport, and inland waterways, have created a strong demand for mobile cranes in India.
    • Pick-n-carry cranes, which constitute over 90% of the total mobile crane industry in India, are widely used for material handling operations.

  2. Growth Trends:

    • In the current financial year (FY24), the Indian mobile crane industry recorded an impressive 26% year-on-year (YoY) growth.
    • The pick-n-carry cranes segment specifically saw a remarkable 45% YoY growth.
    • Escorts Kubota Limited, a market leader in safe cranes, introduced the TRX 30 crane with a 30-ton capacity for mega infrastructure projects.
    • The TRX 30 features joystick-controlled craning, a hydraulically operated winch with safety brakes, and efficient driveline components.
    • Telematics integration allows real-time monitoring of crane performance and location.

  3. Future Outlook:

    • Despite a potential drop in the first quarter of FY25 due to general elections, the mobile crane industry is expected to grow at a CAGR of 4-5% until FY28.
    • Government policies supporting infrastructure development will continue to drive demand for mobile cranes in India ¹.
      :building_construction::construction:

(1) The Indian mobile crane industry will continue to grow in future… The Indian mobile crane industry will continue to grow in future. - Top Construction and Infrastructure Magazine.
(2) Construction Times - Top Construction and Infrastructure Magazine. https://constructiontimes.co.in/.

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