Share Dilution

Escorts shares, owned by Rakesh Jhunjhunwala, trade in red; Kubota takeover in progress

Rakesh Jhunjhunwala’s stake in Escorts is valued at approximately Rs 1,202 crore with 64 lakh shares.

Escorts Ltd, owned by Rakesh Jhunjhunwala, traded flat with a negative bias on Thursday morning, against a backdrop of a bear market. The stock is currently trading at Rs 1,879 per share, having jumped 48.2% in 2021. Escorts, at the start of the last quarter, said Japanese agricultural machinery maker – Kubota, will take over as co-promoter of the company, subject to a preferential issue. shares and an open offer. Big Bull Rakesh Jhunjhunwala currently owns a 5.22% stake in the company.

Kubota takeover in progress

According to the latest Escorts shareholder data, Kubota currently owns a 10% stake in the company with 1.22 crore of shares. However, with a preferential issue of 93.63 lakh capital shares, Kubota’s stake will increase to 14.99%. In addition, Kubota also made an open offer to Escorts shareholders. Investors can start selling their shares from January 11 or Tuesday of next week at an offer price of Rs 2,000 per share, a premium of 6.4% over the current market price of the. action.

According to Edelweiss Alternative Research, Kubota will acquire 26% of the open offer. “After the open offer closes and the issue comes into effect, Kubota will become a joint promoter of the company with the existing promoters,” said Edelweiss. Current Escorts promoters will not participate in the open offer. Edelweiss added that the minimum acceptance rate for the open offer to succeed is 51% while estimating that the final acceptance could be around 70-75%.

During the current quarter, shareholder data shows the total fully paid Escorts of Escorts shares to be 12.25 crore. This is down from 13.48 crore of fully paid shares at the end of the July-September quarter. The drop in the total number of equity shares comes after the escorts canceled 1.23 crore of equity shares. The company will further cancel 2.14 shares before Kubota becomes a co-promoter of the company. The cancellation of treasury shares and the takeover of Kubota, as well as the merger of the Kubota entities can lead to a 5% to 10% equity dilution, analysts at Emkay Global said earlier.

Sales fall sharply

The escorts had informed the stock exchanges earlier in the month that the company had sold 4,695 tractors against 7,733 tractors sold in December 2020, a drop of 39.3% over one year. “Rural cash flow started to improve, but the industry’s wholesale sales were affected during December 2021 due to a high base last year,” the company said in a commercial update. So far this fiscal year, the company has sold 72,333 tractors, 2.5 percent less than it sold in the same period last year. While the company’s exports are better than they were in the previous year, domestic sales were lower.

The participation of Rakesh Jhunjhunwala in Escorts

Rakesh Jhunjhunwala’s stake in Escorts is valued at approximately Rs 1,202 crore with 64 lakh shares. The big bull has had a stake in the company since at least 2015. Rakesh Jhunjhunwala had reduced his stake in Escorts in the January-March 2020 quarter to 7.4% from 7.7% earlier. It then reduced its stake to 5.6% in the July to September 2020 quarter and to 4.8% in the October to December 2021 quarter. Emkay Global has a “Buy” rating on Escorts with a price target of Rs 2,140 each. Kotak Securities has an “Add” rating with a fair value of Rs 1,900 per share.

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