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Nirmal Bang Report
We note that Escorts Ltd. is undergoing a significant change in its shareholding structure, with global company Kubota Corporation poised to become the major shareholder (~53% post dilution and acceptance of open offer as per our calculations).
This partnership could potentially lead to material benefits. However, we believe that execution risk persists and anticipated tangible benefits are likely to flow only in the medium to long term.
While the open offer price by Kubota at Rs 2,000/share could provide some headroom for valuation catch-up, we believe cyclical risks (moderating rural growth and peaking tractor demand cycle) could restrict Escorts' outperformance in the near term.
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