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Journalism of Courage
NEW DELHI, JUNE 8: Escorts group plans to raise its equity holding in Escorts Finance from 52 per cent to 70 per cent.
"The objective is to strengthen the finance arm so that it provides capital support to all the group’s businesses," Escorts group chairman Rajan Nanda said.
Of the 52 per cent stake held by the group, flagship Escorts Ltd holds around 19 per cent. The balance is owned by the other group companies.
The hike in the equity holding in Escorts Finance will be done in stages, he added.
In the first stage, the equity stake of the group is likely to increase to 60 per cent over a period of one year.
The Nandas along with the group companies plan to take the creeping acquisition route. The group can acquire up to five per cent in a year through this process.
Nanda is keen that Escorts Finance evolves into a finance vehicle for providing capital support to all its businesses. The group will draw advantage from the finance arm as it would provide financing to all its products including tractors, motorcycles and construction equipment.
"It will be a win-win situation for both: The finance arm will get business routinely from all the group companies of Escorts and the companies will get incremental business", said a top company official.
EFL has an equity base of around Rs 20 crore.
The majority of the financing business of Escorts Finance will come largely from the Escorts group, but the company will also provide financing to other company’s products.
The company’s range of services include car and commercial vehicle finance, hire purchase, plant hire, bill discounting and equipment leasing. Escorts Finance — a non-banking finance company — was promoted by Escorts Ltd in 1986.
Earlier, almost two years ago, Escorts had proposed to subscribe to the preferential allotment of shares by Escorts Finance Ltd. EFL was planning to make a rights issue of equity shares of Rs 10 each for cash at par in the ratio of one share for every one share held. Escorts Ltd would have been offered 38,19,700 equity shares of Rs 10 each. In addition, it was proposed to also apply for up to 1,44,05,300 additional equity shares in the rights issue. The proposal was shot down by the financial institutions who are the second largest shareholders of Escorts Ltd.
