Escorts Limited Divests Stake in Carraro India Limited for Euro 20 Million
New Delhi, 15th September 2006: Escorts Limited has signed an agreement with Carraro International S.A., a group company of Carraro S.p.A. to divest its 49% shareholding in Carraro India Limited, a joint venture between Escorts Limited and Carraro S.p.A. This divestment in turn would help Escorts Limited realize Euro 20 million at the current rate of exchange.
Escorts Limited intends to utilize the proceeds of this divestment for repaying its debts and thereby bringing down the interest costs to improve the bottom line of the company. Earlier, staging a turnaround, the net profit of Escorts Ltd. in the 3rd quarter ended June 30, 2006 stood at Rs.1.57 crore compared to Net Loss of Rs.57.38 crore in the corresponding period of the previous year. The total income increased by 94.79% to Rs.478.50 crore during the quarter ended June 30, 2006 compared to Rs.245.64 crore in the same period of the previous year. Focusing on the long-term growth, the company has been re-concentrating on its core businesses of Agri Machinery, Auto Suspension and Ancillary Products, Railway Equipment and Construction equipment.
Carraro S.p.A is a leading company in Europe for transmissions, axles and gears. In 1997 Escorts Ltd. and Carraro S.p.A. had entered into a joint venture - Carraro India Limited for manufacturing and supplying axles and transmissions to tractor manufacturers both in India and overseas. While the majority shareholding was by Carraro S.p.A. in the joint venture, 49% was held by Escorts Ltd. To use India as a supply base to the Asian and International markets, Carraro S.p.A. had been contemplating of having a fully owned company in India. With Escorts Ltd. divesting its stake in favour of Carraro International S.A., it will help Carraro realise its plans. To support the production plans of Escorts for the next 3 years by supplying axles and transmissions, Escorts Ltd. has entered into a supply agreement with Carraro Group and expects to be a major buyer of Carraro's axles and transmissions.