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This is an archive article published on July 19, 1997

Escorts to go for majority stake in new JVs

NEW DELHI, July 18: Escorts Limited, the flagship company of the Rs 3,300 crore Escorts group, has decided to have majority control in all ...

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NEW DELHI, July 18: Escorts Limited, the flagship company of the Rs 3,300 crore Escorts group, has decided to have majority control in all its future joint ventures in India. The company boasts of over half-a-dozen joint equity ventures with some of the leading MNCs.

Escorts chairman Rajan Nanda said that he would also like to incorporate a clause in Escorts’ all future joint venture agreements that will prevent a take-over of the company by its minority overseas partner.

Nanda said "future joint ventures will be entirely on our terms and the focus will be the shareholders’ return in Escorts." The company is exploring a number of fresh joint ventures with foreign companies mainly from the Asian countries.

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Dismissing the threat of joint venture partners taking over Indian companies, Nanda emphasised that the Indian partner should insist on a majority stake and there should be no compromise on the fact that the agreement would have to be part of the overall growth strategy, guided by the vision of the company.

Ultimately the success of any joint venture should be determined in terms of whether it adds value to the bottomline of the company, the Escorts chairman pointed out.

The Escorts chairman said that his group was in the process of giving a major thrust to all its products in the international market. "We have joint ventures with leading international companies which help us to produce world class products at very competitive prices," he said.

Commenting on the success of the restructuring programme undertaken by the company, Nanda stressed that in spite of having divested some profitable businesses to form joint ventures, the turnover of Escorts Ltd, the flagship of the group, had grown to Rs 1,657 crore in 1996-97 from Rs 1,444 crore in 1995-96.

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Earnings per share had grown from Rs 17.50 to Rs 19.52 despite an increase in the paid up capital. Net profit was up from Rs 139 crore to Rs 167 crore and the dividend was hiked from 40 per cent to 45 per cent during the corresponding period.

The Escorts group’s total income also rose 19 per cent to Rs 3,342-crore in 1996-97 while net profit increased 22 per cent to Rs 303 crore. An ambitious target of Rs 10,000 crore has been set for the year 2000.

Nanda is optimistic about achieving accelerated growth rates in its core agri-machinery business as well as a substantial return on its cellular telephone joint venture. Escorts group is also considering plans to expand its existing construction machinery business, company sources said.

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