French automobile and engineering major Renault has divested its 20 per cent stake in International Tractors Ltd, an unlisted company that is part of Delhi-based Sonalika Group.
As a sign of consolidation gathering pace in the tractor industry, this is the third instance of a company changing hands since May this year.
Interestingly, ITL's promoters have bought back Renault's stake for Rs 44 crore (Rs 440 million), the same price at which Renault had bought it five years ago, even though, according to ITL chairman L D Mittal, the valuation of the stock had vaulted five-six times in this period.
Mittal said talks were on with another international tractor major to offload the Renault stake. It seems the transaction was triggered by Renault. "Since Claas of Germany took over Renault's tractor business worldwide, the company exited from ITL too," Mittal said.
In February 2003, Claas, in a global deal, had picked up 51 per cent stake in Renault Agriculture. The agreement between Renault and ITL gave ITL the first right of refusal. Still, Renault pulling out of ITL comes as a surprise.
In 2002, there were talks of the French company buying out ITL at Rs 2,000 a share, a hefty premium on the original deal price of Rs 400 a share. ITL had declined this offer.
Renault's exit from ITL comes close on the heels of L&T exiting a joint venture in favour of its US partner John Deere. Earlier, Delhi-based Eicher Group sold its tractor business to Chennai-based Tractor and Farm Equipment for Rs 310 crore (Rs 3.1 billion).
The business itself is witnessing an upswing. After a three-year lull, from 2001-02 to 2003-04, the last two years have seen better business. The industry posted a 30 per cent growth in 2004-05 with total sales rising to 249,000 tractors, the highest in five years.
The heat in the tractor segment has also been reflected in market-friendly developments like the launch of a Rs 100,000 tractor by SAS Motors under the brand name Angad last year and the recent launch of a 25 HP tractor by HMT Ltd called Yuva at an unprecedented price of Rs 185,000.