The move to buy out Eicher's tractor unit, according to Mallika Srinivasan, director, Tafe, was initiated to consolidate the Chennai-based company's number two position.
Speaking to Business Standard, Srinivasan said the consolidated turnover of the three units of Eicher was around Rs 500 crore (Rs 5 billion).
"We have done an internal assessment of the value of these businesses, which we cannot reveal at this stage," she said.
Srinivasan added, "Tafe has a market share of around 14 per cent and the combined market share, if we take over Eicher's tractor business, could be 22 per cent, which will help us consolidate our position," Srinivasan said.
Market leader Mahindra & Mahindra enjoys a share of close to 30 per cent in the Indian tractor market of 245,000 units.
In a separate statement to the media, the Eicher group said the company had undertaken a review of its business portfolio and had decided to focus on the commercial vehicles business, which it believed was a major growth driver for the group.
"This is in line with the company's strategy of focusing on select businesses in which it can attain a strong market position. Consequently, Eicher Motors is exploring the possibility of divesting its tractor business," said the statement.
The company informed the Bombay Stock Exchange that the board of directors of Eicher Motors had granted approval in principle for exploring opportunities to sell its tractor division located in Mandideep, Madhya Pradesh, the gears division in Parwanoo, Himachal Pradesh, and the engine division in Alwar, Rajasthan, to Tafe.
Said S Sandilya, chairman and group chief executive, Eicher Group, "We believe we have the potential to grow aggressively and reach a leadership position in commercial vehicles. Against this background, we have entered into discussions with Tafe for divesting our tractors and engines businesses as going concerns. The transaction will be subject to due diligence of the businesses and approval by the board of directors and by the shareholders."
