Tractor and Farm Equipment Ltd proposes to retain the Eicher brand in the market even after it acquires the tractor business of the Delhi-based Eicher Group.
TAFE's strength lies in the mid- and high-horse power segments (30 horse power and above). On the other hand, Eicher has a 55 per cent market share in the sub-30 horse power segment, which commands a volume of 38,500 units in the 226,000 unit domestic tractor market.
A TAFE spokesperson said: "The due diligence and valuation process is progressing smoothly, and we propose to retain the Eicher brand even after we take over their tractor business. The management, of course, will be common. Apart from the obvious market share consolidation we also expect cost efficiencies in terms of common sourcing of raw material and media buying for advertisements and the like."
With a market share of 14 per cent in India, TAFE will further consolidate its position with an additional 8 per cent (in the overall market).
Interestingly, TAFE on its own increased its market share in 2004-05 and became the number two player in the domestic tractor market, replacing Punjab Tractors, which fell to the third position with 13.2 per cent market share in 2004-05.
In the last week of February this year, Tafe announced it had offered to buy the tractor, engine and gear manufacturing businesses of the Eicher group. The consolidated turnover of the three units of Eicher is estimated at Rs 500 crore (Rs 5 billion).
The Eicher group had said it had undertaken a review of its business portfolio and had decided to focus on commercial vehicles, which it believes is a major growth driver for the group.
"This is in line with the company's strategy of focusing on select businesses in which it could attain a strong market position. Consequently, Eicher Motors is exploring the possibility of divesting its Tractor business," said an Eicher executive.
The board of directors of Eicher Motors has granted in-principle approval for exploring opportunities for sale of its tractor division at Mandideep (Madhya Pradesh), Gears Division at Parwanoo (Himachal Pradesh) and Engine Division at Alwar (Rajasthan) to Tafe.
