Punjab Tractors edged up on Tuesday following newswire reports that its divestment would be completed by May 2003.

The scrip of the Punjab-based tractors maker grew 1.1% to Rs 148.70 on BSE in mid-morning trades. The scrip, however, failed to sustain the day's high of Rs 152.80. A total of 13,200 Punjab Tractors shares were traded on BSE.

After staging a sharp recovery from a mid-October 2002 low of Rs 112.75 on divestment-related developments, the stock has been on course some oscillation. It has moved in a high-low range of Rs 155-Rs 141 over the last few weeks.

Analysts say news regarding the company's divestment will dictate the trend in the stock over the next few months.

As per reports, the Punjab state government, which proposed to divest its 23.4% holding in PTL, proposes to complete the divestment by May 2003.

PTL's divestment has received strong response with a number of companies including some domestic and foreign tractor majors putting in initial bids. Substantial interest has been generated over PTL as a result of its being a leading player in the tractor industry in the north and the second largest tractor maker in India after Mahindra & Mahindra. Thus, an acquisition of PTL would automatically promote the acquirer into the front ranks of the Indian tractor segment.

After receiving an overwhelming response from leading companies for the divestment of PSIDCs 23.4% stake in, the core group of officers in the Directorate of Divestment has asked 10 shortlisted companies to sign agreements of confidentiality. These companies include Mahindra & Mahindra, Escorts, Sonalika, New Holland, Tafe in league with Agco, SAME, FIIs Warburg Pincus, J P Morgan and CDC and a consortium led by NewBridge Llc, a private US equity fund.

The bidders are yet to put price bids. Market talk has it that the state government has pegged a reserve price of about Rs 211 per share. Reserve price is the minimum price below which the government will not sell its stake.

PTL is currently witnessing difficult times due to sluggish demand and inventory pile up, which has adversely affected its financial perforamance in the current year. For Q3 ended 31 December 2002, PTL reported a 62% fall in net profit to Rs 10 crore. Top line dropped 41% to Rs 137.4 crore (Rs 1.37 billion). The demand growth has been sluggish due to the poor monsoon. The fortunes of the tractor industry are directly linked to the monsoon.

PTL's working capital has also worsened in the past one year, and receivables have climbed up to four months of sales. This has led to interest cost rising sharply, thereby, putting further pressure on the bottom line.

The company has a capacity of 60,000 tractors. Besides tractors, PTL's product line also includes combine harvestors and forklifts.

PTL has controlling stake in in Swaraj Mazda (29%) which makes tractor engines and light commercial vehicles, and a 33% stake in Swaraj Engines, which produces diesel engines.

BSE code: 500344

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