Escorts get Kubota investment at the right time
Yesterday’s Market Performance
Nifty: 117,764.80 | -133.85 (-0.75%)
Sensex: 59,636.01 | -372.32 (-0.62%)
FII Buy Sold: INR 3,930.62 crore
DII Net Bought: INR 1,885.66 crore
Howdy Toasters!
In today’s issue of the Morning Toast, we discuss:
- Escorts gets Kubota investment at the right time
- A lot of new and exciting updates on the crypto front
- An education concept to keep you chugging along
Escorts gets Kubota investment at the right time 📉
Kubota is a global manufacturing company, specialising in Agriculture, Water & Living Environment products, with a worldwide network in >100 countries
Transactional Contors
- Kubota Corporation (Japan) has decided to increase its shareholding (first entered in 2016) in Escorts, through a preferential allotment (9 Mn) & open offer (37 Mn) of equity shares, for INR 94 Bn or INR 2000/share
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Pursuant to the closure of open offer (likely to take till March 2022), Kubota will become Joint Promoter along with existing promoter group of Escorts, with Kubota’s stake in Escorts to touch ~53.5%
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From a leadership perspective, the current management personnel are likely to continue, with the incumbent Chairman & MD to lead the next phase of growth for the company, under the newly titled position of Senior Managing Executive Officer
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Existing Promoter Group of Escorts (Nanda family) has indicated they are not selling any shares & continue to remain fully invested in the company; name of the company is proposed to be changed to Escorts Kubota Limited, subject to approvals
Why? Strategic rationale behind transaction? 🙄
Escorts
- Company to become the exclusive vehicle for manufacture & sale of certain Kubota products in India
- Leverage Kubota’s longer expertise through enhanced R&D capabilities, significantly improving lead time for new product launches
- Export portfolio to significantly improve, piggybacking on Kubota’s global distribution network
- The primary capital infusion will likely accelerate growth & expansion initiatives in non-core (Ex-Tractors) business lines, along with Agri-Machinery segment
Kubota
- Increased exposure to the large & growing India market
- Assured supply of low-cost value-added agriculture machinery, which will aid in connected networks
- JV with strong, legacy brand with diversified portfolio & leadership position within India market scenario
Interesting! Final thoughts? Stock Price, Valuations et al. 🧐
- Kubota has been on an acquisition spree (~6 in the last 18 months across Asia, North America & Europe) to achieve strategic targets of establishing ‘Global Major Brand Kubota’, and is presently in a healthy financial position (0.3x D/E and FCF for H1CY21 ar USD 0.9 Bn)
- Escorts stock reacted positively to the news, and was +10% on the day of the announcement (clearly the market was enthused with the development)
- Q2 results for the company (much like everyone else) were tepid, given the slowdown in demand, thus impacting revenue / EBITDA numbers; however on a longer term, core business parameters are still intact, with Agri & Construction Equipment & Railways likely to continue momentum going forward
Keep a track?
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Crypto News
- The GoI is strongly considering categorising cryptocurrencies as an asset class (like gold, shares or bonds) , as opposed to a mode of transaction
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This decision will in essence be the first official regulation on crypto in India
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There is also a chance of a taxation – 1% GST on crypto exchanges to be collected at the source
Damnn, okay tell us more!! 🧐
- Crypto exchanges will be classified into three platforms – facilitators, brokerages and trading platforms.
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There might also be a crackdown on the advertisements done by these crypto platforms to lure in new investors, a topic which has gained a lot of heat lately
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Ads that highlight the benefits of crypto without even mentioning its pitfalls will be heavily regulated and limited
Can we get some background? 🤔
- In 2018 India had effectively banned crypto transactions altogether, but this ruling was reversed by the Supreme Court in March 2020
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India’s digital currency market was worth $6.6 billion in May 2021, compared with $923 million in April 2020
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RBI has expressed various concerns of macroeconomic and financial instability over the years, and asked for deeper discussions before taking policy decisions
Got it, so what’s the timeline? 🧐
- Details of the bill are being finalised by the government, and that the bill could be presented before the cabinet for consideration in the next two to three weeks.
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On top of this the SEBI could be given the onus of crypto regulation in India
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Meanwhile the RBI is working on its own digital currency and may bring in a crypto bill for the cabinet’s approval
What else caught our eye? 👀
Paytm – the heartbreaker of the year
- Paytm’s stock plunged a massive 27% within an hour of its opening on Thursday
- A possible reason is the structure of the IPO itself with both the price and size pushed to their breaking point
- Retail investors lost heavily, but so did the big players like BlackRock Inc. and the Canada Pension Plan Investment Board.
PhonePe employees have cause for celebration
- PhonePe has announced an ESOP buyback of Rs. 135 Crores this year
- The offer follows a three-tier model based on seniority – top leadership can sell up to 10% of their vested stock, while others can go upto 25%
- The company has allotted ESOPs cumulatively worth Rs. 1500 Crore
Not the best news for the crypto community
- $BTC slipped below $57000 for the first time since October
- Bitcoin recently hit record high of around $69,000 and is up over 93% this year (year-to-date or YTD) so far
- Global crypto market cap in general has slipepd to $2.6 trillion now
