NEW DELHI: International Tractors Ltd, which sells the Sonalika brand of farm equipment, has sold a 5% stake to private equity firm JM Financial India Fund for Rs 125 crore, ahead of its proposed stock market listing in fiscal 2007-08.
This would value the 10% of the company that is likley to be sold to the public, at Rs250 crore at today’s prices.
“We are still deciding on how best to use this money for expansion and funding acquisitions,” said L.D. Mittal, chairman of International Tractors Ltd (ITL), in an interview with Mint. JM Financial is the third private equity firm to buy a stake in ITL. 3i and Citigroup Ventures have a 10% stake each, while the world’s second largest tractor maker, Japan’s Yanmar, has a 12% stake.
Private equity firms such as 3i and Actis invested $450.7 million in the automotive sector in 2006, according to research firm Grant Thornton India. This was 5.7% of the total private equity investment of $7.9 billion in India last year.
“We believe the growth story is untapped in the company,” said Dilip Kothari, managing director of JM Financial India Fund, which is making its second investment in the automotive sector after investing Rs160 crore in component maker Sona Group.
A slew of international tie-ups and entry into new markets such as Africa and US are boosting tractor exports from India. These have increased 41% to 28,118 in 2005-06, compared with a year ago, according to the Tractor Manufacturers’ Association of India.
While ITL has tied-up with Yanmar, market leader Mahindra & Mahindra has started assembling units in the US and China.
ITL has also planned a Rs300 crore plan to double its tractor capacity to 80,000 units per year. “We are also looking at an IPO (initial public offering) at the beginning of the next financial year to fund expansion,” said Mittal.