Tough fight for Punjab Tractors

Ashok Leyland, M&M, Tata group (in concert with Fiat-CNH) and Tafe have emerged as the final four in the race for buying a 43.5% stake in Punjab Tractors. The final bids came in on Monday and merchant banking sources say the bids range from Rs 350 to Rs 450 a share. Private equity firm Actis, which owns 29% stake, and the Burman family (14.5%) are expected to take a final call soon.

The final bids have seen the list of PTL suitors coming down significantly as several players who had earlier shown interest have now dropped out. That list includes Sonalika (International Tractors), Escorts, a private equity consortium that was backing PTL’s former boss Yash Mahajan, and Italian farm equipment company Same Duetz-Fahr. Sources say the successful bid will be decided not only on the basis of price, but also whether the offer was unconditional and the speed at which deal moves forward.

The Tata group is acting in concert with partner Fiat’s tractor company CNH which is represented in India by New Holland. Last month, Fiat boss Luca Di Montezemolo went on record to say that Fiat would extend its partnership with Tata group to get into tractors through the PTL bid. However, Tata group’s flagship, Tata Motors, is not directly involved in the deal. A Tata Motors spokesperson confirmed the company’s non-involvement. “There is no such proposal before the Tata Motors’ board,” he said.

M&M confirmed its ongoing interest in the deal by making an announcement on the BSE on early Monday. Last month, M&M was rumoured to have submitted a non-binding offer for PTL at Rs 350 per share which was rejected by the Actis-Burman combine. PTL has already witnessed a round of bidding last month. Subsequently, the bidding period was extended as Actis and the Burmans were unhappy with the valuations and contenders who entered the race at a later stage asked for an extension. Sources close to the deal confirm that valuations being talked about this time around are an improvement on the last round’s.

Sources also say that PTL’s valuations are being driven by its engine company Swaraj Engines which is a joint venture with Kirloskar group and supplies engines to PTL and Swaraj Mazda. Punjab Tractors itself comprises several divisions spanning tractors, harvestors, forklifts, a foundry and a components division. The company’s valuations though will also be impacted by the receivables sitting on its books. Currently PTL’s receivables are worth more than Rs 500 crore. Receivables were a problem when Actis bought into PTL in 2003