The Escorts - Yamaha Motors Break-Up

Just five days earlier, Rajan Nanda (Nanda), Chairman of Escorts, the flagship of the Rs 35 billion Escorts group, had been to Japan to hold talks with the Yamaha Motor Company (Yamaha Motors) officials- Escorts' equal partner in the Indian motorcycle venture, Escorts Yamaha Motor Ltd (EYML).¹ Before leaving, he had left instructions that a board meeting should be convened on April 24. An important announcement was to be made. At the meeting, Nanda informed the directors that, subject to the board's approval, Yamaha Motors could be given a majority stake in the joint venture company. The Japanese two-wheeler major had offered to buy an additional 24% stake in EYML from Escorts at Rs 200 per share. The deal would add Rs 2.3 billion to Escorts' coffers.

It all started in 1999 when Escorts sold one-third of its shares in the construction equipment company Escorts JCB to JCB of the United Kingdom for Rs 490 billion. This brought its stake down from 60% to 40%. Next came the turn of Hughes Escorts Communication, a 51:49 joint venture between Hughes Communications of the United States and Escorts. In December 1999, Escorts offloaded 23% of its stake to Hughes for Rs 750 million. This brought its shareholding in the company to 26%. This was the second such exercise undertaken by Nanda since 1995 when he took over the reins of the company from his father, Har Prashad Nanda as chairman of the group. At that time, he had identified six areas of growth for Escorts-agri-business, construction equipment, two-wheelers, auto-components, telecom and finance.