Escorts Kubota announced on Wednesday that it has signed a business transfer agreement with Sona BLW Precision Forgings Ltd. for the transfer of its railway equipment business division as a going concern, on a slump sale basis, for a cash consideration of ₹1,600 crore, thereby confirming a CNBC-TV18 newsbreak from September 4.
The company attributed the sale to simplifying its operations, capital re-allocation leading to an increase in scale and efficiency of the core business.
Sona BLW is expanding into the broader mobility sector and the railway equipment business division aligns with the vision of the company. It will also enhance their clean mobility product offerings by adding the railway components business, Escorts Kubota said in its exchange filing.
Brokerage firm Nuvama has retained its positive view on the robust medium-term prospects of Escorts Kubota due to the support from its global partner, technology support and opening up of the export opportunity.
However, Nuvama cut its financial year 2026 – 2027 Earnings per Share (EPS) estimate by 5% and 8% as the loss of the profits from the Railway business will only be partially offset by an increase in other income.
Therefore, Nuvama maintained its “buy” recommendation on the stock but cut its price target to ₹4,650 from ₹5,000 earlier.
Nuvama is anticipating Escorts Kubota’s EBITDA margin to expand from 13.3% in the previous financial year to 14.9% at the end of financial year 2027.
Out of the 21 analysts that have coverage on Escorts Kubota, only four of them have a “buy” rating, six of them say “hold,” while 11 of them have a “sell” recommendation on the stock.
Shares of Escorts Kubota are trading 8% lower at ₹3,406.85. The stock is the top loser on the Nifty 500 index on Thursday. The drop has narrowed Escorts Kubota’s gains for 2024 down to 15%.
Content retrieved from: https://www.cnbctv18.com/market/escorts-kubota-share-price-fall-railway-equipment-business-sale-to-sona-blw-1600-crore-target-returns-19498087.htm.
