Stock Insight: Turning Point

Escorts is the third-largest tractor manufacturing company in the country and a major player in the construction equipment business. Escorts (Idirect Code: ESCORT), incorporated in October 1944 in Lahore, has undergone a major restructuring over the past couple of years by selling off its investments in non-core businesses - like healthcare and telecom - and increasing focus on core areas of agri-equipment and auto components. The company also has presence in service and information technology business segment through its subsidiaries. In 2003-04, the company sold its entire equity holdings in its mobile telecom subsidiaries Escotel Mobile Communications Ltd and Escorts Telecommunications Ltd to Idea Cellular and exited from cellular mobile business. It has also sold its entire 80 per cent stake in Escorts Heart Institute and Research Centre for Rs 520 crore. In the past, the finance structure was tilted towards borrowed funds and debt to equity ratio was around 1.9 in 2003-04 and 1.3 in 2004-05 due to higher working capital requirements. The average cost of debts was much higher at 15-18 per cent and the financing cost was the major drag on the bottom line growth

This article was originally published on January 01, 2007.