Tractor biz to soar on rise in rural incomes: Blackstone

Akhil Gupta of Blackstone explains to CNBC-TV18 the various aspects of the deal inked to purchase a stake of 12.5 percent in International Tractors Ltd for around Rs 520 crore.

Below is an edited transcript of the interview on CNBC-TV18. Q: What are the contours of the particular deal and what sort of valuations was the purchase inked at?
A: We are looking to purchase a 12.5-percent stake at USD 100 million, so that gives you a rough valuation of about USD 800 million. Though a part of the valuation depends on the performance of the company, most of it is upfront. We will be a minority investor and have a seat on the board. We were lured by the performance of the management.
The company has a market-share of ten percent in the last one year. There is tremendous potential for this company and the management wants to work with Blackstone to enable a higher level of performance and we will be intensely involved in helping the company realising that goal. Q: Are there any sectors that are attractive at this point? The tractor business has been facing the impact of the slowdown, but does this sector look attractive for you?
A: Our view of any sector is spread over five-to-seven-year view. In the last three years, the tractor business has posted a 20 percent growth year-on-year. In one year, the business grew at a rate of 30 percent. Though the slowdown does not come as a surprise in the short-term, it holds great potential on a five-to-seven-year horizon.
We are very encouraged by the growth in rural incomes because of minimum support prices, increasing land prices and particularly, the demand for tractors. The favourable factors of influence at work are not rural incomes alone, but also the shortage of labour and the low levels of productivity in the Indian farm sector. We expect to post a growth of eight-to-ten percent on a secular basis in the next ten years.