Germany-based Knorr-Bremse Group is likely to buy the railway business of Escorts Kubota for over Rs 4,000 crore, CNBC-TV18 reported citing sources. Further, the deal is also likely to be announced in a few days, the report stated.
CNBC-TV18 had also written to Escorts Kubota and the Knorr-Bremse Group for comments on the matter. While a reply is yet awaited from Escorts Kubota, the Knorr-Bremse Group reverted saying, "As a principle, we do not comment on specific M&A topics."
The railway business accounts for 10 percent of Escort Kubota's total revenue and has grown threefold in the last ten years. The segment reported a revenue of Rs 842 crore in FY23, up 33 percent from the preceding fiscal.
The business television channel had previously reported on Escort Kubota's plans to sell its rail business on August 29.
Since Kubota has no notable presence in the rail sector, it is keen to focus on its core businesses and hence is looking to sell-off the railway business.
Knorr-Bremse is involved in the business of making brakes and safety-related sub-systems for rail and commercial vehicles. Both Knorr-Bremse and Escorts Kubota are also major suppliers to the Indian Railways.
Shares of Escorts Kubota had soared over 5 percent to hit a record high of Rs 3,440.15 in the previous session after brokerage firm DAM Capital Advisors rolled out a bullish outlook on the stock, anticipating an upside potential of over 60 percent.
The brokerage firm expects the stock to top the Rs 5,000-mark in the next 12 months as it gave a target price of Rs 5,100, up from Rs 3,150 earlier.
Following a meeting with the management of the company, DAM Capital highlighted that Escorts is putting considerable emphasis on generating synergies from its merger with Kubota. The company is also expected to witness an expansion in its market share due to the synergistic effects and the robust standing of both brands in their respective markets.
Baking in the company's plans to scale in the coming years, DAM Capital predicts a revenue CAGR (compound annual growth rate) at 17 percent, EBITDA at 37 percent and net profit at 41 percent for FY23-FY26.
However, strong gains in the counter in the previous session limited the upside in the stock on October 11. At 09.38 am, shares of Escorts Kubota were trading merely 0.4 percent higher at Rs 3,408 on the NSE.
Also Read | Escorts Kubota zooms 5% to 52-week high after DAM Capital raises price target by 62%
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