Escorts to reduce Hughes JV share

NEW DELHI: The Escorts Group, led by Rajan Nanda, is planning to reduce its stake in the joint venture it has with Hughes Network Solutions of the US to provide networking solutions. The American partner has requested permission from the FIPB to increase its stake in the JV, Hughes Escorts Communications, from the current 49% to 74%. The Escorts group owns about 48% of the company through two group companies: Escorts Ltd (26%) and Escorts Motors (23%). “Both partners have agreed to the stake sale. Now, we will begin negotiations to finalize the price for the share purchase,” a source close to the arrangement told ToI. When contacted by TOI, Escorts Ltd CFO Shailendra Tandon confirmed the move and said the stake sale is part of the Escorts group’s intention to exit non-core businesses and focus on four key industries: agri-machinery or tractors, railway equipment, automotive suspensions, and construction equipment. “The stake sale negotiations have not yet started,” Tandon added. It is too soon to predict which Escorts group firm will reduce its stake in Hughes’ favor. Hughes Escorts was listed as a 51-49 JV with Hughes owning the majority stake. However, due to a change in FDI regulations, the American company was required to transfer 2% of its investment to a trust in order to lower its share to 49%. It also bodes well for Escorts’ aspirations to gradually exit non-core sectors, according to a source. “With the FDI guidelines changing and the FDI cap in telecom rising to 74%, Hughes is planning to increase its holding in the venture,” the person added.