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S. Muralidhar

ESCORTS Ltd is in the process of refocussing its resources into the three core areas of agri-business, cellular telephony and healthcare, which have been identified by the company to be the future growth segments that it would like invest in and attempt further expansion.

It was with this intent to focus on core strengths and established expertise that Escorts exited from joint ventures and equity partnerships such as the erstwhile Escorts JCB Ltd, Escorts Yamaha Motors, Escorts Mahle, Escorts Claas and Nanz Supermarkets.

These divestments, done over a two-to-three-year time-span, enabled Escorts to bring the agri-business division, its traditional `bread and butter' business, back into the spotlight. Further, these divestments made it possible for Escorts to rake in a huge Rs 208.6 crore as `other income' during the 2002-03 fiscal.

Much of this was profit from the sale of equity and this boosted the company's bottomline to Rs 24 crore.

With the tractor business down, the high depreciation and interest charges would have pushed the company again into the red, had `other income' not come to the rescue.

However, that done, during the current fiscal, Escorts is also not going to be able to bask in the bounty that it received last fiscal from the equity divestments.

So, with `other income' this year expected to be predictably low, the focus on the company's profitability and operational efficiency is only bound to increase.

Escorts' performance this year is likely to be that much more dependent on the monsoon. After a couple of drought years, the offtake of tractors and farm equipment has fallen drastically.

Last year, the organised segment of the industry is said to have witnessed sales of just about 1.8 lakh tractors, compared to about 2.5 lakh in 2000-01. The company will keenly watch the spread and precipitation levels of the monsoon this year.

A clearer picture will emerge by mid-September when the season starts. But, going by the meteorological department's prediction and the start of the monsoon season in the southern states, the revival may well be around the corner for Escorts' core business of tractors.

Another potentially important development that will increase Escorts' dependence on the monsoons is its agreement with Punjab Agro Industries Corporation (PAIC) to undertake contract farming in an area of 50,000 acres, primarily for the crops of basmati, oil seeds and durum wheat in the kharif and rabi of 2003-04. If this venture succeeds, it could be a cash cow in the long term.

The Escorts stock has risen from the Rs 35 levels in May this year to about Rs 52 now. Escorts' shareholders can continue to hold on to the stock at the current levels.

The company's renewed focus on its core businesses and the likelihood of the monsoon being normal this year offer further credence to its growth projections this year.

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