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Business

Yanmar to lift stake in Indian tractor company

Japanese farm-equipment maker targets world's largest market

A farmer operates a Yanmar tractor in Thailand.

OSAKA -- Farm-equipment manufacturer Yanmar Holdings will increase its stake in India's International Tractors in the spring, hoping to expand in the world's biggest tractor market together.

The Osaka-based company will raise its stake from the current 12% to 30%, obtaining the additional 18% from U.S. investment fund Blackstone for about 25 billion yen ($212 million). International Tractors, based in the state of Punjab, will become an equity-method affiliate, with Yanmar the second-biggest shareholder after the founding family. 

International Tractors is the No. 3 provider of agricultural machinery in India. About 600,000 tractors sell in India per year -- compared with around 300,000 in China and 200,000 or so in the U.S. -- according to industry data.

India is an agricultural powerhouse. And tractors are often used in nonfarming activities as well, for instance to tow cargo when automobiles are not readily available. The tractor market has been expanding by 10% a year as the economy grows and farmers' use of machinery increases.

Founded in 1969, International Tractors employs about 5,000. In 2015, it generated sales equivalent to around 70 billion yen. The company aims to boost tractor sales by about 60% from current levels to 110,000 units in 2019.

Yanmar invested in the company in 2005, and has helped improve technologies for production and other purposes. With the increased stake, the Japanese company will reexamine its parts procurement. Joint development of tractors is also likely.

Yanmar is strong in lightweight tractors that can deliver precise work and do not easily sink in rice paddy fields. International Tractors' expertise is large, low-priced tractors that can carry cargo, which enjoy strong demand in India. The pair will work to hone their products' appeal by combining their respective strengths.

In the Indian tractor market, global leader Mahindra & Mahindra enjoys the top market share. The machinery maker last year acquired a 33% interest in Mitsubishi Agricultural Machinery, which is now called Mitsubishi Mahindra Agricultural Machinery. U.S. company Deere & Co. is also urgently expanding its Indian business, and Japan's Kubota began producing tractors in the country in 2015.

Yanmar targets a group sales increase of some 70% from fiscal 2015 levels to 1.2 trillion yen in fiscal 2020, and has been actively acquiring businesses abroad. Last year, the company bought Spanish generator maker Himoinsa for tens of billions of yen. In the fall, it purchased the European small and midsize equipment business of U.S. construction machinery company Terex for about 6 billion yen.

(Nikkei)

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