Escorts Kubota Finance Receives RBI Approval for NBFC Operations

Escorts Kubota Finance Ltd., a wholly owned subsidiary of Escorts Kubota Ltd., has received approval from the Reserve Bank of India to commence operations as a non-banking financial company (NBFC). This approval allows the company to operate without accepting public deposits, according to a filing on the BSE. The certification marks the company’s expansion into financial services, following earlier disclosures to the BSE in January and September 2024.

Investment Plans in Uttar Pradesh

Earlier, on August 16, 2024, Escorts Kubota announced its intention to invest Rs.4,500 crore in a greenfield facility in Uttar Pradesh. The company plans to execute this investment in multiple phases, generating employment for over 14,000 individuals when fully operational. Once the plant reaches full capacity, Escorts Kubota expects to generate annual production revenue of up to Rs.10,000 crore, according to the reports.

Performance & Analysts’ Outlook

On the stock market, Escorts Kubota Ltd. shares closed 0.39% higher at Rs.4,351.35, underperforming the broader Nifty 50 index, which advanced by 0.81%. Over the past year, the stock has risen by 31%, and year-to-date, it has jumped by 46.87%. Analysts tracking the stock offer a mixed outlook, with 4 out of 21 analysts recommending a ‘buy’, 6 advisings ‘hold’, and 11 suggesting ‘sell’. Bloomberg’s 12-month consensus price target suggests a potential downside of 19.7%.

Financial Overview

Despite challenges, Escorts Kubota reported a 70.87% increase in annual profits, with Rs.1,037.15 crore recorded for FY24, compared to Rs.606.98 crore in the previous year. The company’s inventory turnover ratio stands at 7.89, indicating some inefficiencies in managing inventory. Additionally, Escorts Kubota has maintained a healthy debt-to-equity ratio of 0 and an ROE of 11.77%.

Conclusion: With RBI approval for NBFC operations and strong investment plans, Escorts Kubota seems positioned for growth, though stock market performance also remains good. The company’s plans and financial strength signal potential, and investor sentiment will be interesting to watch.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.