Punjab Tractors was the subject of a block deal of 900,000 shares on BSE in morning trades on Tuesday, but that did not set off a rise in the scrip.

By 12:25 IST, in fact, the scrip of Punjab Tractors  slipped 0.60% to Rs 141.90. It came off the high of Rs 144, while recovering from the low of Rs 140. Over 933,000 Punjab Tractors shares were registered on BSE thus far.

The block deal for 900,000 shares took place on the counter around 10:05 IST. It was undertaken at Rs 140 per share. As per market talk, Unit Trust of India  was the selling party to the block deal, the buyer is still anonymous.

As on 31 December 2002, UTI's holding in Punjab Tractors was 17.15% (ie 1.04 crore shares).

Last week, PTL registered dismal third quarter ended 31 December 2002 results - a 62.4% fall in net profit to Rs 10 crore on a 41% decrease in net sales to Rs 137.40 crore. Though the dismal results were expected, volumes of tractor sales leave a lot to be desired, analysts feel. They say that the only trigger for the company's stock in the near term is its possible divestment.

In December 2002, the state government of Punjab invited initial bids for an equity stake in the company. The state government expects to complete the entire privatisation process during the current financial year ending 31 March 2003.

The Punjab government appointed financial consultancy KPMG as advisor to the divestment process in PTL. The consultancy's bid was found to be the lowest among three short-listed companies. Punjab State Industrial Development Corporation, which is a Punjab state government undertaking, holds a 23.5% stake in PTL.

As per reports, a number of bidders have submitted initial bids for acquiring the Punjab State government's 23.5% stake in the north based tractor major. Among the bidders who have put in expressions of interest are Mahindra & Mahidra, Eicher group, Kirloskar Oil Engines, TAFE, Escorts, New Holland, SAME, International Tractors and private equity investor Warburg Pincus besides agri-MNC AGCO. 15 January 2003, was the last day for the bidders to submit EoIs. The EoIs will be followed by price bids . The Punjab government had set a net worth criteria of Rs 200 crore for the bidders.

The state government's decision to sell its stake in PTL comes at a time when the tractor industry is going through difficult times as a result of the the drought this year. The fortunes of the tractor industry are directly linked to the monsoon as good rain promises a good harvest, and a good harvest results in increased agricultural income. PTL has also been dogged by heavy inventories.

PTL has, over the years, promoted two companies Swaraj Mazda and Swaraj Engines. PTL has a 33% stake in SML, a light commercial vehicles maker with technology from Mazda. PTL owns 29% stake in SEL which makes diesel engines in collaboration with Kirloskar Oil Engines. PTL also holds 24.1% stake in Swaraj Automotives. However, there is no clarity as yet over whether the successful bidder will have to make an open offer to the shareholders of Swaraj Mazda and Swaraj Engines as well.

Last year, PTL increased the investment limit for foreign institutional investors to 74% of its paid-up share capital. As on 31 December 2002, the total foreign holding in the company was only 7.5%, while institutions and the public held 45.45% and 19.44%, respectively.

BSE Code: 500344