Following its liquidity crisis, Amtek Auto has come up with monetisation plans that include selling of non-core businesses and real estate, a move that could fetch $500-600 million. The company is also exploring the option of selling a minority stake in its overseas business, raising another $500 million — all these in a bid to reduce its debt. Edited excerpts from an interview with Amtek Auto Vice-Chairman and Managing Director John Flintham.

Give us some details of your plans to sell non-core assets to repay debt.

We had plans in place even before the share price fell. There are two or three strings to that bow: one, we will look to sell non-core assets and non-core businesses.

Next, we will look to sell surplus industrial real estate, mainly in India. Together, we expect about $500-600 million.  The third option is 25-40 per cent stake sale in our overseas businesses to raise about $500 million. Our target is to raise about $1 billion (about ₹6,500 crore).

By how much are you planning to reduce debt and what is its impact on your debt-equity ratio?    

Ultimately, we would like to reduce it by about ₹10,000 crore in the next 12-18 months.

Our consolidated debt in Amtek Auto is at ₹12,000 crore, while the total is about ₹20,000 crore.

Right now, the debt equity is at 2:1 and post sell-off it may be much lower than one.

What are banks demanding? Are promoters required to pump in more equity in addition to ₹75 crore done already?

The banks are not asking us to sell non-core assets; that’s the management’s initiative. We have now created a $3.6-billion company of which 50 per cent is in India and 50 per cent overseas.

The investors (promoters) have always been prepared to invest in the business whenever needed. They did so in 2008, they also invested in the overseas business when it needed it. I am confident, if required, they would invest further.

Have the earlier string of acquisitions overstretched your balance sheet?

We completely disagree. We have created a $1.8-billion business overseas, we have a healthy EBITDA, we believe that we have an equity value of $2 billion.

We can sell 25-40 per cent of the business to raise quite a lot of money easily, that’s all being generated by the acquisitions we made and the synergies we brought in by combining them. I would argue that we had actually enhanced shareholder value by this.

When do you see your cash flow cycles getting streamlined?

I am seeing some green shoots in India but we are not going to see much recovery until 2016. Our overseas business continues to perform well, mainly in Germany, the UK and Japan.

Our EBITDA at 13-14 per cent is not a bad figure in the current circumstances. So, we are waiting and planning for the recovery.

Will you be able to generate the extra EBITDA to service your debt?

Firstly, we expect our customers to understand where we are. And we are not looking at increasing any prices and want to maintain good relations with our customers.

Will your tractor castings business get impacted with monsoon playing hide-and-seek this year?

We are seeing relatively flattened growth and I hope that the tractors business comes back stronger.

 

(With inputs from Beena Parmar and K Raghavendra Rao)

 

Related Topics
comment COMMENT NOW