Amtek Auto plans to sell assets worth Rs 6,500 cr

The component maker wants to reduce debt from the current level of about Rs 15,000 cr

Amtek Auto plans to raise about Rs 6,500 crore by selling assets. The proceeds will go towards reducing the company’s debt of about Rs 15,000 crore.

“We have grown the business and that has put a strain on the debt. It is still manageable but we want to reduce that by taking a few measures. First, we have agreed to sell some surplus industrial estates in India that are not being used. Second, we are looking to sell non-core assets and businesses, mainly in India. Third, we are in talks to sell a minority stake in our foreign business,” John Flintham, the company’s vice-chairman and managing director, told Business Standard.

He said the first two exercises were likely to fetch the company $500-600 million. “The equity of our foreign business is worth about $2 billion, according to an external valuation, after excluding debt of $500 million. We want to sell at least 25 per cent equity in our foreign business to raise $500 million. We can go up to 40 per cent to generate more cash,” Flintham said. “We are looking to achieve a net debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) level of less than three, against the current five.”

The company said it had already started negotiations on the matter, adding it hoped to execute the steps in 12-18 months.

“We are obviously not going to sell it cheap. We don’t have to sell cheap. There are a lot of talks going on. Time will tell. I believe there is enough interest,” Flintham said.

The company said it hoped to improve the Ebitda of its Indian operations, as demand recovered. “The cash flow we will generate after these measures will be more than enough to service debt.”

Flintham said the company, which gets half its annual revenue (Rs 7,800 crore) from foreign business, is seeing better capacity utilisation, about 70 per cent, in its international business. In India, however, capacity utilisation is about 50 per cent. “There is a fall in demand from buyers in the two-wheeler, tractors, commercial vehicles and industrial construction segments. The passenger car market is flat and only driven by one company. The picture is not as rosy as most think,” Flintham said.

Amtek Auto has consolidated debt of Rs 12,000 crore, while its foreign business has debt of Rs 3,200 crore. At the group level, debt, including those of its three companies — Metalyst Forgings, Castex Technologies and JMT Auto — is Rs 20,000 crore. Flintham said the management was “comfortable” with the debt of other group companies.