Amtek Auto's debt may come down by 75%

Company close to reduction of Rs 10,500 crore in debt

Debt-ridden auto-component maker Amtek Auto is learnt to have moved closer to effecting plans to cut three-fourths of its debt of Rs 13,500 crore by the middle of 2017.

As much as Rs 10,500 crore is expected to come from the asset sale and an infusion of capital by overseas investors. The creditor banks may convert their loans into equity.

Tekfor, a German forging company acquired by Amtek in 2013, will be sold first. Selling Tekfor, which is expected to bring in the bulk of the Rs 10,500 crore, has taken longer than expected due to valuation issues. 

A company executive had said uncertainties around Brexit slowed down the process.

“The closure of the Tekfor sale is likely to be completed in a month. It is going to be an overseas buyer,” said a source close to the developments. 

The valuation of Tekfor, which earns approximately $700 million a year, might not be different from its revenue. The money from this and sales of some non-core domestic businesses will go to the banks. All these could be closed in the current quarter. 

Morgan Stanley has been roped in to advise the company on the Tekfor sale and Amtek has hired the services of EY and Grant Thornton to identify buyers of non-core domestic assets.

The company’s management has declined to comment on the matter. 

In November last year, Amtek said its board had approved proposals from overseas investors to infuse fresh capital. The boards of other group companies such as Metalyst Forgings, Castex Technologies and ARGL have given their approval for the infusion, which may happen through a preferential issue.

The Amtek management is learnt to have planned a three-way merger of group companies Amtek Auto, Metalyst Forgings (both listed) and ARGL. The overseas investors will hold a significant stake in the merged entity. The merger is being done to reduce operational and administrative costs.

The investors have approached the consortium of creditor banks. Once the sale of assets is completed and the banks get the proceeds, the investors will pick up a stake in Amtek and other group companies. 

“Banks have also been requested to pick up a small equity in lieu of debt,” said a bank executive. The consortium of banks includes SBI, ICICI and Axis Bank.

Upon the completion of capital infusion, the overseas investors will control a significant stake in the companies, almost close to what the promoters hold. They will get seats on the boards and may also be part of the management.

Amtek, whose debt has been a consequence of acquisitions and investments in capacity addition, has been making losses for the last few quarters due to a high-interest burden. 

Its loss in July-September stood at Rs 755 crore while the interest for the period was Rs 339 crore.