Warburg takes 9% in Amtek Auto for Rs 292 cr

Warburg Pincus has picked up over 9 per cent stake in auto parts maker Amtek Auto from the open markets.

Going by the ruling market price of the stock, the acquisition should cost Warburg nearly Rs 292 crore, putting the valuation of the company at around Rs 3,400 crore. This is nearly four times the company's annual sales.

When contacted, an Amtek Auto executive confirmed Warburg's acquisition of over 9 per cent stake.

Industry sources said Warburg might send a representative to the Amtek board, though the Amtek executive denied that this would be so. The Amtek stock today rose 6.82 per cent to close at Rs 286 in a firm Mumbai market, against yesterday's close of Rs 267.75.

The acquisition by Warburg follows private investment banking group Stonebridge Investment picking up a 4 per cent stake in the company for Rs 144 crore at the end of June.

The Amtek executive said Warburg might have bought into the long-term growth potential of the company. Amtek had reportedly emerged as the highest bidder for JL French Automotive Castings Inc's Whitham plant in Essex in the UK, pipping Swaraj Paul's Caparo Group.

The final announcement in this regard may take place this month. BDO Stoy Hayward LLP, administrators for JL French, put the plant up for sale after the company filed for bankruptcy.

Investment banking sources said Amtek was in talks to buy a machine component unit abroad for about $250 million (nearly Rs 1,175 crore). It could also simultaneously acquire a casting firm for about $20-25 million. The targeted component-maker, part of a large engineering group, had factories in Europe and the United States.

Amtek mopped up $250 million through five-year convertible bonds in May. It has cash reserves of another $100 million to fund any acquisition.

Indian promoters hold over 36 per cent stake in the company, while banks and institutions hold 55 per cent. Public shareholding accounts for only 2 per cent. The total foreign holding stood at 43 per cent.