 "Banks close to finalising AMW-Kamaz deal")
In a rare case of banks managing to offload their shares in a company that they had earlier taken over under strategic debt restructuring (SDR), a consortium of lenders is in the last leg of discussions to sell a 51 per cent stake in debt-laden truck maker AMW Motors to the Russia-based Kamaz Group for $50 million, or about Rs 335 crore, according to sources.
Under SDR, banks can take majority control of a defaulting company, by converting their debt into equity, and implement management changes. Such an exercise has to be done within 18 months of taking over; otherwise, they will have to incur hefty provisioning.
|
OFFLOAD RELIEF In a rare case, lenders are being able to offload their shares in a company they had taken over under strategic debt restructuring |
|
AMW was among the top three truck makers in the country in certain segments. It ran into rough weather in the past three years as construction and mining activities dipped and demand for new trucks plummeted. During the boom years, AMW volumes more than doubled in two years to hit a career high of 10,021 units in 2011-12 from 3,939 units in 2009-10. However, last year, its volumes slumped to 848 units, down 72 per cent from 2014-15, according to data from the Society of Indian Automobile Manufacturers (Siam).
Kamaz is present in India since 2009, with a facility in Hosur, near Bengaluru. AMW has a factory in Bhuj, Gujarat. In April, only 10 trucks were produced by the company. This fall comes at a time when the medium and heavy commercial vehicle (MHCV) industry is on a strong upswing; the segment saw a 25 per cent rise in sales during the month, shows Siam data. AMW could not benefit from the upswing because of lack of enough working capital, say sources. The company is understood to have had held discussions with several global CV makers, including Italy’s IVECO.
It owes about Rs 1,800 crore to banks, and was taken over by the lenders in December under the SDR route. It had been looking for a strategic partner for some time, Kamaz being one. An e-mail to Kamaz went unanswered. AMW did not offer any comment for this story.
The lenders'consortium is led by IDBI Bank; there are also Bank of India, Federal Bank, UCO Bank and Punjab National Bank. After the stake sale, the promoters will have 49 per cent equity and the banks will have to take a cut in their claims. Analysts estimate that in any SDR, banks will have to take a cut (termed a ‘haircut’) of as much as 50-65 per cent on their claims. However, the lenders will continue with the rest of their debt on the books of the company, instead of converting it into equity, a banker said.
If the bankers’ arrangement with Kamaz goes ahead, sources say, the new entity could operate as a joint venture company on the lines of Volvo-Eicher Motors, the Indo-Swedish venture. There could either be joint branding or independent product retailing through independent brands. Notwithstanding the haircut, if the deal goes through, it would probably be the first such success for banks, as lenders are invariably clueless on how to manage a company once it is taken over under SDR. The best bet for banks is to find outside management experts to run the company and find a buyer. Usually, banks put a director on the board of the company to oversee the functioning.
While talk about change in ownership in some SDR cases are ongoing, nothing is concrete and banks say the equities in these companies are largely dud. It has been challenging for banks to find owners for recently acquired Visa and Electrosteel, even as they’ve made some progress in the case of Gammon India.
