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With its stock taking a severe hit after it announced plans for the Rs 14,500-crore buyout of US-based Cooper Tire & Rubber Co, Apollo Tyres today sought to assure investors that the deal will not load its Indian operations with excessive debt.
The company's shares had plunged to 52-week low of Rs 67.75, down by 26.35% on BSE during yesterday's trading on debt concerns due to the deal. It had closed at Rs 68.60, a loss of 25.43% over previous close.
Today Apollo Tyres shares ended at Rs 64.75 down 5.61% from yesterday's close.
"Apollo India has not taken all the loan of $2.5 billion. It has only taken a loan of $450 million, this is what the financial structure is," Apollo Tyres Vice Chairman and Managing Director Neeraj Kanwar told reporters here.
Elaborating the funding structure for its proposed acquisition of Cooper, he said Apollo group has taken debts at two levels -- $450 million by Apollo India and $2.1 billion of overseas debt on cash flows of Cooper and Vredestein.
The debt from the Indian arm will be partly offset by the recent sale of the South African business to Sumitomo Rubber Industries in a deal valued $60 million, he said.
Kanwar further said out of the $2.1 billion overseas debt, $1.9 billion would be raised through bond market in the US and rest $200 million would come from asset based loan.
The company said it expects one time cost of $40 million for the integration of Apollo with Copper in the next two years.
After the completion of the deal, the net debt on its Indian operation would rise to around $800 million.
"We are concerned about the huge debt burden which could strain the balance sheet of the combined entity," Surjit Arora, Research Analyst (Institutional Equities) at Prabhudas Lilladher had stated yesterday.
When asked about the timeframe for the completion of the deal, Kanwar said it will be completed in the next three months.
Stressing that the deal is good for the company and its shareholders, Kanwar said: "With this acquisition we get presence in America and Europe which are the most high profit margin regions. Then you get China and India which are the fastest growing economies of the world, so there is not better play for Apollo than this."
The deal would help Apollo Tyres strengthen its reach with the global OEMs, (original equipment manufacturer), he added.
"It will also give us an opportunity to sell the Apollo branded truck tyres in North American markets. Apollo has premium positioning in truck tyres, that's a big opportunity for us in the US market," Kanwar said.
