With a consolidated debt of ₹12,000 crore, Amtek has been fighting crises for quite some time. It has finally come up with a line of action through stake sales and debt restructuring. John Flintham, Vice-Chairman and MD, shares the company’s plans with Bloomberg TV India.
Amtek was expected to resolve the debt issue with JP Morgan. Can you share some perspective on that?
We are continuing to talk with JP Morgan and together we are very close to reaching a solution, which we believe will be in the next two weeks. The solution would be to the satisfaction of JP Morgan and, more importantly, there would be no default. So, we are very close now to reaching a satisfactory conclusion.
The overall debt position of the company, if you look at a consolidated debt, is about ₹12,000 crore. We have announced we are looking at a debt reduction programme, where we are looking to raise somewhere in the region of $1 billion, which is ₹6,500-7,000 crore. So, that will all come out of that consolidated debt number.
Last time, you gave us a certain timeline on the debt revamp. How are you are going to approach it? Can you elaborate on the change in terms and conditions?
The thing is we have to raise $1 billion. I think it’s going to be in three phases. First of all, we have an overseas company, which we have developed into an extremely profitable and valuable company — we have a valuation of round about $2 billion. The update on that is we are looking to sell minimum 25 per cent minority stake in that business.
We have appointed Morgan Stanley to lead the negotiations and those negotiations are progressing extremely well. We have a number of interested parties already contacted the company and those talks are going on very satisfactorily.
The other two parts of the debt reduction programme — one was the sale of non-core assets in India and the other was sale of industrial assets based in London and in India, and that also makes up the balance of the $1 billion of net debt reduction programme we are talking about.
Can you share some perspective us to what’s been the interaction with bankers? I believe 80 per cent of your debt probably involves domestic banks...
We have been discussing this with the Indian banks — the mismatches of cash flows. We have been discussing re-alignment of the debt maturities in line with the new cash flows from the Indian market, which as you know is pretty flat at the moment. This is not a restructuring. This is not additional debt. This is realignment with the cash flows with debt maturity and those discussions have been very positive with the Indian banks. We are expecting that to be concluded by the end of October.
We have a number already concluded, already signed. A part of that also includes the promoters injecting equity. So the agreement there is that the promoters will, over a period of time, put ₹225 crore into the business, which was part of the discussion with the banks. The banks also have a formality to do a viability study, which has also been approved by the banking consortium. So that’s progressing very well.
What kind of moves are we actually expecting when it comes to the entire debt situation? Can you share some perspective as to operationally how the company is functioning right now? As you mentioned, there has been a little bit of a heat coming in terms of the way the cash generation...
No, actually it’s quite the reverse. The (company’s) operation has been very satisfactory. The banks have been very supportive. As regards customers, all the customers are extremely supportive at Amtek. We are building a strong relationship with our customer base. And, we do not have any problem at all in terms of working capital and in terms of operations in India.
What about valuations? What kind of valuations are you looking at as far as Amtek’s global businesses are concerned? What kind of stake sale plan you have in that regard?
As I said, I think, our overseas businesses we developed over a period of time. We have got revenues around $2.5 billion, a very very healthy EBIDTA in the region of 11-12 per cent as you have been seeing a year, which is a very healthy level. We value that business at about $2 billion and we are looking to sell anything between say 25-40 per cent. The 25 per cent would raise $500 million, which is 50 per cent of our overall target.
Is there a certain timeline that you can share on this stake sale?
We believe it will be completed within 12 months.
We have been tracking what’s happening as far as Europe is concerned quite closely in regard to the whole Volkswagen fiasco. Does Amtek in any sense have an exposure with that company that can just add to the woes of the company?
We are also watching it very carefully and I think everybody is watching it very carefully in terms of what is going to be its impact not only on Volkswagen but also on the diesel market and people’s perception of diesel market. I think on Volkswagen, nobody needs to worry too much. Volkswagen is a world-class company that can survive with these types of hiccups. Certainly market would have seen September sales in Europe are strong for diesel.
Now you would probably argue that’s too early for that decision to be made by anybody. But I think generally Peter Borough would come out of it eventually. In terms of our exposure, we have single digit exposure in our overall overseas business to the Volkswagen group. So it’s not just too alarming
We have seen some additional directors come on the company’s board. Are we seeing any changes in the board structure?
Yes, we are actually strengthening the board significantly over the last 12 months. And we are also anticipating further strengthening the board with some more non-executive directors joining the board. I think it will happen over the next 6-12 months.
Can you share some details as to where we are likely to see those representatives come from?
I think it’s too early to say that but it is our intention to strengthen the board from all aspects — financially and technically.
Have the bankers directed the changes in the board?
No, there is no dictation from the banks in terms of the board.