Anand Patel, CEO, Ammann Apollo India says that the proceeds from the sale of 70-percent stake in its subsidiary Apollo Construction Equipment Limited (ACEL) to Switzerland-based Ammann Group will be used to build the company's crushing and screening equipment for the mining sector.
Speaking to CNBC-TV18, Patel adds that the remaining 30-percent stake will be held by the company and the proceeds of the transaction will result in the company being debt-free.
Below is the edited transcript of the interview on CNBC-TV18
Q: Can you explain the details of the sale where you sold a 70-percent stake in one of your subsidiaries for Rs 280 crore? What was the reason for the sale? What are you planning to do with the proceeds of the sale?
A: Gujarat Apollo Industries Limited has a subsidiary named Apollo Earthmovers Limited (AEML) which in turn has a subsidiary called Apollo Construction Equipment Limited (ACEL) and is a wholly-owned subsidiary. It is in this subsidiary that Switzerland-based Ammann Group has invested for a 70-percent stake. The remaining 30 percent will be owned by a subsidiary of Gujarat Apollo.
Q: Will this reflect in your profit and loss (P&L) statement?
A: Yes, since this is a minority shareholding in the operating company it will not be reflected in the P&L statement or balance-sheet. It will be as an investment and all the income as dividend will be reflected in the balance-sheet.
Q: The market cap of the company is Rs 180 crore and this deal is worth Rs 280 crore. Can you explain the contours of the deal? Is it all-cash deal? What is the current situation of the debt and will any of the proceeds be used to service debt?
A: Thanks to the all-cash deal, Gujarat Apollo will not have any debt left. The business was sold from two of the Apollo companies – Gujarat Apollo and Apollo Earthmovers. Gujarat Apollo, which is a listed entity, is to receive funds to the tune of about Rs 240 crore through the sale of the business from Gujarat Apollo to the Apollo Construction Equipment
Q: By how much does your debt reduce?
A: To start with, we did not have any long-term debt. The Gujarat Apollo board will decide how to deploy the funds in terms of improving the valuation for shareholders and stakeholders.
Q: When does the name of this listed entity change?
A: No, the name of the listed entity doesn't not change.
Q: What will the cash be used for?
A: Gujarat Apollo deals in crushing and screening equipment and the funds will be used to tap opportunities in the mining sector.
Q: In your previous announcement of earnings, revenues stood at Rs 65 crore. By how much will your annual revenues fall due to the sale?
A: The last reported annual revenue was about Rs 200 crore. The quarterly revenue stood at Rs 60 crore and post this deal, revenues are likely to be at Rs 25-30 crore.