Anand Patel, CEO, Ammann Apollo India says, in an interview on CNBC-TV18, 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.
Gujarat Apollo deals in crushing and screening equipment and the funds will be used to tap opportunities in the mining sector
Ammann Apollo India
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.
Gujarat Apollo stock price
On May 29, 2015, Gujarat Apollo Industries closed at Rs 129.90, down Rs 1.6, or 1.22 percent. The 52-week high of the share was Rs 164.40 and the 52-week low was Rs 110.50.
The company's trailing 12-month (TTM) EPS was at Rs 4.69 per share as per the quarter ended December 2014. The stock's price-to-earnings (P/E) ratio was 27.7. The latest book value of the company is Rs 192.67 per share. At current value, the price-to-book value of the company is 0.67.
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