Clutch Auto rejigs biz, sees rev at Rs 400cr in FY12

The board of auto ancillary manufacturer Clutch Auto has approved restructuring the company by hiving off or formation of another company, that is, containing the business of new auto ancilliaries or technologies project and the real estate project through a scheme of arrangement.

In an interview with CNBC-TV18, Vijay Kishan Mehta, VC & MD of Clutch Auto threw light on the company's restructuring plans.

Below is a verbatim transcript. Also watch the accompanying video.

Q: Can you then just tell us about this restructuring which the company has approved? Can you just take us through the details and the value of the new auto ancillary business and the real estate projects which are possibly going to be hived off?

A: We are a very strong IPR oriented company being one of the very few who have their own technology and their own development capability. So whatever patents we have and some new technologies which we are developing with the NMITLI (New Millennium Indian Technology Leadership Initiative) under CSIR government of India, Department of Science and Technology is a very high plan technology, which is in the final stages of concluding, and by March we are completing that project.

And that technology will be available for exploitation at our new Bhiwadi facility within the next six-eight months. So all the new technology development and IPR rights are being placed in a company which is known as CA Clutch Vision. The name is already approved. And the place where we are right now situated is on the main Mathura road. The value of the plant, the value of the location is fair. But it is not reflecting in our results or in our working figures.

So the reality is that the company is going under CA Developers Limited. This is going as a subsidiary of the CA Clutch Vision so that they are both sustaining and all shareholders of Clutch Auto will be shareholders of this company, new company and they will get benefits both from Clutch Auto as well as from CA Vision. The benefits of the value of the land where we are situated would actually accrue to CA Clutch Vision with the liabilities of the new technology also vested in that.

Q: Could you ascribe a value to this new entity that you are looking to set up?

A: The new entity that is being set up is about Rs 14-15 crore is the soft loan from the government of India. And we have put in about Rs 15 crore into the project. The land value which is about 6.38 acres on the main Mathura road, just at the corner where the metro finishes is a very prime land today for those who are conversant with Faridabad.

Q: Roughly what is the size, the value of this land?

A: It should be anywhere in excess of Rs 100 crore.

Q: Are you developing this land at all?

A: No, what we are doing is the book value is about Rs 5 crore and this is a tax-neutral proposition. So we will be actually participating in the joint venture with a company who could build a mall or a park or an official structure or go for outright sale and they could develop it. So this project we could not explore further until the board had approved.

The board had cleared this on Saturday. So there are various options available. But liquidity will come into the company and maybe we should be able to neutralise some debt from here. In any case, this, coupled with the new technologies, are going to give a lot of leeway and independence of action to CA Clutch Vision and Clutch Auto will benefit from the new technologies developed under this project.

Q: Just a quick question. What is the shareholding pattern of this new company, and once you hiver off into a new company, is there a possibility of listing it on the exchanges?

A: Yes, the new company would also be listed like Clutch Auto. We have prepared it in a manner that the benefit will go to all the existing shareholders on a like-to-like basis. So all shareholders of Clutch Auto will be shareholders of this company. But then it will be true value of technology, intangible assets as well as the land, it will be accruing to the shareholders. We will now be going to the SEBI.

Q: Could you tell us what the share swap ratio could be between Clutch Auto and this new entity? If you are looking at listing it, any kind of fund raising that you are looking at?

A: Fund raising is actually going to accrue from the land, rather than from an outside agency. So that is the situation. There is not going to be a change in the present structure of shareholding, except for minor shareholding from this new public limited company that we are taking which will go for listing.

That would mean that, by and large this structure will be the same. But out of the total Rs 16 crore equity of Clutch Auto, the new company that is already formed has an ongoing capital of about Rs 1.6 crore. Barring that there will be no disturbance of the existing shareholding pattern.

Q: What exactly is the revenue profile going to look like for the company, once it is hived off? What does it contain and how much does it actually contribute to Clutch Auto? Can you give us a brief of what the numbers will look like?

A: What we are looking at is technologies developed with the government of India, DST, with about five national laboratories placed at Clutch Auto