Amtek Auto picks 51.3% stake in JMT Auto

Amtek Auto acquired 51.27 percent stake in an auto ancillary player JMT Auto for Rs 110 crore via cash accruals. Speaking to CNBC-TV18 about this acquisition, John Flintham, senior managing director & CEO of Amtek Auto says, synergies of both the companies put together will boost margins.

Meanwhile, few months ago Amtek had bought a company called Neumayer Tekfor Group and is in the process of synergising that with Amtek. "That was a large acquisition of Rs 4,000-crore revenue with EBITDA around Rs 320-330 crore," he adds. He says the company will continue to hunt for good value assets going ahead. Amtek’s cash on the books in December was Rs 2,400 crore.

Also Read: Amtek Auto buys 30 lakh shares of Amtek India Below is the verbatim transcript of John Flintham's interview on CNBC-TV18 Q: Take us through the rational behind acquiring JMT Auto and how have you funded this deal? A: The rational is that the business is very synergetic with Amtek Auto businesses. It has an outstanding reputation in the industry for manufacturing high value components. It also covers a wide range of industries, both auto and non-auto, both in the oil and gas industry as well, good exports in non-auto sectors. We think the synergies we will be able to glean from putting together JMT into Amtek organization, which will be very beneficial to everybody. In terms of funding the deal, we have paid about Rs 110 crore for 51.27 percent of the business. There will be an open offer for 26 percent, following the government guidelines and we have paid for the business out of cash accruals. Q: What and when can we expect gains in the Amtek Auto profit and loss (P&L)? Would anything accrue in FY14 or the synergies will be seen in FY15? An idea of what kind of delta you will get because of this acquisition? A: Our new financial year starts in a few days, so timing is perfect. In our new financial year 2013-14, I would expect to see some improvements in the margins, both of JMT and also for the synergies of both companies together. We will start seeing some benefits next year and the full benefits in the following year. Q: You said some margins. Would you want to give us some ballpark basis points? A: I think that is difficult at the moment when I am so close to end my financial year. Q: You mentioned that you would be funding this deal via internal accruals. Can you tell us exactly what the cash on the books is of the company and will any of this deal be funded via debt? A: The cash on the books in December was Rs 2,400 crore. We funded this acquisition out of cash accruals. We may well raise some debt at a later stage, but there is no decision on that at the moment. Q: Are there any more acquisitions that you have lined up, anything else that you are looking at, not just in the Indian market, but globally? A: Two-three months ago, we bought a company called Neumayer Tekfor Group and we are in the process of synergising that with Amtek Auto. That was a large acquisition of Rs 4,000-crore revenue with EBITDA around Rs 320-330 crore. We continue to look at good value assets. This is a good time, flattening of market in India, falling of markets in the Europe. There are some good assets out in the market and our track record is that we look at good value assets and continue to do this. Q: What kind of capacity utlisation is the auto ancillary industry itself working at because the numbers from the auto sector, in terms of sales, is getting poorer and poorer? A: I think there is no doubt, everybody is aware that the market is pretty flat at the moment, which feels like a recession, but is not a recession; it’s pretty flat. We are seeing slight growth in two-wheelers in our particular share of the market, slight growth in passenger cars, commercial vehicles are down and we are going to see a continuation of this certainly for the remainder of this financial year or this calendar year 2014-and we expect to see a pickup in probably halfway through 2014. In terms of overseas markets, America is still doing very well, our exports to America is doing very well and we expect the European market to bottom out now and start picking up in the next 12 months.