Amtek Auto has entered into share purchase agreement with Japanese company Asahi Tec Corporation to acquire various group companies related to iron casting, forging & machining.
Amtek, one of India’s largest auto component maker, will complete the transaction through its overseas subsidiary. Speaking to CNBC-TV18, John Flintham, Senior MD & Global CEO, Amtek Auto said the company acquired six companies of Asahi Tec which includes three in Japan, two in Thailand and one in China.
This is Amtek Auto's second acquisition over the last two years. Asahi Tec has revenues of around Rs 1,500 crore and will help in transforming the company’s operations in Southeast Asia, added Flintham.
Below is verbatim transcript of the interview:
Q: Is this a purchase by Amtek Auto and not Amtek India and what is the financial size, how much have you spent to buy these six companies?
A: Yes, it’s Amtek Auto purchase. We entered into share purchase agreement (SPA) to purchase the Corporation. Three are in Japan; two are in Thailand and a strategy holding or joint venture in China. It is a solid performing business. We are in the process of doing the exchange, which we expect by the end of May and at that point I can release all the financial details.
Q: Will this acquisition be earnings per share (EPS) accretive?
A: Yes.
Q: From year one itself?
A: Yes, it’s a solid performer already. When it comes into the group, we will work hard and synergies that we have done with other acquisitions, but this is a solid performing unit from day one.
Q: Is it also positive profit making group of companies?
A: It is.
Q: You acquired some debt as well?
A: We raised debt from Japan Bank, some equity injection from corporate office in headquarters.
Q: What are the debt levels of the company at this point – Amtek Auto’s debt and how much cash do you have on your books currently?
A: We have our board meeting in the next few days. I cannot release any figures until that board meeting.
Q: Can you tell us a bit about Asahi Tech? What it brings on board in terms of geographic presence and how much would you expect it to add to your own revenues in the next fiscal?
A: This is second of our transformational acquisitions in the last two years. We did Tekfor a couple of years ago and that transformed our European operations and North American operations. This has gone to south Asia; our first entry into Japan.
Japan is one of the world’s leading manufacturing process technology companies and we expect the same synergies to be across our Indian units from process technology point of view. They are exactly in the same market that we are so it’s highly synergistic; casting, forging and machining. We also get access to Thailand and also relatively low cost entry into China which is the world’s biggest automotive market.
Q: You called it a transformational purchase. Is this more in terms of getting to new market geographies or is it to get into new products or new technologies?
A: It’s two of those three, mainly globalisation. The process technologies that they bring will be highly beneficial to our Indian forging and casting companies.
Q: When you say new geographies especially China, you expect that you will therefore be able to sell your other suite of products in China now, should we be eventually seeing you earn a lot more out of China?
A: Its not just China, entering into Japan is a real tick in the box for a company like ours where our aspirations are to be truly global company.
Thailand is also an attractive area and large car manufacturing and automotive manufacturing area and as I say China will be very good for us, in terms of exports from India to China - I think that’s going to be difficult but putting the two together with China manufacturing, Thailand and India, we have got a lot of coverage in all the low cost countries in the world.
Q: Do you have any more acquisitions lined up in this calendar year?
A: We always look at acquisitions that are earnings enhancing and as long as they gel into our overall debt reduction plans then we do, but our new financial year is only a few days old, so we have a long time.
Q: Which geographies this year look like the most growing areas, the most productive areas for you?
A: If you look at India, India automotive market is still very flat in most of the areas, Maruti Suzuki’s figures yesterday were very encouraging but generally the market outside of passenger car is flat. US is still very buoyant, Europe is a bit of a mix bag and that space is the same as it has been for some times.
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