Amtek Auto is in focus on the back of reports that their subsidiary Amtek Global has raised Rs 1,800 crore (235 million euro) of long-term finance from global investment firm Kohlberg Kravis Roberts (KKR).
As part of the definitive agreement inked between the two firms, KKR will provide Amtek Global Technologies (AGT) 235 million euro of long-term, flexible financing to replace its existing bridge loan and consolidate all of the company's existing debt.
Discussing the development, Gautam Malhotra, MD, Amtek India, said with this he expects margins for acquisitions to improve to double-digits and reduce debt by USD 250-300 million over next year. The group’s average cost of debt stands at 8-9 percent.
Below is the transcript of Gautam Malhotra’s interview to CNBC-TV18’s Latha Venkatesh and Sonia Shenoy.Sonia: Can you take us through how much of long-term finance you have raised from KKR and what are the terms of the refinancing of this loan?A: We have raised a five year senior secured term loan from KKR and the amount is euros 235 million. Latha: What use you will put it to?A: The acquisitions we have done recently and also existing businesses, the loans were maturing and there were short-term loans we had taken for acquisitions. So now we have taken it to a longer term five year loan.
Latha: So how much do you save in terms of interest cost?A: I am not at the liberty to discuss that at the moment, we cannot give any specific details on that. Sonia: What is the exact debt of the group and say in the next 6-12 months where do you see the debt stand at?A: The last figure we came out with was net debt of about Rs 15,000 crore and we do our deleveraging plan over the next 12-18 months for the entire group. Latha: What will they mean, deleveraging plans, are you just going to pay back from internal accruals or will there be some sale of some non core assets?A: No we will be paying back from operations. Latha: So what might it come down to you said?A: We are targeting over the next two financial years September ending, so over the two financials years we are targeting about USD 250-300 million. Sonia: Can you give us an update on how your recent acquisitions both Neumayer Tekfor and Kuepper are panning out and what could be the growth in terms of margins and revenues for the company?A: Neumayer Tekfor we have completed first year in June and we have managed to expand the EBITDA margins from 6 percent to 11 percent. Kuepper is also now operating at 10 percent plus levels. Our target for these two companies over the near term future is to take them to the mid teens about 14-15 percent and we are on track for that.
Sonia: What is the average cost of debt for the company at this point?A: Across the group the entire group the average cost is around 8-9 percent. Latha: What will your immediate fall in finance cost be? Last quarter your interest outgo was Rs 114 crore. What will it fall to in the second half, quarterly run rate?A: That is too much of forward looking statement, I won’t be able to answer that but you should see some movement lower in the finance cost. Sonia: What is the situation as far as the domestic auto business is concerned? Are you noticing any improvement in the CV cycle, any improvement in the overall numbers?A: Yes there has been an improvement over the last few months barring October which we can set aside but there has been an improvement, we are seeing some significant upticks coming in and some new programme launches also happening, that has also helped. So going forward we are a little more optimistic now that the cycles will improve. The economic conditions are directly related, the CV cycle is related to the economic conditions. The government is making the right noises, it is all about the execution and actions panning out and we should be able to see good progress in the next quarter or so. Latha: We want to know whether on the ground, whether capital utilisation for you or for the industry in November is better than October or October was better than September?A: The September quarter was very good, October was pretty much flattish or just marginally higher. November is panning out well as well. Too early to say because typically what happens is the month starts by good, you tend to get to know towards the second half of the month how it is panning out.
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