The selling pressure on the stock may be on the back of F&O exclusion, says Gautam Malhotra of Amtek Auto. He, however, refutes that the company is facing any problems (payment) with lenders, terming them as 'rumours'.
The company also has huge debt on its books, but Malhotra says he is exploring various options to reduce the same and expects to lower it by up to Rs 2,000 crore in the next two years.
The promoters of the company also plan to infuse Rs 75 crore if required, he adds.
Regarding today's stock price fall (nearly 30 percent), he says the company plans to write to Sebi about it.
Below is the verbatim transcript of Gautam Malhotra's interview with CNBC-TV18's Sonia Shenoy and Anuj Singhal
Anuj: What really is going wrong with the Amtek group? The stock market today is telling us a scary position?
A: I can't really say what the stock market is doing. However from our point of view we have had one bad quarter. If you look at it we have had a lot of good quarters over the last 2-3 years. We have one bad quarter this quarter. So, I think it is partially the results and we also got to know that from October 30 onwards there is no F&O segment. So, there could be selling pressure because of that.
Overall looking forward we feel that the company is still on the right track and our strategy remains to move forward as planned.
Anuj: I want to clarify one doubt which market has been raising, which is you have trouble in terms of your lenders right now and they have formed a forum to get the dues out, if you could tell us if that is right?
A: No, there is nothing like getting the dues out. Anything with our lenders is between our lenders and us is private but there is nothing like getting dues out.
Sonia: Bank of Maharashtra had told us that USD 70 million FCCB repayment that you had to make, there is some issue that is going on, on that front and a joint lender forum has been formed. Is that incorrect?
A: USD 70 million FCCB cannot be subscribed by any Indian institution, it is an FCCB. So, it is subscribed by international funds and as of July 31 we had actually put in a notice to convert that into equity. So, there is no recall on it yet. And it is anyways due in 2017, it is not due till 2017.
Sonia: So, you are not facing any liquidity issue at this point in time?
A: No. I don't know how we got onto that USD 70 million FCCB issue causing a chaos or a problem.
Sonia: The stock fell 30 percent today, so there is something that the street is worried about. You said one bad quarter - it is not a question of one bad quarter, it is the first time that the company has reported a loss. What seems to be the problem at this point and what is the team doing in order to bring down its debt?
A: We are working on a debt reduction plan which is partially through operations and then may be looking at other options as well to reduce the debt. However if you look at the results, the sales are down but EBITDA is still positive. What\\'s really caused this is, one, the depreciation effect of new Companies Act is causing a little bit of extra hit on the bottomline and because of the debt and interest costs the PAT is negative this time.
Anuj: Have you recently defaulted on the payment of interest of some of your lenders?
A: No we have done any default.
Anuj: Has there been any Rs 350 crore default because that is the word on the street, ofcourse not confirmed yet and that is why I am asking you?
A: There is no default. When you have a default, it is an NPA and that is a pretty public knowledge.Sonia: You said Rs 75 crore equity is being put in by the promoters, any more infusion by the promoters that we can expect?A: If required, yes, definitely. If you look at it, the thing that we are taking to the extraordinary general meeting (EGM) is for Rs 150 crore. So, out of it, Rs 75 crore has gone and thinned down and the remaining Rs 75 crore will be infused if required over the next 12 months.Sonia: Also, just coming back to where the root cause of the problem is apart from debt, it is the way the business itself is seeing deterioration across all parameters. So, even in the quarter gone by, your revenues have fallen 20 percent not just in Amtek Auto but in all of the group companies whether it is Metalyst Forging, whether it is JMT Auto. What is going wrong as far as top-line is concerned? And should we expect to see further deterioration in terms of revenues going ahead?A: Actually, over the last couple of years, we have been focusing a lot on the non-auto segment and growing that revenue. And if you look at the last six months, the non-auto segment has pretty much fallen through, whether it is the tractor segment or the earth-moving segment or the oil and gas segment.So, it is more of a market factors than anything. Quarter-on-quarter (Q-o-Q), the commercial vehicle (CV) segment, overall heavy commercial vehicle (HCV) and large commercial vehicle (LCV) segment put together was down about nine percent. So, that is the cause of the revenue decline and that has actually put a little bit of pressure on the earnings before interest, taxes, depreciation and amortization (EBITDA). EBITDA is still positive, it is still healthy. But yes, the interest cost and the depreciation have always been a little bit on the profit after tax (PAT).Anuj: Again, I keep getting back to this whole big fall in stock prices because clearly, the market sees something that we do not. All your companies saw really a horror show as far as last quarter was concerned. It was not just one or two companies, every group company had bad numbers. So, it looks like more than just one quarter issue.A: Let me put your question to ease. There is no customer issue. There is no order book issue, there is nothing like that. And it is not actually every group company has gone down. If you look at JMT, JMT has pretty much maintained its revenue.Anuj: No, JMT revenues were down 31 percent and profit fell 50 percent.A: Are you looking at year-on-year (Y-o-Y) or are you just comparing it Q-o-Q? If you look at the quarters, it is a difference of Rs two crore.Sonia: Coming back to this whole Joint Lender Forum issue, the reason we are asking is because we understand that a Joint Lender Forum has been formed between Bank of Maharashtra, Bank of India, Andhra Bank, all of the companies that have lent to you and they are concerned about the non-payment of interest. In fact, you have been, your account has been classified as SMA-II account which is whenever a company does not pay interest for more than 60 days. Is that correct that you have not been paying interest for two months?A: Anything that is between the lenders and us is private between us and I would not want to comment on it.Sonia: But, your shareholders do need to know if there is some liquidity issue that the company is facing.A: As I said, wherever the liquidity issue was needed to be addressed, the promoters did infuse the Rs 75 crore.Anuj: Would it be fair to say that this Rs 300 crore interest cost that the market is talking about that you have been late on the payment or that Rs 350 crore interest payments? Would that be a right number?A: Anything that is between the lenders and us, I will not be able to comment upon it and I do not think there is a lot, at the end of the day, it is just a market rumour, right?Sonia: You said, Rs 150 crore is the total infusion that the promoter will make and Rs 75 crore has been done already. By when can we expect the remaining Rs 75 crore?A: Whenever required in the business, they will put it in. You get a period of 12-18 months to infuse it. Sonia: And finally, what is the total debt that the group is sitting on and who is the guarantor?A: There is no guarantee on the debt at the moment and if you look at the total, Amtek Auto and Metalyst, the total/net debt will be about Rs 18,000 crore.Anuj: As you said, it is between you and your lenders, but any meeting with your lenders which is lined up over the next couple of days? Are the lenders calling you with a bit of panic with the stock price behaviour that we have seen today?A: Not at the moment. I mean it is just happening, so let us see.Sonia: So, there is no corrective plan that has been discussed with you because that is something that the lenders have told us, that a plan is being discussed with the Amtek Group.A: Anything that is between the lenders and the company is finally between the lenders and the company.
Sonia: If you can just give us a roadmap, currently Amtek Auto is sitting on almost Rs 16500 crore of debt and the interest cost although you did mention that the EBITDA is not negative but it is just a matter of time before the EBITDA becomes negative as well. So, what exactly is the timeline in terms of debt reduction and by the end of next year how much do you think your debt can reduce to?
A: By next year I can't you a very precise figure. Our plan is that over the next couple of years we will be looking at debt reduction in a major way.
Sonia: By how much?
A: I can't disclose that at the moment but we are looking at a significant number - upwards of Rs 1500-2000 crore.
Anuj: I appreciate that you may not have too much inkling about the market performance of your stock but your stock has been in F&O trading ban for last 2 or 3 months almost on a perennial basis. Have you spoken to Sebi in terms of whether cartel is working on your stock because if we have seen quite a bit of decline over the last 2 or 3 months in your stock price?
A: I think that is something that we need to investigate as a company further before we comment on it.
Anuj: Would that be something that you would be looking to do after today's fall because today's fall has been crunching?
A: I agree with you and that is something we are going to be doing.
Sonia: You did mention that you are looking to reduce your debt by Rs 1500-2000 crore, how do you plan to do that? Are there any non-core assets that you would be looking to sell?
A: We are firming up our plans but most of the journey would be done operationally as the market's rebound back and we do feel the markets would rebound back and the topline goes back and starts growing, that will bring the EBITDA back to a healthy position for us to operationally start delevering it. However we are looking at other non-organic options as well to reduce the debt.
Sonia: So, you are saying at this point in time you have no issues with the lenders in terms of repayment of your interest costs?
A: There are no issues and anything with the lenders is a private thing. If you notice the financials also, we came out with an announcement where the promoters have infused Rs 75 crore of equity into Amtek Auto to support the company. So, that is how we have taken care of the situation and going forward we intend to take care of it if required.
Anuj: Any client specific problem? At the end of the day there is something that is leading to this kind of stock fall, it can't be just F&O exclusion or just one quarter of loss. Clearly there is something that we are not able to understand right now. So, has there been any problem with regards to any particular client that you are facing right now?
A: No problems with any clients. I also fail to understand the 35 percent fall but at the end of the day market is market. So, I can't comment on it. There are no issues with any clients or anything whatsoever - business as usual, operations as usual.
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