Aim to halve debt to Rs 7Kcr: Amtek Auto

Troubled auto maker Amtek Auto reported a consolidated net loss of Rs 987 crore for the year ended September against a net profit of Rs 848.21 crore last year. In an interview to CNBC-TV18, John Flintham, Vice Chairman and Managing Director, says the company is likely to see a depressed domestic market in the days ahead too.

Flintham says while the overseas business is doing well, he doesn't see much activity in India and expects H12016 to be similar to the current market situation.

The company has plans to monetise its assets to pare its Rs 14,000 crore debt to something closer to Rs 7,000 crore.The company's Q4 revenues came in at Rs 833.8 crore, down 20 percent with its EBITDA falling 44 percent at Rs 175.2 crore. The company's interest costs rose two times year-on-year to Rs 238.4cr versus Rs 118.3 crore.Below is the verbatim transcript of John Flintham’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.Anuj: You posted a big loss for the financial year at nearly Rs 1,000 crore. Will you continue to report losses?A: I think there are number of answers to that. First of all, the losses we posted this month or this quarter and also for the year, the PAT level was pretty much expected and I have talked about that in previous reviews. In 2016, unfortunately I don’t see much happening in the Indian market. Domestic market most of the segments seem pretty depressed and we probably see that going on through most of this financial year. Our overseas business is performing very well and I think we will see that even stronger. If you look at our overseas business currently, the current run rate is over 73 percent of our revenues are now coming from our overseas business. So, that is quite a turnaround over the last 12 months from that split. I would suggest that after we finish our discussions with the banks for realignment of our domestic debt inline with our current cash flows then that will be a big help to the company in terms of its interest cost and also its restructuring going forward. So, I think 2016, in the first half you are probably going to see pretty much inline with what you see at the moment. Ekta: Your interest costs have doubled quarter-on-quarter (Q-o-Q) to around Rs 238 crore and it is around 1.5 times your EBITDA generated as well. How do you plan to reduce debt over the next 12 months? A: I think we have already declared that we are on a monetization program which has got three strings which is our overseas business and also our Indian businesses in the core and non-core sector. Our target as I have said previously is to raise USD 1 billion which will all be used to reduce debt and therefore obviously reduce interest burden which would be a significant move forward.In terms of that program, we are pretty advanced on that program, probably ahead of the game in terms of where we expect it to be particularly with our overseas businesses which is generating a lot of interest in terms of acquisitions and pricing. We expect that to generate debt reduction. I would say within 12 months, maybe 12-18 months but internally we are targeting 12 months. Anuj: Have you signed any term sheet or shortlisted any buyers for the monetization of these overseas assets? A: I am not going to give too much details away. This is a negotiation and all I would say is there is plenty of interest both from trade buyers around the world to financial institutions. So, we have been very pleased with the extent of the interest particularly in the overseas business which has been very encouraging. Ekta: What will be the debt picture assuming monetization does happen in the next 12-18 months?A: If you look at our debt from a consolidated, Amtek Auto consolidated position of debt is around about Rs 14,000 crore. If you then look at what we are trying to raise, you can do the calculation yourself, our aim is Rs 7,000 crore debt reduction. If we can achieve that and we are pretty confident that we will achieve that then that actually restructures the business quite nicely. Anuj: Even your revenues have fallen 20 percent year-on-year (Y-o-Y) this quarter. Which geographies are you facing pressure in? A: I think nearly all of the reduction is India across all markets. Although passenger cars are showing slight increase but driven heavily by Maruti Suzuki still. However, if you look at the construction industry, you look at the agricultural industry, tractors, you look at commercial vehicles, you look at two wheelers sector, you look at our non-auto sector and oil and gas, all these markets are under strain and that really where you are seeing the downturn in revenues. Our overseas business is generated by recent acquisitions have generated healthy growth and that is evident by the fact that now what was 50-50 in terms of revenues, split between overseas and domestic, it is now running around about 73 percent of our group revenues now come from overseas. So, you can see the overseas markets are still performing very well and domestic market is still challenging. Ekta: Can you update us on the demand in Europe and the outlook there?A: If you dissect the overseas business, Japanese and Thailand business is performing pretty much inline with expectations in terms of volume growth. Our Japan business, there is a lot of exports, as well as our Thailand business so that is encouraging. Europe driven by still a very good Germany market and UK market is still healthy. Brazil is still a problem but is relatively small in the overall picture where Brazil volumes are down significantly. However, that is counter balanced by the US where the market still continues to perform at very high levels.Anuj: Have you completed the synergy plan at Kuepper? What kind of earnings will you expect from that business?A: On the synergy plans before I come on the Kuepper, I think it is also worthy of saying that we have really completed our plans now. Neumayer Tekfor which was the acquisition we did couple of years ago, we are now running healthy EBITDA margins at Tekfor at over 10 percent which is nearly double where we were when we bought the business about two years ago. So, that has been a very successful turnaround.In terms of Kuepper, we have not completed yet. We only took that business on relatively recently. We part way through the synergy programs and the turnaround plan but we are pretty confident we are going to see pretty similar results to Kuepper that we have seen at Tekfor. So, the team is working hard at the turnaround plan at Kuepper and we are expecting to see that coming through and benefit in the coming quarters.Ekta: What about demand in the domestic business, that has been very fragmented and weak? Do you expect more pressure on your business from that particular segment?A: I don’t think we are going to see much more pressure. I think the market is at the lowest. Everybody is hoping, willing and praying that the domestic market picks up. I think we are at the bottom of the trough. I think there are little signs that the commercial vehicle market is starting to pick up a little bit. I am concerned about agriculture and construction but I don’t think we are going to see much more reduction in our domestic market.Then we also have in the year a record order intake with Rs 13,000 crore of new business coming into the group. So, that will over the next coming months and years will be very useful to the growth of the company.Anuj: Any update on the foreign currency convertible bonds (FCCB) issue of Castex’s stake?A: We fully converted that on September 10th – that has already been converted to equity so that was our concern, that is a closed issue.Ekta: As per our understanding some of the FCCB holders were not happy with that conversion and even challenged the same legally?A: There was a challenge which we went to court and won that battle. I am not aware if anything as I stand here today.