http://www.livemint.com/Opinion/Kt56Bic5jKxqVhMzo4ggkN/Banks-to-blame-for-Amtek-Autos-bloated-debt.html
Now comes the most interesting piece of this puzzle—the debt. Amtek Auto had a debt of Rs.9,923 crore in June 2015; its other Indian entities, including Ahmednagar Forging and Castex Technologies (formerly Amtek India Ltd) Rs.9,811 crore, and international businesses only Rs.1,400 crore. Out of a total Rs.21,134 crore debt, international businesses’ exposure to lenders was only 7%.
Simply put, by using the Indian banking system, Amtek has built its international business. But its lenders do not get the benefit of the cash flows from the international business as they have been ring-fenced. How?
In November 2014, Amtek Global Technologies (AGT), the holding company for international businesses, entered into a credit arrangement with KKR & Co. Lp under which KKR provided AGT with €235 million of long-term financing. While doing so, KKR restricted Amtek and AGT from making any repayment to its group entities and or any other payment to Indian entities. These details were not disclosed to lenders in India, coming to light only when Amtek was facing a cash crunch leading to delayed payment of interest and principle dues to Indian lenders, beginning April 2015.
On a conservative estimate, if Amtek’s loan cost is around 10%, it has to serve at least Rs.2,100 in interest alone. How can Amtek serve this when its Ebitda from domestic operations is less than this, around Rs.1,775 crore?
In the six months between September 2014 and March 2015, Amtek Auto’s capital expenditure was Rs.1,623 crore. This investment was done in an environment where capacity utilization at the company had been 35% in forgings and castings, 33% in aluminium castings and 50% in machined auto components.
As of March, Amtek Auto had extended Rs.1,230 crore as loans and advances to related parties, including Rs.654 crore to its international subsidiaries (AGT, Amtek Deutschland GmbH, Amtek Investments (UK) Ltd, Amtek Germany Holding GP GmbH and Amtek Precision Engineering Pte Ltd).
In addition, since September 2013, Amtek has acquired three international companies—Asahi Tec, Rege Holding GmbH and Scholz Edelstahl GmbH—with a combined revenue of $710 million and at an estimated value of $227 million.
Auto components could be his first love, but the promoter of Amtek believes in diversification—even if that means getting into new businesses which are totally unrelated to his company’s core business. So, we find Rollatainers Ltd, a thinly traded public listed firm that offers complete packaging solutions. The promoters of the Amtek group hold a 75% stake in this company.
Rollatainers, in turn, owns Barista Coffee Co. Ltd, Mapple Hospitality Pvt. Ltd (hotels and restaurants, with a presence in Delhi, Bengaluru, Jodhpur, Corbett and Bhimtal), franchises in India for Wendy’s and Jamie’s Italian, Welgrow Hotels Pvt. Ltd (which owns the Italian restaurant chain Sartoria) and Kylin, which operates a range of restaurants under the brand names Kylin Premier, Kylin Experience, Kylin Skybar, Go Kylin and Kylin Express.
Then, it has numerous real estate companies in its fold. Some of them are: Adhbhut Infrastructure Ltd, Lotus Infraestates Pvt. Ltd, Hazel Real Estate, Forbes Builders Pvt. Ltd, Ashoka Developers & Builders Ltd, Chandni Realtors Pvt. Ltd, Dhanpat Properties Pvt. Ltd, Dilkhush Buildtech Pvt. Ltd, Ghanshyam Realtors Pvt. Ltd, Kusham Real Estate Pvt. Ltd, Rista Developers Pvt. Ltd and Radhika Buildprop Pvt. Ltd.
Yes, there are other businesses too—OCL Iron and Steel Ltd, Amtek Travels Pvt. Ltd, Amtek Lifestyle Tour Pvt. Ltd, SPT Infotech Pvt. Ltd and Kamakshi Silk Mills Pvt. Ltd. The list could be even longer.
For the lenders, Amtek Auto has been a time bomb ticking away. It failed to repay its institutional holders nearly Rs.800 crore in bonds that were due for redemption on 20 September. Before that, in August, JPMorgan Mutual Fund restricted withdrawals from two of its funds—JP Morgan India Treasury Fund and JPMorgan India Short-Term Income Fund—which have a collective exposure of aboutRs.200 crore in Amtek Auto.
The bonds were issued in 2010. Axis Bank Ltd was the lead arranger for the bond issue. Although Amtek Auto has defaulted on Rs.800 crore of non-convertible debentures (including to lenders such as JPMorgan Mutual Fund, IDBI Bank and Axis Bank), media reports indicate that it has selectively repaid high-net-worth individuals holding these bonds, including Bollywood star Aishwarya Rai Bachchan, movie maker David Dhawan and a few others. Amtek promoters denied this to the bankers.
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