Amtek Auto may sell Tekfor for Rs 6,000 crore

Delhi-based auto component maker is looking to receive bids from about a dozen bidders next month

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Debt-ridden Amtek Auto might end up selling Tekfor, the German forging company it acquired in 2013, for Rs 6,000 crore. The Delhi-based automobile component maker is looking to receive bids from about a dozen bidders next month.

“The asset has generated huge interest and many international strategic investors and private equity firms are likely to bid for it,” said a company official. The firm, which appointed Morgan Stanley to identify buyers, is holding road shows for potential suitors in cities of Japan, China, Europe and the US.

Tekfor generates  $700 million (Rs 4,600 crore) of annual revenue and is a profit-making business.

Tekfor produces components related to transmissions, engines, drivelines, special applications and safety fasteners. The top customers for Tekfor include Volkswagen Group, Fiat, SKF, BMW, Daimler and Ford. The company has nine manufacturing facilities and about 3,000 employees across Germany, the US, Brazil, Mexico and Italy.

Amtek Auto expects to receive money from this deal in the first quarter of the next calendar year. The company had indicated it would raise Rs 6,500 crore to bring down the consolidated group debt of Rs 19,000 crore.

It had appointed Morgan Stanley to find buyers for some of the international businesses and also appointed EY and Grant Thornton in India to sell non-core assets.

If Amtek succeeds in raising Rs 6,000 crore from overseas assets, it will meet almost the entire debt reduction target, reducing the immediate pressure to sell any domestic asset.

Amtek Auto, which generates consolidated annual revenue of Rs 7,800 crore, posted its first loss in the past 20 years during the April-June 2015 quarter. The company is faced with a low demand and capacity utilisation in the domestic market owing to a slowdown in demand from automobile segments such as light commercial vehicles, tractors and select car makers. The sluggishness in the construction market has also contributed to the decline in business.

This has affected its ability to generate adequate cash flows to service all the debt it has raised for domestic expansion and overseas acquisitions. It is in talks with banks to realign debt repayments with the cash flows. At the same time, it has planned to raise money through sale of assets.

JP Morgan resolution to be announced in next few days

The resolution of Amtek Auto's non-repayment in the case of Rs 200 crore worth of non-convertible debentures with JP Morgan is likely to be completed within a week or so, said a person familiar with the development. JP Morgan is expected to announce the resolution once the matter is settled. The NCDs matured on September 20 but as Amtek Auto was facing a "cash flow mismatch", it was unable to make repayments to its investors. JP Morgan, which bought the NCDs from the open market early this year, had to temporarily stop redemption of the two funds. It was later resumed after JP Morgan segregated the assets exposed to Amtek Auto's debentures from other assets of the scheme.