Do not anticipate default; there's no need to rejig debt: John Flintham

Interview with Vice-chairman and managing director, Amtek Auto

Amtek Auto and other group companies have been battered at the stock exchange on a host of concerns. There have been allegations on conversion of bonds and on debt servicing. John Flintham, vice-chairman and managing director of the automobile components maker, tells Ajay Modi it's business as usual for the group and the management is working to address all the contentious issues. Edited excerpts:

Where did the crisis originate? Are you concerned about the crash in market value?

Our latest quarterly result had a relatively good Ebitda (earnings before interest, taxes, depreciation and amortisation) and a PAT (profit after tax) loss, driven by a change in depreciation and increase in interest cost. Ebitda was positive at 13-14 per cent at the group level. Our revenue is $3.6 billion, of which half is outside India. The overseas business has an Ebitda of about 10 per cent, which is good.

I think the removal of Amtek from the futures and options by Sebi (the capital markets regulator) started some pressure on the shares. Who could tell what drives a share price down or up? We communicated facts about what we are doing and the price goes up by 50 per cent. I am pretty pragmatic. I don't get excited when it goes up. I don't get excited when it goes down, as long as we are doing the right things, which I believe we are.

Is the business under pressure?

The overseas business is seeing better capacity utilisation, of close to 70 per cent. However, in India, the utilisation is low at about 50 per cent. There is a fall in demand from buyers in two-wheelers, tractors, commercial vehicles and industrial construction. The passenger car market is flat and only driven by one company. The picture is not as rosy as most think.

How have buyers and suppliers reacted to the recent events?

Over the past two weeks, we have pro-actively met all of our major customers. We have explained where we are and that there is no problem with working capital. There has been no delivery issue. They are pretty supportive. We have not asked customers for improved payment terms as reported. We are still securing business. In the past month, we secured a lot of new business. In the past quarter, we got Rs 600 crore of new business from companies like Ford and Caterpillar. Suppliers have also been supportive.

Could the company have handled the issues better?

We haven't come to the market to refute or challenge whatever is being said for seven-10 days. We had to, sort of, take a step back. We did not speak because we have been working behind the scenes on the joint lenders forum and on the bond issue. We had to sort these issues, get the negotiations started. There have been lots and lots of meetings behind doors. We will now reach stakeholders with regular communication.

Is there concern among your bankers and investors?

Amtek Auto is meeting its lenders. There is a joint lenders forum that has been formed to align maturities in line with the cash flows. The banks are extremely supportive. We expect a satisfactory conclusion in these meetings. Our accounts are standard and we have not missed interest payments. We don't need to restructure debt. We will raise $1 billion by asset sale to reduce half of Amtek's debt. There has been no default and I do not anticipate one.

What has been the issue with Amtek's and Castex Technologies' bonds?

The JPMorgan bond was purchased from the secondary market. It wasn't from us. But, we have been party to discussions. We expect that issue to be resolved amicably between all interested parties in the next few days. With regard to the $200-million FCCB (foreign currency convertible bond) issue at Castex, a few holders are complaining about undue practices, which we totally refute. We are a professionally run company and do not influence the stock price. I understand they have written to Sebi and asked for an enquiry. We welcome a scrutiny and will fully comply with Sebi investigations, if it happens. There is nothing to hide.

When you look back, is there realisation that Amtek could have been less aggressive in acquisitions?

We have created an overseas asset valued at $2 billion. People have missed this in their understanding of the company. There is a misconception that overseas assets are dragging down the Indian business. In most of the businesses we acquired, we have seen increased profits. We have not yet pushed the synergies. People have to be patient. It will perform. If I were to sell all overseas assets, I could wipe out all my debt.

Are your 16,000-plus employees concerned? What have you been telling them?

I recognise that whatever negative news appears in the press is going to have an impact. So, I had an offsite (meet) with all my senior chief executives (30-40 of them) late August, two days after the troubles started... There has been no exit at the employee level. Salaries are being paid on time.

I briefed them on the business, on the happenings in the marketplace, on the bond and JPMorgan issue. All of them later briefed their senior managers, who communicated the message below.

Will Amtek still look at acquisitions?

I could lie and say No. But, if something comes along that is cheap and offers good value and synergy, we will look at it. We have grown by acquisitions. Every single acquisition we made is synergistic.