Liberty House's resolution plan approved, all set to take over Amtek Auto

Sumant Banerji        Last Updated: April 13, 2018  | 19:11 IST
Liberty House's resolution plan approved, all set to take over Amtek Auto
Sanjeev Gupta, Executive Chairman, Liberty House Group

The committee of creditors of troubled domestic auto parts maker Amtek Auto on Thursday approved the resolution plan submitted by Liberty House, clearing the decks for the acquisition by the Sanjeev Gupta-led global industrial group GFG Alliance.

Amtek Auto has been under corporate insolvency resolution process under the provisions of the Insolvency and Bankruptcy Code 2016. It was among the twelve high profile debt laden companies that were pushed by banking regulator Reserve Bank of India for a clean up last year. Since July 2017, Amtek Auto's affairs, business and assets were being managed by resolution professional Dinkar Venkatasubramanian appointed by the National Company Law Tribunal.  

Besides Liberty House, Amtek Auto had received only one more bid from the US based hedge fund Deccan Value Investors. Initial bids from both companies were rejected by the creditors as they were below the liquidation value of Amtek Auto of Rs 4000 crore. Creditors have claims worth Rs 12,321 crore in the firm and liquidation value had been set at a third of that amount. In subsequent bids, Liberty House was declared the preferred bidder last month. While details of the resolution plan have not been made public yet, sources claim, from the perspective of Liberty House, it involves a juicy 75 percent haircut for the banks.

Amtek Auto is one of the top component suppliers with a client list that includes Maruti Suzuki, the nation's biggest car maker, and Tata Motors, the top truck maker in India. The company makes steel and aluminium parts that include connecting rods, crankshafts, flywheels, engine blocks, cylinder heads and various engine housing and drive train components. Its operations are spread across forging, iron and aluminium casting, machining and sub-assemblies.

A darling with the investors till a few years back, Amtek's troubles started as it had problems servicing the debt it raised to acquire a string of companies outside India in the last decade. Between 2005 and 2014, Amtek acquired as many as 22 companies across the globe including Kuepper and Nuemayer Tekfor of Germany, forging business of Asahi Tech of Japan, Sigma Castings of UK and Rege and Scholz of Germany. Slowdown in the automobile business particularly in the two-wheeler segment in India in the last 3-4 years impacted the company's cash flow while Volkswagen's diesel gate fiasco in Europe led to a significant increase in compliance costs for its European operations. The weakened balance sheet led to a massive downgrade of its stock by rating agencies eventually bringing the firm's financial troubles in public domain.    

After emerging as the preferred bidder last month, GFG had said it would apply its GREENMETAL vision in India and develop a full end-to-end enterprise ranging from renewable energy generation and metal-making right through to finished engineering products.

No stranger to scripting a turnaround to sick assets, the acquisition gives GFG a direct entry into the automotive component industry in India, which is tipped for exponential growth over the next decade in line with the growth in the automobile industry. India is the largest market for two-wheelers, fourth largest for passenger vehicles and fifth largest for commercial vehicles in the world.

"We are very excited about this opportunity to restore a great Indian business to its rightful position and add a major new asset portfolio to our international network. This business will be the cornerstone of our strategy to bring GREENMETAL to India and expand our footprint in the automotive sector worldwide," said Sanjeev Gupta, GFG Executive Chairman last month. "We look forward to working closely with the high calibre customer base Amtek Auto enjoys. We are very pleased to be able to secure the jobs of 6,000 workers and welcome them to the global GFG family."

In the past, GFG has made a string of acquisitions in the UK and Australia in the steel sector, including Tata Steel's UK operations. The company believes its plans for Amtek Auto post acquisition will complement its existing automotive strategy in the UK whilst sharing many common customers.

"India is one of the most promising markets in auto and we are well poised to bring our expertise and impeccable track record in this sector from the UK to India, focusing on rapid innovation and growth," said Dr Douglas Dawson, Chief Executive of Liberty Industries Group who led the bid.

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