Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / News/  SES raises concerns over Amtek Auto’s restructuring plan
BackBack

SES raises concerns over Amtek Auto’s restructuring plan

SES recommends shareholders vote against move by Amtek Auto to convert a Rs95 crore loan into equity

Arvind Dham, chairman of Amtek Group. SES also said Amtek Auto executive director Gautam Malhotra and chairman Arvind Dham are on the board in violation of the Companies Act.Premium
Arvind Dham, chairman of Amtek Group. SES also said Amtek Auto executive director Gautam Malhotra and chairman Arvind Dham are on the board in violation of the Companies Act.

Proxy advisory firm Stakeholders Empowerment Services (SES) on Tuesday raised concerns on a move by Amtek Auto Ltd to convert a Rs95 crore loan into shares in the company.

The debt-ridden auto parts maker, which has been recommended for bankruptcy proceedings, has called an extraordinary general meeting on 7 July to vote on a resolution to convert the unsecured loan given by Assets Care and Reconstruction Enterprise Ltd.

In a report that recommended voting against the resolution, SES said Amtek Auto had previously received several such unsecured loans from promoter entities—Aisa International Pvt. Ltd and Amtek Laboratories Ltd— which were converted into equity later.

Apart from questioning the source of the promoter loans, SES said there was a lack of transparency on whether it would benefit shareholders and banks. As per the disclosures made by the company, its finance cost rose from Rs774.54 crore in the year to 30 September 2015 to Rs1,366.75 crore in the year to 31 March 2017.

Calls and text messages to a spokesperson for Amtek Auto yielded no response.

Whether the equity conversion is beneficial to shareholders or not will depend on whether Amtek Auto goes into bankruptcy or settles with lenders, SES said. If there is a settlement, “it is the lenders who are going to lose out and benefit will flow to equity holders", SES said. Promoters have previously increased their stakes in the company by converting their loans to the company into equity. As per annual reports, Amtek started receiving loans from the promoter group after 2013-14.

Promoter companies have lent hundreds of crores to Amtek, SES said, wondering how these companies had managed to extend loans since their own profits are quite meagre.

SES also said Amtek Auto executive director Gautam Malhotra and chairman Arvind Dham are on the board in violation of the Companies Act. Under the Companies Act 2013, any person who is a director of a company which has not filed financial statements or return statements for three financial years, cannot be reappointed as director in any company for a period of five years. Aisa and Amtek Laboratories have not filed their annual return after 2013-14 and balance sheet/profit and loss account after 2012-13, SES said.

SES also asked whether banks had questioned the promoter entities on the source of these unsecured loans extended by Aisa International and Amtek Lab.

An email sent to the lead bank Corporation Bank was not answered.

“When promoters are bringing money in form of unsecured loan as if it is available on tap, bankers rather than feeling the comfort that promoter has skin in the game must be asking the source," said the SES report.

According to J.N. Gupta, managing director and co-founder, SES, the issue is one of diligence.

“If banks do not ask such questions, even in debt restructuring cases it shows how careless they are or inefficient or collusion or lack of concern. Further if you allow a company which is under CD-R (corporate debt restructuring) to extend loan to another company which is also in CD-R, what are we doing," Gupta asked.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

ABOUT THE AUTHOR
Jayshree P Upadhyay
Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 05 Jul 2017, 12:40 AM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App

Chat with MintGenie