Plummeting interest cover for Amtek group companies
Parent firm Amtek Auto and its group companies too are challenged with rising interest cost and contracting profit
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The sell-off in Amtek Auto Ltd’s shares after it declared its June quarter earnings a week ago has wiped off two-thirds of its market capitalization. The stock was excluded from the futures and options section of the National Stock Exchange, which triggered the sell-off.
A spate of acquisitions in the last few years and the downturn in auto demand led to burgeoning debt that began to eat into profits.
Parent firm Amtek Auto and its group companies too are challenged with rising interest cost and contracting profit. Total group debt is high at ₹ 18,000 crore. The chart shows that interest cover (operating profit/interest cost) has plummeted in the last eight quarters. It is less than one for three companies, indicating difficulty to service interest cost through profit generated from operations. Sales at these firms also dropped in the recent June quarter. So did net profit, which was weighed down by interest costs.
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