Seeking to arrest the fall in its scrip, which was caused by debt concerns arising from its recent acquisition of Cooper Tire , Apollo Tyres, on Friday, said only $450 million of the total $2.5 billion debt for the deal would be serviced by its India business.
The remaining debt of $2.1 billion is a “non-recourse debt, taken on cash flows of Cooper and Vredestein (the European subsidiary of Apollo Tyres),” the company’s Vice-Chairman and Managing Director Neeraj Kanwar told reporters here.
However, this failed to assure investors, with the company’s shares falling by 5.61 per cent on Friday to close at Rs. 64.75. The company’s share took a beating on Thursday, when it plunged to a 52-week low of Rs. 67.75, down by 26.35 per cent on the BSE. Mr. Kanwar also added that “sufficient cash flow is generated to meet the debt requirement.”
Of the $2.1 billion overseas debt, $1.9 billion would be raised through bond market in the U.S., and the rest would come from an asset-based loan. The company said the debt from the Indian arm would be partly offset by the recent sale of the South African business to Sumitomo Rubber Industries in a deal valued $60 million.
One-time cost
The firm expects a one-time cost of $40 million for the integration of Apollo with Copper in the next two years.
After the completion of the deal, the net debt on its Indian operation would rise to around $800 million.