Debt and cash to fund PTL acquisition: M&M

09 March 2007

With this deal, M&M will get a 14-per cent s5take in Swaraj Mazda and 33 per cent in Swaraj Engines.

M&M says that this deal would consolidate the company's position across India and help its exports, as PTL has an installed capacity for making 60,000 tractors and harvester combines. The company also said that the deal enhances shareholder value as PTL's products complement M&M's range.

Elaborating its future plans for PTL, Bharat Doshi, CFO, M&M, said that PTL's foundry capacity could be hiked to 20,000 tpa from 9,000 tpa currently.

He further adds that the M&M would use debt as well as cash to fund the acquisition, although they did not need to raise substantial debt.

CNBC - TV18 shares with domain-b its exclusive interview with Bharat Doshi:

Are you going to make an open offer for both Swaraj Engines and Swaraj Mazda now?
In Swaraj Mazda we will only get a 14-per cent stake when we acquire PTL. So at this juncture there is no question of an open offer for it, but we will definitely make an open offer for Swaraj Engines and another company, Swaraj Automotives, which makes seats, etc.

At what price will each of these open offers be?
That would be a separate question, we will come back on the detail but basically the PTL deal will be at Rs360, the other prices will be worked out depending on the date of the open offer and then you have to work backward with 14 days as well as looking at the transactions.

What do you expect to see by way of capacity addition the? Is there any debt that you would take on as well with this acquisition?
As far as the capacity is concerned Punjab Tractors' capacity is 60,000 tractors and they are making 30,000 tractors so there will be that capacity addition which would actually help us in our planning now in the sense that at M&M we were coming close to our capacity in terms of what we are producing so instead of adding new capacity somewhere this capacity could be a very useful synergy for us.

As for raising debt, you know that we have substantial surplus funds plus substantial debt raising ability. It is not necessary that we have to raise substantial debt, since we don't have to.
What we need to do is to work out the best mix.