Even though the car sales have gone down dramatically, it will not affect Motherson Sumi as the company is constantly adding new products, assures chairman Vivek Chaand Sehgal .
Passenger car sales fell 7 percent in FY13, their lowest in a decade amid expensive loans, rising fuel prices and overall economic slowdown. However, Sehgal expects his company's Q4 margin growth to be in same range as Q3. "2013-14 should be a very good year for us. We have huge orders coming. Our mirror company has done phenomenally well. You will see the Peguform portion of Motherson also doing very well," he told CNBC-TV18.
On the way forward, Sehgal says, "We have given a very clear guidance in 2010 that by 2014-15 we will be a plus USD 5 billion company."
Below is the verbatim transcript of his interview on CNBC-TV18
Q: How bad is the auto ancillary situation? Is it as bad as the auto sales situation?
A: The situation on the ground is obvious as the numbers do not lie, but these are times when companies restructure, rejig. These are breathers. To go to the next peak, you need a breather, so I would not read too much into the numbers. The different agencies involved in allowing this wonderful industry to grow further will have to see as to what can be done so that the pain is alleviated.
Q: It was a great third quarter that you reported. Even in QoQ, both your margins and revenues grew fairly robust, consolidated, standalone just about all parameters. Should we expect fourth quarter to be as good?
A: Motherson is always working on how it is going to do better and better. We always benchmark against ourselves. I am sure my teams are working very hard to ensure that we keep on this wonderful tradition.
Q: You had a 70 bps improvement in margins in QoQ, so should we expect that your margins in fourth quarter will be better directionally?
A: We hope so.
Q: What about revenues? Were you affected by the slowdown in domestic auto sales and will there be pressure on sequential growth of revenues?
A: Only 20 percent of our turnover is coming from India, but it is an important 20 percent. We do not discount that in anyway. We are equally affected as the others are, but if you understand the basic working of Motherson, we are improving more because we are adding more and more products. So even though the car numbers may go down, go up; go up is exceptionally wonderful for us but even if the car numbers may go down Motherson is adding new products. When you are adding new products you are having more sales.
Q: Why are you not going ahead with your fundraising plan? There was a qualified institutional placement (QIP) issue that you dropped, any reason?
A: You said it yourself, three quarters we are giving exceptional results. I love my equity. Why should I dilute it?
Q: Did you cancel any capital expenditure plans? You would have planned, but isn’t Rs 1,100 crore a lot of money?
A: We can do it by ourselves with a little bit of loans. People are a bit worried about my loans, but I am not worried. It is a better in this kind of an environment where internationally the funding is so cheap, why would we want to keep diluting our equity?
Q: Did you trim any plans?
A: No. There are eight new plants coming in different parts of Motherson. We are building the capacity, not reducing it.
Q: Can you guide us more about FY14? We have seen the Society of Indian Automobile Manufacturers (SIAM) numbers. For your 20 percent, you have some tepid expectations and then there is the global 80 percent for you. How much do you think would be the run rate in terms of revenue growth or EBITDA growth?
A: We have given a very clear guidance in 2010 that by 2014-15 we will be a plus USD 5 billion company. We are sure that Motherson Sumi will cross at least one year before the plans. We are very confident that our gross figures, our top-line figures are going to be very good.
2013-14 should be a very good year for us. We have huge orders coming. Our mirror company has done phenomenally well. You will see the Peguform portion of Motherson also doing very well. I am sure that 2013-14 would be equally, if not more exciting than 2012-13.
Q: Globally, we have seen fairly decent JLR sales. Our slowdown is peculiar to us at this juncture, what is your view on this?
A: We should also take into account that one of the biggest car producers in India did have two months of problems. We have to take everything in context with that and plus it could also be that certain models are going up and down and that does happen.
Q: Your synergies with your global entities have given you more and more by way of margins in every subsequent quarter. What will be the FY14 margins of P&L for their consolidated entity?
A: It would be much better than where we are. We are working very hard on that.