May 17, 2013 05:57 PM IST | Source: CNBC-TV18

Company's profitability in triple digits: Motherson Sumi

Vivek Chaand Sehgal, chairman, Motherson Sumi says the company has added lot of capacities. Even if the stock is down, people should go deeper into the company's numbers and they will find that the performance is phenomenal.

This is a stellar year for Motherson because the company has got highest sales and  profitability, says Vivek Chaand Sehgal, chairman, Motherson Sumi. Talking to CNBC-TV18, he says Samvardhana Motherson Peguform has grown with total revenues up 182 percent. On the company’s stock being down 4 percent, he says investors should take a closer look as the performance of the company has been good, despite the slowdown in the car industry.

Here is the edited transcript of his interview with CNBC-TV18

Q: Can you start by giving us an update with regard to how exactly your subsidiaries did this quarter, that is basically Samvardhana Motherson Reflectec (SMR), and also how the domestic business did for you all?

A: I think this is a stellar year for Motherson because we have got the highest sales, the highest profitability, every single aspect of the company has done very well. If you contrast that to the global scenario, sort of little bit of  pessimism on the automotive.

I think my team has done a phenomenal job. I think as far as Samvardhana Motherson Peguform (SMP) and SMR are concerned, they have done phenomenally well.

SMP by itself has grown. The total revenue is up 182 percent, EBITDA is up 714 percent and profit before tax (PBT) is up 120 percent. This is in the first year of operation and we believe that going ahead, we have kind of vindicated that this particular company was a very good buy for Motherson.

On SMR, which is the mirror company, the results are absolutely phenomenal. I think the revenue in rupee terms is up 22 percent, euro terms is up 15 percent, EBITDA is up 60 percent and PBT and profit after tax (PAT) are up – PAT of course is up 195 percent.

So, it is a phenomenal result. I was telling my son who has stepped down this year as the CEO of the company, which is a tradition of Sehgal family phenomenal place to sign-off, great place to sign-off.

Q: Just wanted a word on that only because the stock is down 4 percent because of the domestic performance. So if you could take us through that?

A: I think the domestic performance in fact is phenomenal, because here in India the situation is that the car industry – all of you are always talking about it. But we have grown plus 4 percent on just the standalone terms. The profitability is up phenomenally, it is in triple digits.

In fact we are virtually feeling phenomenal about the fact that we have added lot of capacities. So, I am really worried why people are thinking the other way around. If they go deeper into the numbers they will find that actually the performance is phenomenal, it is stellar. Motherson, they always take time to understand the numbers because there are so many numbers to catch.

Q: Can you just leave us with some guidance with regards to how FY14 would pan out especially for the domestic business, considering that majority of your clients are focused within the passenger vehicle segment, which hasn’t done too well in FY13 and despite that you all have managed to buck the trend?

A: I think there is a very key point to understand there. I think the Indian consumer is getting more discerning and he is going up the value chain. So yes, the numbers may belie a little bit of a disappointment or something. But I am very happy that the consumer is choosing cars, which are little bit more up, it is an aspirational thing.

So, in fact, our content-per-car is going up, and for us we have grown 20-odd percent. But it is basically because our content-per-car is going up, so we are not so concerned about it, its just small blips if there is one.

Q: Motherson as a company always does phenomenal sales numbers, quarterly sales at the rate of 6,000-6,500 crore, but the EBITDA margin is so low, in single digits 7-8 percent that does not translate into bottomline, is this going to remain a 7-8 percent kind of margin business or maybe in FY14 or going forward do you see a possibility of inching up these margins to double digits?

A: Motherson never gives guidance on margins per se because there are so many parts. It is very difficult to give individual guidance on each part or something like that. We do give guidance on return on capital employed (ROCE) and as you would have deducted last year our ROCE was sitting at 14 percent, this year the Motherson Sumi Systems has given plus 17 percent.

So, I think the target is to give you a 40 percent ROCE and we have got two more years to do that because the first year target that we had given was a top-line of 5 billion, we are almost about 4.8-4.9 billon already this year. 

I think we have got two more years to years to improve the ROCE and that we will do. So if you give us the next two years, we feel very strong this thing inside us that we will hit the numbers that we have been guiding you for.

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