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Vivek Chaand Sehgal, chairman, Motherson Sumi Systems Ltd says the company is open to acquisitions, and would look into it if they are worthwhile and add to the interest of the company, shareholders and customers. The Volkswagen Group contributes to 47 percent of the company’s sales.
If there is an offer to us, we look at it very diligently and if it is adding to the interest of the company, the shareholders and the customers we will definitely do it.
Vivek Chaand Sehgal
Samvardhana Motherson Sumi has clear guidance of revenues and margins of Rs 40,000 crore for the group in 2014-2015. Motherson Sumi has already achieved its target , says Vivek Chaand Sehgal, chairman, Motherson Sumi Systems Ltd.
Talking to CNBC-TV18, he says that the company is open to acquisitions, and would look into it if they are worthwhile and adds to the interest of the company, shareholders and customers. The Volkswagen Group contributes to 47 percent of the company’s sales.
Below is the edited transcript of his interview with CNBC-TV18
Q: In the UBS note, one thing struck me that the customer-wise sales contribution for FY13 - Volkswagen Group, a single client contributing 47 percent, while rest is 7 percent for Hyundai, 6 percent for Maruti, BMW, Nissan.Is that a bit of a risk and would you be looking at some diversification going forward?
A: 47 percent of Volkswagen is a bit different . There are actually four different constituents of that 47 percent. It is Volkswagen themselves, SEAT, Audi and the Porsche so in total we classify it as Volkswagen Group but these are five different companies including Skoda.
Q: What do you think you will be able to do in terms of revenues and margins now?
A: We have a clear guidance in 2014-2015 of Rs 40,000 crore for the group. Motherson Sumi has already achieved its target and I am sure they are not going to stop that so they are going to keep moving ahead.
We believe that Samvardhana Motherson Reflectec (SMR) is only consolidating its position. We have been very vociferous in saying that we have got huge orders, new orders, which are there so you will see some reasonably good growth coming up in SMR.
Standalone definitely is benefiting from the fact that the consumer in India is going up the value chain as far as the cars are concerned. Samvardhana Motherson Peguform (SMP) we have shown that it was a very good buy from our side because we got the EBITDA up from 0.4 percent to almost 4 percent and I think this year you will see growth towards a little higher numbers from them.
Our main job is to stabilise and to make sure that all plants are EBITDA accretive. I think they are looking forward to a very good year.
Q: SMR has plants at Hungary, Brazil, Thailand and India. At least three of the countries, Brazil, Hungary and India, are showing slower and slower pace of growth, can you give us some numbers in terms of utilisation in these plants?
A: You have to keep one particular fact into cognizance and that is that this country per se maybe showing a little bit of a flattening of demand or something like that, but the value of the car is going up and since the product value that we are supplying to even a car production, which is 1 percent to 2 percent or 5 percent lower, the value per car is actually going up.
Second thing that is in favour of Motherson is the amount of cross selling that we are going to do and we are doing between countries, between customers and between the components that we supply.
You must have noticed in 1993 when we were listed we were at USD 3 million topline. We have already crossed USD 5 billion and the car industry has not grown to that particular level. So, it is a different model.
We do not really follow the car numbers of a particular country, what is happening to us. The other offerings which is including as I said, cross selling of our products, selling of our own components, for example last year we sold about Rs 240 crore worth of wiring harnesses to SMR.
I hope I am able to explain to you that we are not so dependent upon any particular country whether the number is going down or going up. If it goes up, that much more advantage to us.
Q: Since you are in this auto ancillary business, as an industry view are you surprised? I am sure you would have gone through the big acquisition that Apollo Tyres is making, are you surprised by this big downtick this stock has seen 36 percent fall?
A: No, I have no knowledge of what is happening there. When we acquired Peguform, I remember a call from CNBC telling me that my stock is falling and I said that is the market trying to grasp what the acquisition is all about and it is fair.
Q: In the UBS note, it says that there is appetite for some small acquisition in Motherson Sumi. Are you looking at any opportunity?
A: We are always looking at opportunities. If there is an offer to us, we look at it very diligently and we are very sure that if it is worthwhile and we think it is adding in the interest of the company, the shareholders and of course the customers then we will definitely do it.
Motherson Sumi stock price
On April 23, 2014, Motherson Sumi Systems closed at Rs 263.65, up Rs 13.00, or 5.19 percent. The 52-week high of the share was Rs 277.00 and the 52-week low was Rs 120.94.
The company's trailing 12-month (TTM) EPS was at Rs 5.69 per share as per the quarter ended December 2013. The stock's price-to-earnings (P/E) ratio was 46.34. The latest book value of the company is Rs 18.41 per share. At current value, the price-to-book value of the company is 14.32.
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