Motherson Sumi to deliver 40% ROCE as promised

3368 Investors following Motherson Sumi. Share this News with them.

0

Like this story, share it with millions of investors on M3

Motherson Sumi to deliver 40% ROCE as promised

As Motherson Sumi's biggest customer Maruti is coming out of trouble, Vice Chairman Vivek Chaand Sehgal said that the company will deliver 40% return on capital employed (ROCE) as promised. Morover, he indicated that the car sales in Europe were not impacted by the prevailing uncertainties.

Post your opinion here

 

0

Tweet

Share on Tumblr

Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Motherson Sumi See previous management interviews See what other Experts & Brokerages are saying about Motherson Sumi Motherson Sumi BSE | NSE 30/05/12 Are Mutual Funds betting on Motherson Sumi?

During the second quarter FY12, Motherson Sumi 's revenue was up 19.4% at Rs 2,338 crore versus Rs 1,957 crore (YoY) and profit after tax (PAT) was down 72% at Rs 24.2 crore versus Rs 85.9 crore (YoY). The company's operating profit margin (OPM) was at 5.5% versus 10.6% (YoY).

As the company's biggest customer Maruti is coming out of trouble, Vice Chairman Vivek Chaand Sehgal said that the company will deliver 40% return on capital employed (ROCE) as promised. Morover, he indicated that the car sales in Europe were not impacted by the prevailing uncertainties.

Here is the edited transcript of his interview to CNBC-TV18. Also watch the accompanying video.

Q: What were the difficulties that kept the margins under pressure this quarter?

A: The margins are not really affected. We are in the process of growing very rapidly. When we grow, we have to put up a new facility. To put in new facilities, one has to shares the fair gain of the expenditure. All of them are coming in at the same time.

Unfortunately, one of our big customers has gone a bit into trouble, but is now coming out of that. They have four new plants that are being commissioned or have already started initial production.

The sales are up. We are up 98.5% on a consolidated basis and almost 19% on a standalone basis. We are very conservative when it comes to accounting. We will mark to market and we have done that.

Q: Shouldn't we extrapolate this quarter's performance for the second half of the year? As Maruti comes to some level of stability, will your second half do a lot better, both in terms of revenue and bottomline? How much better can it be?

A: We have never given quarter-on-quarter performance. We will deliver around 40% ROCE as promised.

Q: As far as Samvardhana Motherson Reflectec (SMR) is concerned, what has been the margins performance there this quarter? Because the situation in Europe is very volatile, how does the second half of the fiscal look for SMR particularly?

A: We can't connect the European economy to the car sales. The car sales have been doing very well. The three German biggest car makers are doing phenomenally well. One could not connect car sales to what is happening in the euro zone. SMR is going through its growth pattern, which was very important. We have picked up orders and almost USD 800 million have been announced.

We just inaugurated our Hungarian plant. Next month, we will inaugurate our Brazilian plant. It will take about two-three months to come. SMR has grown in euro terms about 13.5%. If you are growing at 13.5%, it is very difficult to understand why everybody says that the car production is down.

Q: For Peguform, you are looking for a shareholder approval for a qualified institutional placement (QIP). How much are you looking to raise? What it the timeline? When we can expect to hear about the fund raising?

A: Peguform is totally funded by loans. QIP is an enabling resolution. Once Peguform comes in and the new growth patterns come in from our customers, we would need more funding. It is just an enabling resolution. When the market decides and we feel that we need the money, we would do so. Our balance sheet is very strong. So, we don't need to do it.