Margins won't be impacted post Peguform buy: Motherson Sumi

Indian auto parts maker Motherson Sumi Systems earlier last week acquired 80% stake in a Germany-based plastic component maker Peguform Group from Cross Industries AG for 141.5 million euro. This acquisition was through a joint venture in which Motherson Sumi would hold a 51% stake and Samvardhana Motherson Finance 49%.

The company said it will fund the deal through overseas loans and has appointed ICICI Bank as the lead arranger. But this, Vivek Chaand Sehgal, chairman of the Motherson Sumi Group says won't impact the margins. In fact, he is quick to add that Volkswagen is Peguforms big client that Motherson will benefit from. "Peguform has orders 33% higher that last year," Sehgal tells CNBC-TV18 in an exclusive interview. Also read: Peguform deal valued at 141.5m euros, says Motherson Sumi Below is the verbatim transcript of his interview with Udayan Mukherjee and Mitali Mukherjee of CNBC-TV18. Also watch the accompanying video. Q: There has been some concern expressed on the Peguform acquisition because of the relatively low margins it enjoys compared to Motherson Sumi and also the very sedate revenue growth it has managed over the last couple of years. Are you sure that it will be accretive as a deal for Motherson Sumi? A: Absolutely. You will have to look at the opportunities that this particular acquisition gives the group, especially Motherson Sumi. In the last year, it has grown 20%. It has got a huge customer base. It opens up a lot of doors to all the other products of Motherson Sumi as well. The company is coming out of Lehman crisis, it has already restructured. It is a great time to acquire this asset. It has tremendous amount of know-how. The car production is going to go to about 10-11 million cars. So, this is a great technology company to have with us. Q: Part of the concern I guess is because this revenue performance has been static for the last two years running and it is also a company that has changed hands successively. Any other niggling operational problem that you see with Peguform and the integration with Motherson Sumi? A: No. In fact the whole world has come out in the last two years without trouble. In Europe and America companies do change hands. This has changed hands about five times in its history of 51 years. I do not think that is something to be concerned about. We feel that Peguform will add tremendous amount of abilities into our group. We ourselves have about USD 300 million worth of similar business that Peguform has. We are working in India. They are not in India, South Africa, Thailand. We are there in all these geographies. Volkswagen is the big customer for this particular company. Volkswagen is one of the fastest growing companies. So, I really wonder why you are concerned that we won